Benchmarking - Uncovering Best Practices and Learning from Others

By: Dave Trimble

"Competitor and customer benchmarks may be the most underused motivators in the management's administrative tool kit"
—Hamel and Prahalad, Competing for the Future

Overview

Have you ever asked yourself these questions:

"How are we doing?"

"Are we tracking the right measures?"

"How do we compare with others?"

"Are we making progress fast enough?"

"Are we using the best practices?"

Benchmarks and benchmarking can provide you with facts to answer these questions. They can provide you with data to show you what can be achieved. Perhaps more important, benchmarking can tell you how you can achieve the same type of results! In short, benchmarking gives you the external references and the best practices on which to base your evaluations and to design your work processes.

This tutorial provides an overview of how to implement benchmarking in your organization specifically, what you need to do and how to go about it. The tutorial starts with an introduction and some definitions and then gives a high level view of a benchmarking process, from both a results and a process focus.

Benchmarking: What is it?

"... benchmarking ...[is] ...'the process of identifying, understanding, and adapting outstanding practices and processes from organizations anywhere in the world to help your organization improve its performance.'"
—American Productivity & Quality Center

"... benchmarking ...[is]... an on-going outreach activity; the goal of the outreach is identification of best operating practices that, when implemented, produce superior performance."
—Bogan and English, Benchmarking for Best Practices

Benchmark refers to a measure of best practice performance. Benchmarking refers to the search for the best practices that yields the benchmark performance, with emphasis on how you can apply the process to achieve superior results.

All process improvement efforts require a sound methodology and implementation, and benchmarking is no different. You need to:

1. Set objectives and define the scope of your efforts
2. Gain support from your organization
3. Select a benchmarking approach
4. Identify benchmarking partners
5. Gather information (research, surveys, benchmarking visits)
6. Distill the learning
7. Select ideas to implement
8. Pilot
9. Implement

The Code of Conduct

Benchmarking can be fraught with potential problems, ranging from simple misunderstandings to serious legal problems. To minimize the likelihood of these types of difficulties, we strongly recommend that teams follow the simple Code-of-Conduct scripted by the International Benchmarking Clearinghouse.

Legality

Don’t enter into discussions or act in any way that could be construed as illegal, either for you or your partner. Potential illegal activities include, for example, such simple actions as discussing costs or prices, if that discussion could lead to allegations of price fixing or market rigging. The process of how you arrive at prices may be acceptable, while discussion of actual costs and prices may not.

Exchange

Don’t ask questions of your benchmarking partner that you are not willing to answer yourself ¾ to the same level of detail. It helps to fully disclose your level of expectations with regard to the exchange early on in your discussion.

Confidentiality

Treat the information you receive from your partners with the same degree of care that you would for information that is proprietary to your organization. Many organizations may not even want you to disclose that you have had such discussions with them. In this regard, you may want to consider entering a non-disclosure agreement with your benchmarking partner; consult your legal staff.

Use of Information

Don’t use the benchmarking information you receive from a partner for any purpose other than that to which you have agreed.

Contact

Don’t go beyond the mutually agreed-on procedures that govern whom you will interact with in your partner’s organization. Comply with their wishes and culture.

Preparation

Be prepared for your meetings and exchanges. Doing so increases your efficiency and effectiveness, and that of your partners as well. It promotes an air of professionalism.

Completion

Don’t make commitments you can’t or don’t keep. Complete your work to everyone’s satisfaction, including that of your partner.

Understanding

Benchmarking’s Golden Rule: treat your partner and their information the way you’d like them to treat you and yours.

Types of Benchmarking

There are essentially three types of benchmarking: strategic, data-based, and process-based benchmarking. They differ depending on the type of information you are trying to gather. Strategic Benchmarking looks at the strategies companies use to compete. Benchmarking to improve improvements in business process performance generally focuses on uncovering how well other companies perform in comparison with you and others, and how they achieve this performance. This is the focus of Data-based and Process-based Benchmarking.

Sources of Information

Isn't really useful and important information proprietary (private)? Not always.

First, there's tons of information out there in the public domain, some because, by law, it has to be disclosed and others, by choice, because of a company's desire for publicity. Second, people are proud of the good things they are doing and are usually quite willing to talk about them in some context, whether it's a technical paper, a panel discussion, or in sales information to vendors and customers. And third, you're not the only person who has a problem that needs to be solved. Exchanging information in a benchmarking partnership allows each of you to gain what you need for the price of sharing what you already have.

Who can you get data from? Look at getting information from other divisions, competitors, other companies with divisions that perform the same functions that you are, and vendors, an often over-looked source, as well as from more traditional information sources of "secondary data" such as libraries and data bases.

For example, you could go from the secondary-data analysis directly to several telephone interviews. You could stop there, or proceed to a teleconference and then a site visit, go directly to a site visit, if that's deemed appropriate.

Note the relationship and the flexibility that results with a multi-faceted approach (benchmarking is not just visiting others; it's not industrial tourism). It's gathering information about best practices by any and all appropriate means and applying it to help achieve superior performance.

A Benchmarking Process

Now that we have the basic objectives and the definitions, we need a process to achieve the objectives; such a process provides the means for achieving the ends outlined by our objectives.

Defining and Planning the Project

You need to define the project in precise terms and develop a complete, yet simple, project plan. Start with a preliminary plan and build it over time to the appropriate level of preciseness. Such a plan should include a way to measure your success. A project like benchmarking is like (and should probably be managed like) any other project you undertake. Be sure to include in your project plan items such as project objectives, scope, approach, timeline, and budget.

Understanding Where You Are

In order to utilize information about how others are doing, you need to first understand how you are doing or, at least, how you would like to be doing. This requires that you have performance measures or Metrics, so that you can judge how you are doing.

Given these measures, you can use them to help organize your project and to select your benchmarking partners. You can use these measures to guide your search for secondary data, to help generate your preliminary questionnaire, and to conduct a preliminary survey to narrow the field in your search for potential partners.

Understanding Where You Can Be

Based your preliminary studies, you need to select potential partners, ascertain their willingness to participate, and develop your final questionnaire. The questions should help you focus on the specifics of what you want to learn.

To get the most out of an exercise like this you have to have the "right" people participate, both from your team, as well as those of your partners. The right people means the best combination of technical and people skills so that you can both elicit and understand the information you are gathering.

Once you have your team, you can proceed to schedule and conduct the information exchanges with the several partners you've identified.

Two points to remember:

1. Benchmarking is a search for how, as well as how much. To replicate results in your organization you need to understand how they have been achieved by others, and
2. Benchmarking need not require you to visit others. You can achieve the results in many ways, depending on the time and resources available to you. The following chart outlines several alternatives for conducting exchanges. As more time and resources are available and as the need increases, you can elect to use the more sophisticated and time-consuming processes.

It is through these processes that you gather the data to determine where you can be.

And the next question is, "How soon can I expect to see some results?" The following table gives some ideas of time frame, based on our experience.

How Soon You Need Results	Benchmarking Alternatives
Within a week	Reading library research Surfing the web Telephone interviews
One to two weeks	Research by a professional librarian Hire a consultant
Three to six weeks	Rapid Benchmarking* Traditional site visit (2 or 3 sites only)
Two or more months	Traditional benchmarking

Identifying Lessons Learned

Now that you know how others are doing, you can use the data to understand how you can improve. The most straight-forward way is to assess where there are gaps between your performance and that of your benchmarking partners. Further, you can use these assessments to identify best practices, in particular ones you'd like your organization to adopt.

Applying the Lessons Learned

You are ready to begin implementing what you've learned. This is the "next step."

This is where the rubber hits the road. You've learned what others are doing and how they are doing it. You need to ensure that all relevant staff in you reorganization is aware of and can make use of what you've learned. Your report and your presentations may in fact be one of the most important activities in your project.

Summary

We've defined benchmarking and provided an overview of a process that you can follow. The process allows you to understand where you are and where you can be, and then provides a view of how you can identify the lessons learned in your study. These are the best practices. They are what you can form the basis for improving your process for moving it to where it needs to be.

source: http://www.isixsigma.com/