BENCHMARKING

PROF.A.S.SASTRY
S.S.ASSOCIATES
MANAGEMENT CONSULTANTS & TRAINERS
18, MAGNA CHAMBERS, TOP FLOOR,
LENAINE ESTATE, ABIDS, HYDERABAD 500001
TELE FAX - 23387896

MOBILE: 9848204283

E-mail : ssassociates1@rediffmail.com
profsastry@yahoo.com

Only a mouse finds its hands full with a

Couple of food grains. Small desires do
not behove you. Commit yourself to a
lofty target worthy of you. Be convinced
that you will succeed.

Mahabharata. Udhyoga Parva

Mother Kuntis exhortation to the
Pandava Princes and Krishna

TOTAL VALUE INDEX FOR MEASURING AN

ENTERPRISE COMPETITVENESS
Maximize
Quality

Unscheduled Changes

Unit Circle

Maximize
Overall
Productivity
World Class
Level

Minimize
Minimize
Inventory
Minimize

0.0

Time toMarket
(Schedule)

Minimize
Desirable State

Undesirable State

Maximize Profitability

Key

Cost - of- Quality

Maximize
Customer
Satisfaction

World class
Level
Areas to be
maximized
.
Undesirable State
- Desirable
state

THE CUSTOMER LED VALUE CHAIN

.

OLD
Assets / Core competencies

NEW
Customer Priorities

Inputs, Raw Materials

Channels

Product / Service Offering

Offering

Channels

Inputs, Raw Materials

The Customer

Assets / Core Competencies

DETERMINANTS OF CUSTOMER ADDED

VALUE
.

Product
Value
Services
Value
Personnel
Value
Image
Value

Total
Customer
Value
Customer
Delivered
Value

Monetary
Price
Time
Cost
Energy
Cost
Psychic
Cost

Total
Customer
Cost

RE-ENGINEERING
Cost cutting opportunities through prevention ( measurement of cost quality)

The Cost of Doing Business

key
c-t-c-q: Cost-to-correct-quality
C-t-e-q-: Cost-to-ensure-quality

Total Cost to-correct-quality

External failures
Internal Failures
Appraisal, Inspection
Total Cost-to-ensure-quality
(Initial)
Waste Elimination

Cost to
- correct -quality
(c-t-c-q)

Additional
Cost-cutting
Opportunities
at Time T1
(c-t-c-q)

(c-t-e

Continuous Improvements
Cost-to-ensure-quality
C-t-e-qError Proofing
preventions
Monitor

T0

T1

Time

(c-t-c-q)

T2

Tn

WHAT IS BENCHMARKING
The process of identifying, understanding and adapting outstanding
practices and processes from organizations anywhere in the world in
order to help your own organization to improve its performance.
A reference or measurement standard for comparison

Are you certain

your benchmark
was the right way
up?

WHY BENCHMARK ?
Uses a disciplined, structured approach
Identifies what needs to change
Identifies how to change it
Identifies the potential for improvement
Creates the desire for change

REASONS FOR BENCHMARKING

Strategic planning for developing short long-term plans

Product comparisons comparing with competitors or best
practice organizations.
Forecasting predicting trends in relevant areas
Goal setting establishing performance goals in relation to state-ofthe-art practices.

BENEFITS OF BENCHMARKING
It develops realistic stretch goals and strategic targets.
It establishes realistic action plans for implementation
It encourages a striving for excellence, breakthrough thinking and
innovation
It creates a better understanding of competitors and dynamics of
industry
It emphasizes sensitivity to changing customer needs.

10

LEVELS OF BENCHMARKING

Performance level

BENCHMARK
LEVEL

LONG-TERM
GOAL

ACHIEVABLE
LEVEL
BASELINE
LEVEL

Time

11

LEVELS OF BENCHMARKING
1.

The baseline or current performance level

2.

The achievable level, which is the best performance that can be

achieved using current resources in order to eliminate waste and
improve the cycle time

3.

The benchmark level, which is the potential level of performance

that has been identified from the benchmarking study.

4.

The long-term goal, which is the future target performance level.

12

BENCHMARKING - PERSPECTIVE
Functional best practices world class
Functional best practices any company in India
Industry best practices (includes non - competitors)
Competitors best practices
Internal best practices
by function

13

BEST PRACTICE BENCHMARKING

Internal

Competitive

Functional

Generic

14

DIFFERENT TYPES OF BENCHMARKING

Best practice Competitive

Benchmarking Analysis

15

COMPETITIVE ANALYSIS
Focus

Market

Strategic

Industry Analysis

Tactical

Product positioning
Reverse engineering

Business

Customer satisfaction
Employee Satisfaction
Community perception
Business results
Process performance
Measures

16

GENERIC BEST PRACTICE BENCHMARKING

17

Where do we start?
The level of effort

1,45,000
Benchmark

Months
1234
56

Reduced costs
Increased sales
Greater customer retention
Enhanced market share

18

BENCHMARKING
The key factors for success

Adopting a formal approach to Benchmarking

The total involvement of the top management
No competition in the information shared
Two-way exchange of information
Building a relationship of trust and alliance
Benchmarking firms should be of the same size
Target Managers should not be overburdened.

19

THE KEY ELEMENTS OF BENCHMARKING

EFFORTS

Management support and direction

A systematic approach
Research facilities
Networking
A code of conduct
Training for team members and process owners
An internal database of study plans, programme reports and
results
Internal communication to share successes learning

20

THE BENCHMARKING GUIDE

Dont go on a fishing expedition Pick a specific area where you want
to improve and do your homework well.
Make people implement the changes It wont help if Senior Executives
do the Benchmarking, involve process owners.
Be prepared to share information you should be willing to answer any
questions you ask another company
Avoid legal problems Dont poach information - discussions that imply
illegal activities spell trouble.
Respect confidentiality companies that do not mind sharing data with
you may not want it going to a competitor.
21

PLANNING THE STUDY

Form the benchmarking team

Establish the process to be benchmarked

Document the current process

Define the topic areas for data collection

Critical
Success
Critical
factors
Success

Factors

22

IDENTIFYING POTENTIAL BENCHMARKING

PARTNERS
Standards setting organizations
Opinions
Press, particularly editors of trade and
Local press
Where facilities or headquarters are
Located
Local organizations
Universities and authors who publish
in the field

Government offices
Market research groups
International organizations
Watching groups
Financial community
Agencies involved in regulation
industry promotion and financing

23

IDENTIFYING POTENTIAL BENCHMARKING

PARTNERS
Industry observers

Suppliers

INDUSTRY

Internal sources:
Market research staff
Sales force
Service organizations
Engineering staff
Purchasing department
Research and development

Dealers

Customers

Service organizations:
Trade associations
Investment banks
Consultants
Auditors
Commercial banks

24

Analyzing and using the Data

Normalize the performance data

Construct a comparison matrix
Identify the best practices
Isolate the involved process enablers

Constructing a comparison matrix

The Study Subject

The Business profile
The environment / culture
Organization results
Study measures
26

ADAPTING THE BEST PRACTICES AND

ENABLERS
Successful implementation will be dependent on two things. These are:

Support from upper management and process stakeholders

An organized strategy with realistic, actionable improvement goals

The key steps in the Adapt stage are:

Communicate findings and gain a commitment to change

Set goals to close the gaps
Adapt the enablers
Develop the implementation plan and implement it
Monitor the report on progress
27

Constructing a comparison matrix

Study measure

Own Hospital Hospital A Hospital B Hospital C

First contract on entering 00:04:00

Casualty department

00:08:30

00:08:30

00:00:30

Patient enters treatment

Room

00:28:00

01:07:00

00:12L45

00:15:30

Doctor begins treatment

00:41:00

01:24:00

00:48:00

00:29:00

Number of annual
Casualty

44,000

52,500

44,000

36,500

Average number of
Visits per day per doctor

60

72

81

67

Study Subject : minimizing the time taken to process a patient

(cycle time)
28

Developing the implementation plan and implementing it

Process studied
Related Critical Success Factor
Process owner:

Date:

Benchmarking team members

Objective of study :
Summary of study results
Benchmarks observed
Measure

Our performance

Short term goals

Date

Benchmark

Long-terms goals

Bench marking implementation plan summary sheet

Benchmark
company

Date

29

The concept of business strategy

Product performance

Competitor

Step change
Incremental change
Company

Now

Time (years)

Fig. 1.5 Benchmark projection of product performance.

30

The benchmarking principle:

Tomorrow's world
class
Today's
world class
Leadership
Next level
Current
level

Performance benchmarks
Source: Adapted from C.Y. McNair and K.H.Y. Leibfried : Benchmarking : A tool of continuous
improvement ( New York, Harper Business, 1992). P. 33. Copyright 1992 C.J. McNair and
K.H.Y. Leibfried. Reprinted by permission of Harper Cottons Publishers. Inc

31

Outline of Benchmarking steps:

Interview Internal Staff

Establish entity goals

Gather internal information

Develop action plans

Prepare questionnaire

Communicate results

Conduct external intern vies

Implement specific action

Analyze and contract data

Monitor programmes

Report

Recalibrate benchmarks

32

CHANG
E

ANALYSIS

MEASUREMENT

Identify scope for benchmarking

Identify appropriate drivers and performance drivers

Identify potential external organization to benchmark

Source: W. Kreuz : Competitive benchmarking : Will it change your

strategy ? (Unpublished paper, 1992)
33

THE BENCHMARKING ROADMAP

Key players
1 Stakeholders
2 Executive champions
3 Process sponsor
4 Benchmarking team
(leader / facilitator)
5 Benchmarking
(team)

Main steps
Trigger for
change
Step 1
Planning
the
study

Step 4
Adapt

Support
Step 2
Collect
data

Step 3
Analyze
data

6 Functional/technical
(experts)
7 Research resource
(team)
8 Benchmarking
partners
34

THE BENCHMARKING ROAD MAP

1. Identify the
criterion
(What to
Benchmark)

2. Identify the
Benchmark
Sources

3. Select the
appropriate
Benchmarks

6 Agree on
the steps to
achieve this
performance

5 Set appropriate
target for your
performance

4 Analyze the
processes and
practices
rival use

7 Implement
your
benchmark
plan

8 Measure &
control to new
performance
level

9 Ask the
question, can
we improve?

35

Communicating findings ands gains an commitment to

change

Leadership
goal

Best
practice
Benchmark
gap
Your
performance
Today

Time

Current performance compared to

benchmark

Performance level

Performance level

Setting goals to close the gaps

Best
practice

Party
goal

Your
performance

12 months 6 moths To day

T1

T2

Time
Predicting future performance

36

Capability Gap Analysis

High

surgery

Importance of Process

High importance
Low performance

3
Low importance
High performance

Low importance
Low performance

1
Low

High importance
High performance

Process Performance

High

37

A PROCESS FOCUSED APPROACH

High
Based on
Need:
Refine
Redesign
Reengineer

Focus
The need
for the
process

Low

If Process is
not Needed,
Can it be
eliminated?

Waste

The performance
of the process

High

38

Benchmark and BPR

Performance level

Continuous
improvement
Benchmarking
accelerates
innovation and
change
Breakthrough
improvement
Continuous
improvement
Time
A Word about business process re-engineering

39

RE-ENGINEERING
The fundamental rethinking and radical redesign of business processes
to achieve dramatic improvement in critical, contemporary measures of
performance such as cost, quality, service and speed.
Re-Engineering an Imperative
For Survival
The Three Cs
Customer
Competition
Change
Re-Engineering Focus
Customer Orders
Customer Service
Customer Feedback

40

RE-ENGINEERING
Business Process Reengineering Implies :
Putting aside the wisdom of two hundred years of Industrial
Management (based on Adam Smiths Concept)
At the Heart of Business
Discontinuous
Thinking

Reengineering

lies

the

notion of

41

RE-ENGINEERING
Reengineering revolves round processes rather than on structures,
jobs and tasks.
Reengineering challenges much of the wisdom of two hundred years of
industrial management and getting free from the influence of Adam Smiths
notion of breaking work into tasks, assigning tasks to people and managing.
Reengineering is not same as reorganizing or flattening or delivering an
organization reengineering may result in these.
Reengineering and TQM also have different focus.
Information technology (IT) plays a critical role in reengineering
Focus shifts from
Deductive Thinking To Inductive Thinking

42

RE-ENGINEERING
Process Centric
Redesign Ruled
Radical
Dramatic
Fragmented process and specialized structures of companies bred for an
earlier day are unresponsive to large & change in the External
environment and market
To day fragmented organizations display appalling diseconomies
Of scale quite the opposite of what Adam Smith envisioned
Inflexibility
Should Provide
Absence of customer focus
Change
Obsession with To
And
Activity rather than result
Overall
Performance

Customer Focus

43

RE-ENGINEERING
The need is urgent, the vision exists, and the environment is right.
Reengineering is no longer a choice, it is imperative for survival.
Reengineering, in fact, often involves commonly available
technology applied uncommonly well in order to achieve dramatic
improvements in process performance.
Any old system that cannot be seamlessly integrated with the new
systems has to be eliminated, because allowing it to survive beyond
its life expectancy may result in the infant morality of the reengineering project.
need to transform our enterprise which lie anchored on First
Generation systems and procedures, soaked in Second generation
perceptions and attitudes, managed through third generation
concepts using fourth generation computers to achieve Fifth
generation aspirations and longings.
44

RE-ENGINEERING
Business Process Re-engineering versus Taylorism
Product concept
Begins
Strategic
Tactical
Senior
management
Middle
Management
Operational

+
Purcha Sales
Prod
sing
Design-uction

Functional Barriers

Management Barriers
Product concept
Begins

BPR Change
From

Process
input

To
Process output

=
Product
evolves

Islands of inefficiency & secrecy

Process
output
Process
output

Product evolves

Islands of inefficiency & secrecy

Process output

45

BUSINESS CHANGE & REENGINEERING

Information
System

GRAI Conceptual Model

Decision
System

Decision
Centers

Level of
Decompo
sition
Physical
System
Operational
resources
Raw Material

Products

46

BUSINESS CHANGE & RE-ENGINEERING

signal data channel

Interactions

communication
technologies

verbal articulation
standard of acceptable behavior Purpose
Role
teamwork codes rules laws
leadership
culture Conduct

user
interface

Individual

Technology

structure
control technologies
e.g. robotics

management hierarchy
information system skill

cognitive style
knowledge
meaning
motivation
emotion
Self discipline
personal
development

Performance
vision / forecast
performance criteria
measurement
practices

Transformation

A Model of Process

47

CASE STUDY FORD MOTORS

Ford
(Bills Payable System)
Purchase

Copy of
Purchase
Order

Purchase Order

Vendor

Goods
Received
Reconcile
Correspondence

Invoice
Payment

500 People taking 6 weeks to do !

48

CASE STUDY FORD MOTORS

MAZDA

MAZDA
Computer

Direct
Link
Supply

day
EDI

Vendors

Get paid same

through
Just in- Time Production Line
Just 5 People Empowered 100 times
1
49

Mission
Envisioning
Mission, Vision,
Values, CSFs

Future state
of the
Organization
Why are you
in business?
CSF
CSF
CSF
CSF
CSF
CSF

Current State
of the
Organization

56

CSF
CSF

CSF

CSF

CSF

STRATEGIC QUALITY / BUSINESS PLANNING

Results

Critical
Success
Factors

Core
Process
Strategies

Process
Improvement
Projects

Objectives
Vision/
Mission
To move from current state to future state requires a
significant change in the way business is conducted.
Business is conducted through processes.
51

Key Processes
Assessment
Report

Organizational
Assessment

Key Processes
$ $ ROI Summary
$ $
Actions

Schedule

Commitment

52

QUALITY TEAM ROADMAP

Phase 1
UNDERSTAND
Macro Business
Process
ID
Customers
Extension And
variation

Phase 2
ANALYZE
Data Collection Strategy
For Process Analysis
Probable Causes
Sampling
Data Display
Process Measurements

Understand
Process flow
Set Priorities / Goals /
Objectivities / Cause
& Effect / Pareto
New Measures
In-Process and
at Completion

Histogram

Run Chart

Scatter
Diagram

Control Chart

Phase
IMPROVE
NO

P
YES

Causes
Identified
?

Propose
Improvements
Select & Plan
Implement
Plan

Collect and
analyze data

A
NO
C
Compare with
Objec
Benchmark
tives
& Previous results
Met?
YES
Monitor
Document
standardize
53

Forces for change

New Technology

Forces for Maintaining status QUO

Group Performance Norms

Better Ram Materials

Fear of Change

Competition from
other Groups

Member Complacency

Supervision Present

Well learned Skills

Current Level of
Performance
Fig-Force Field Diagram

Higher Level of
Performance
54

MANAGEMENT OF CHANGE
Vision

Skills

Incentives

Resources

Action Plan

Change

Skills

Incentives

Resources

Action Plan

Confusion

Incentives

Resources

Action Plan

Anxiety

Resources

Action Plan

Gradual
Change

Action Plan

Frustration

Vision
Vision

Skills

Vision

Skills

Incentives

Vision

Skills

Incentives

Resources

False
starts
55

BUSINESS PROCESS REENGINEERING

Establishment of Procedures
Documentation
Going Global..
ISO

Cha
n ge
Mgm
t.

0
90 0

Sharing Vision
Achievement of
cultural Change

TQM
Re-En
gg.
Obliteration by
elimination of
unnecessary work

I.T.
gy
e
t
a
Str

Reduction of
Paper work
Information
Empowerment
Enhanced Decision
Support

or process
Reduction of Cost /
cost reduction
response
Time
profit improvement
rapid growth

The TQM
Organizati
on

Quality
Enhancement
Work life
Enrichment

56

DIAMOND FOR BUSINESS EXCELLENCE

JIT
(Just-in-Time)
BPR
(Business,
Process,
Reengineering)

Supply
Chain
Management
TQM
(Total Quality
Management)

Information
technology
(IT)
Total Cost
Management
(TCM)

Total
Productive
maintenance

57

Annexure
Some World class Companies
Inventory Control
Westing House

Federal Express
Nissan

Marks & Spencer

Bench Marking Xerox American Express

Motorola
British Airways
IBM ICL
Billing and
American Express
British Telecom
Midland Bank

MCI

Customer Focus
Ford
Westing House
Collection Xerox GE ( Plastics)
Customer Service
First Direct (UK)

Federal Express
L Bean

British Airways

58

Annexure
Some World class Companies
Manufacturing
Design

Motorola
DEC

NCR
Ford

Employee
Suggestions

Toyota
Dow Chemical

Digital
Olivetti

Empowerment

Honds
Milliken

Xerox
Ryman's

Engineering

General Motors

Hewlett Packard

Environment
Management

3M

Dow Chemical

Flexible
Manufacturing

Allen-Bradley
Motorola

Ford (UK)
Swatch

Human Resource

Hewlett Packard
Arthur Anderson

J Wlater Thompson
Honeywell

59

Annexure
Some World class Companies
Industrial
Design

Black & Decker

Bruin

Porsche
Rayban

Information
Systems

Caterpillar
Kodak

Motorola
Marks & Spencer

Leadership

GE: Jack Welsh

Virgin: R Branson

Body Shop:
A Roddick

Logistics

Wal-Mart
Hershey Foods

Toyota
B&Q

Marketing

Proctor & Gamble

Microsoft

Bennetton
Guinness
60

Annexure
Some World class Companies
Product
Development

3M
Intel

Mars
Sony

Purchasing

Honda
Mazda

Xerox
Toyota

Quality Process

Westing House
IBM

Rolls Royce
Mercedes

R&D

AT & T
Shell

Siemens
British Aerospace

Sales
Management

Merck
Proctor & Gamble

Bennetton
61

Annexure
Some World class Companies
Self directed
Work teams

Corning
International

Xerox
Proctor & Gamble

Supplier
Management

Levi Strauss
3M

Ford
Intel

Training

Polaroid
General Electric

Mars
Arthur Anderson

Warehousing and

L Bean

Hershey Foods

(Source: Share 7 Share, David Altany, Industry Week, July

62

PERFORMANCE OF DEVELOPING COUNTRIES (1994)

Subject

Worldwide

Developing Countries

Stock Turnover
(Times Year)

75

Rejection in the Final inspections

(Per Million pieces)

0.03%

3.8%

Production Costs
(Relative)

57

100

Delivery Time from Date of Order

(Days)

78

Utilization of the Installed Capacity (%)

97

68

Added Value

67.8

39.7

Costs of Guarantee Over Sales

0.11

7.8

Source: UNDP report

63

WHICH PROCESS TO BENCHMARK?

To determine which process to benchmark, your benchmarking team
now has the task of correlating the CSFs with the critical processes that
have been identified. To do this, complete the following steps:
1.

Draw up a matrix, with the CSFs down the left-hand column and
the critical processes along the top.

2.

Working down each process column, rate the importance of each

process for each CSF using the following scale:
1 =
2 =
3 =

Low impact
Medium impact
Major Impact

Write the impact rating in the top (left) half of each box.

64

WHICH PROCESS TO BENCHMARK?

3. Now rate the performance of each critical
process using the following scale:
1 to 10
Write the process performance rating in the
horizontal column provided at the top. Find
Performance Gap
4. Multiply the CSF impact rating by the process
performance Gap for each critical process to
get the improvement priority score. Enter the
result in the bottom (right) half of each box.
65

WHICH PROCESS TO BENCHMARK?

5. Total the priority scores for each process. The result will give a
measure of the degree of importance, in terms of improvement, of
each of the critical processes. The improvement, of each of the
critical processes. The highest scoring process is the one that
should be selected as the prime candidate for the benchmarking
study.
The calculation described above is shown graphically in the diagram
below. This exercise has assumed that there are five CSFs and three
critical processes.
Rating for impact of critical
Process 1 on CSF 1
66

10-7 = 3

27

Sales

11

10-8 = 2

22

Investment Analysis

13

10-8 = 2

26

Record Keeping

10

10-6 = 4

40

Customer Services

10-7 = 3

27

Personnel Selection

10

10-9 = 1

10

Distribution & Mailing

12

10-5 = 5

60

Management info
systems

12

10-4 = 6

72

10 = Perfect Process

Priority

* Process
Performance
Gap

Process
Performance

Key Processes

workforce
Total Impact

Cost effective
operations

Marketing

2 Medium
3 High

Responsive
to customers

1 Low

Profit on
Investments

Asset security

Process
Performance
1 Inadequate
2 OK
3 Very well

Distribution
report presence

Process impact

Critical Success Factors

Skilled motivated

Rating Key:

Weighted Gap

PROCESS PRIORITIZATION MATIRX

PROCESS PRIORITIZATION MATIRX

Key Processes
1
2
3
4
5
6
7
8
9
10

68

Priority

2 Medium
3 High

Critical Success Factors

Process
performance
Gap

1 Low

Process
Performance
1 Inadequate
2 OK
3 Very well

Process
Performance

Process impact

Total Impact

Rating Key: