1. Rachal Roach Tim Hyder Chris Green
Chapter 8 Benchmarking
Rachal Roach
Tim Hyder
Chris Green

2. Introduction
Book definition: Benchmarking is a systematic method by which organizations can measure themselves against the best industry practices
Benchmarking is a standard that companies compare themselves to and strive to be that good

3. Benchmarking What is your definition of benchmarking?
What is the process for benchmarking?

4. Benchmarking Concept What is our performance level? How do we do it?
What are others' performance levels?
How did they get there?
Creative
Adaptation
Breakthrough Performance

5. Benchmarking Concept Concept has been around for a while
2 Key elements
1) Units of measure (to measure performance)
2) Managers need to understand why their company's performance differs

6. Reasons to Benchmark Promotes continuous improvement
Makes companies search for the best practices, innovative ideas, and highly effective operating procedures
Can notify a company if it has fallen behind the competition
Inspires managers to compete
Allows goals to be set objectively

7. Reasons to Benchmark Weaknesses
Organizations must continue to innovate as well as imitate.

8. 6 General Steps to Benchmarking
1) Decide what to benchmark
2) Understand current performance
3) Plan
4) Study others
5) Learn from the data
6) Use the findings

9. Deciding What to Benchmark
Think about the mission and critical success factors
Decide the scope
Devise charts that will pin point the exact problem
Decide on a numerical measure to show improvement

10. Understanding Current Performance
Understand and document current processes
Form a benchmarking team
Decide on a way to numerically measure findings

11. Planning
Decide what type of benchmarking to perform (internal, competitive, or process)
Choose the type of data to be collected
Devise a method of collection
Identify which organizations to use as your benchmarks
Make a timetable to adhere to for each task
Have a desired output for the study

12. Studying Others Use internal sources Apply data in the public domain
Utilize original research
Combining all or some of these

13. Learning from the Data
Is there a gap between the organization’s performance and the performance of the best-in-class organization?
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?

14. Learning from the Data Studies can reveal 3 outcomes: Negative gap
External process better than internal processes
Parity
Process performance approximately equal
Positive gap
Internal process better than that found in external organizations

15. Learning from the Data At least two ways to prove a superior practice:
Analyzed quantitatively
Summary measures and ratios (activity costs, return on assets, or customer satisfaction levels)
Market analysis
Does the market prefer one process over another?
Price outside services

16. Using the Findings
When a benchmarking study reveals a negative gap in performance, the objective is to change the process to close the gap
Two groups must agree on the change:
Process owners (those who run the process)
Upper Management (incorporating changes and providing resources)

17. Using the Findings Generic steps of Action Plans: Specify tasks
Sequence tasks
Determine resource needs
Establish task schedule
Assign responsibility for each task
Describe expected results
Specify methods for monitoring results

18. Using the Findings
Goals and objectives should be consistent with the execution of the action plan so that the end result is process superiority
The best results are obtained when the process owners fully participate in the design and execution of the plan

19. Using the Findings The next step is to repeat the benchmarking process
The benchmarking process must be used continuously to pursue emerging new ideas

20. Pitfalls & Criticisms Idea of copying others
How can an organization be superior if it does not innovate to get ahead? How can an organization even survive if it loses track of its external environment?
Not a strategy or business philosophy
It is an improvement tool
Not a substitute for innovation
It is a source of ideas from outside

21. Pitfalls & Criticisms Avoid – Benchmarking for the sake of it
Focusing entirely on comparisons of performance measures rather than the processes and activities that enable the achievement of good practice
Expecting that benchmarking will be quick or easy

23. Questions for Discussion
What are the six core techniques of the benchmarking process?
1. Decide what to benchmark
2. Understand current performance
3. Plan
4. Study others
5. Learn from the data
6. Use the findings

24. Questions for Discussion
Efficiency has been defined as “doing things better” and effectiveness as “doing better things.”
Describe how benchmarking can be used to improve both efficiency and effectiveness…

25. Questions for Discussion
Explain how an organization might benefit from benchmarking organizations in a completely different industry…

26. Questions for Discussion
Identify and explain the three types of benchmarking…
In what circumstances would each type be most appropriate?

27. Questions for Discussion
How are critical success factors important in benchmarking?

28. Questions for Discussion
Benchmarking studies are a search for two types of information –
An understanding of best-in-class processes
The metrics that result
Which piece of information is more important and why?

29. Questions for Discussion
Why is it important to understand internal processes before studying those of other organizations?
What tools are useful in examining internal processes?

30. Questions for Discussion
Who in the class has experience in the benchmarking process?

31. Thanks for your time!
Rachal
Tim
Chris