BENCHMARKING

PRESENTATION BY
RUKSHANA V

1
 INTRODUCTION
Benchmarking is a systematic method by which
organizations can measure themselves against the best
industry practices.
WHAT : Promotes superior performance - an
organized framework - learn how the “best in class” do
things
WHY : How these best practices differ from their own -
implement change to close the gap - tool for
continuous improvement.
HOW : The process of borrowing ideas - adapting
them to gain competitive advantage.
2
WHERE : Both manufacturing and service
organizations, including Xerox, AT&T, Motorola, Ford,
and Toyota.

3
 DEFINITION

Benchmarking is the systematic search for best

practices, innovative ideas, and highly effective
operating procedures.
Benchmarking considers the experience of others and
uses it. Indeed it is about learning from others what
they do right and then imitate it.
Benchmarking is not new and indeed has been around
for a long time.

4
Two Key Elements of Benchmarking
Measuring perfomance : Units of measure – metrics -
Expressed numerically.
Target - The numbers achieved by the best-in-class
benchmark. An organization seeking improvement
then plots its own performance against the target.
Managers : Understand why their performance differs.
A thorough and in-depth knowledge of both their own
processes and the processes of the best-in-class
organization - allows managers to organize their
improvement efforts - setting goals and objectives -
meeting them by improving processes
5
 Reasons to benchmark
A tool to achieve business and competitive objectives
Powerful and extremely effective
Decide which markets to serve and determine the
strengths to gain competitive advantage.
Help organizations develop those strengths and
reduce weaknesses.
Inspire managers (and organizations) to compete.
Time and cost efficient
Involves imitation and adaptation rather than pure
invention
Enhances innovation
6
 PROCESS

Decide what to benchmark.

Understand current performance.
Plan.
Study others.
Learn from the data.
Use the findings.

7
8
 Deciding What to Benchmark

Critical success factors : Most organizations have a

strategy that defines how the firm wants to position
itself and compete in the marketplace. This strategy is
usually expressed in terms of mission and vision
statements. Supporting these statements is a set of
critical activities, which the organization must do
successfully to realize its vision.
Critical processes are usually made of a number of
sub-processes. It is best to begin by thinking about the
mission and critical success factors.
9
 EXAMPLE : Org – 1 vs Org - 2
 Easiest in the industry to do
business with.
 By emphasizing speed of
writing policies and an
outstanding level of customer
service.
 Critical success factors : 24-
hour, toll-free call service, fast
payment of claims, database
systems on all policies held by
each customer, and reduced
cycle time.
 Benchmarking customer
service processes would have
a substantial impact on the
vision.
 Only an average performer in
terms of customer service but
intends to reduce the cost of
insurance through excellent
investment performance
 Critical success factors : hiring
and training good financial
managers, using
telecommunications to track
and act on developments in
global money markets,
development of on-line, real-
time information systems, and
expert forecasting.
 Benchmarking investment
processes would be
appropriate in this case 10
High impact areas to benchmark

Which processes are causing the most trouble?

Which processes contribute most to customer
satisfaction and which are not performing up to
expectations?
What are the competitive pressures impacting the
organization the most?
What processes or functions have the most potential
for differentiating our organization from the
competition?

11
Understanding Current Performance
Flow diagrams and cause-and-effect diagrams, and
understanding.
Careful questioning is necessary and handling
exceptions.
Unit costs, hourly rates, asset measures, and quality
measures.
Special care should be taken when using accounting
information. Bench-markers should take the time to
determine what is and what is not included in
accounting information.

12
 Planning

Benchmark planning is a learning process.

Internal - similar activities are performed in different
operating divisions.
Competitive - depends on performance relative to the
competition.
Process - benchmarking sometimes known as
functional or generic benchmarking. It is much easier
to get organizations to share information.

13
 STUDYING OTHERS
Benchmarking studies look for two types of information:
a description of how best-in-class processes are
practiced and the measurable results of these practices.
Techniques for conducting original research :
Questionnaires - ensure respondent anonymity and
confidentiality .
Site visits - opportunity to see processes in action
and for face-to-face contact with best-in-class
operators.
Focus groups - simply panels of benchmarking
partners brought together to discuss areas of
14
mutual interest.
Learning from the Data

Is there a gap between the organization’s performance

and the performance of the best-in-class
organizations?
What is the gap? How much is it?
Why is there a gap? What does the best-in-class do
differently that is better?
If best-in-class practices were adopted, what would be
the resulting improvement?

15
Outcomes of benchmark studies
(A negative gap) - External processes may be
significantly better than internal processes. Negative
gaps call for a major improvement effort.
(Parity) - Process performance may be approximately
equal. Parity requires further investigation to
determine if improvement opportunities exist.
(A positive gap) - The internal process may be better
than that found in external organizations. The finding
of a positive gap should result in recognition for the
internal process.

16
Using the Findings
The generic steps for the development and execution
of action plans are:
1. Specify tasks.
2. Sequence tasks.
3. Determine resource needs.
4. Establish task schedule.
5. Assign responsibility for each task.
6. Describe expected results.
7. Specify methods for monitoring results.

17
Pitfalls and Criticisms of Benchmarking
 Benchmarking is an improvement tool. To be effective, it
must be used properly.
 It isn’t very helpful if it is used for processes that don’t
offer much opportunity for improvement.
 Some processes may have to be benchmarked repeatedly.
 It is also not a substitute for innovation and it forces an
organization to set goals and objectives based on
external reality.
 Consumers don’t care if a process achieved a 20% year-
to-year productivity gain. They care about quality, cost,
and delivery.
18
THANK YOU

19