Benchmarking BasicsAn Introduction to Benchmarking

Dr Adrian GundyInnovation, OD & Growth

About Us

• Designed to help organisations achieve EXCELLENCE in their business initiatives.

• Through our global partnerships and member networks, Centre for Competitiveness harnesses the best practices of leading organisations and turns this knowledge into practical resources.

• Centre for Competitiveness is a network of organisations that share the same ambitions to drive excellence through the organisation and aspire to reach excellent results.

The four mechanisms we use to improve competitiveness are:

• Innovation and Creativity • Productivity Improvement  • Quality Excellence

Through Education, Training, Facilitation, Projects and Coaching

Benchmarking?

what does the term benchmarking mean to you?

Benchmarking

• with standard(s)

• with our competitors/peers

• with our own expectations

• with almost everything !

benchmarking is about making comparisons…

how do we benchmark ourselves in our everyday

lives ?

Benchmarking is everywhere

Definitions

“Benchmarking is the search for those best practices that will lead to superior performance of the company ....”

Robert C Camp

“Benchmarking is the continuous process of measuring products, services and practices against the toughest competitors or those recognised as leaders in any field.”

David Kearns

“Stealing Shamelessly”.

“Creative Swiping”.

A better definition

“ Benchmarking is the practice of being humble enough to admit that someone else is better at something, and being wise enough to learn how to match and even surpass them at it.”

APQC

Benchmarking is not

Competitive analysis.

“Number crunching”.

Site briefing and industrial tourism.

Just “copying” or “catch up”.

Spying or espionage.

Necessarily quick and easy.

BENCHMARKING=

Benchmarking should be focused on improving existing performance rather than used to justify existing

performance

European Framework for Benchmarking

STARTING ON THE WAY MATURE

EARLYDIAGNOSTIC

HOLISTICBENCHMARKING

PROCESSBENCHMARKING

•EFQM

•IIP

•GOLD STAR

•IMPR3OVE

•ISO

MODELS OFBEST PRACTICE

•WINNING MEASURES

•CAM

•PROBE

•MICROSCOPE

•CABINET OFFICE

•OPTIMUS

DATABASES

ESTABLISHINGTHE GAP

UNDERSTANDINGWHY

Benchmarking types

Performance:

analysis of relative business performance by comparing key performance indicators.

Process or Functional:

analysis of key processes and functions among best practice companies.

Internal:

analysis of internal processes / activities across units, sites etc. to gain an understanding of internal performance standards.

Informal & formal

Comparison ratio examples

• net profit margin (%)• return on capital employed (%)• debtor days • etc…

financial perspective

customer perspective• customer growth (%)• orders rejected during warranty period (%)• complaints per order (%)• etc…

• training expenditure to turnover (%)• new employees per FTE employee (%)• employees with formal qualifications (%) • etc…

learning and growth perspective

internal processes perspective• supplies delivered on time (%)• sub-standard supplies (%)• rework (%)• etc…

Comparison ratio examples

Why benchmark?

Improve profits / effectiveness.

Accelerate and manage change.

Set stretch goals.

Achieve breakthroughs / innovations.

Create sense of urgency.

Overcome the “Not Invented Here” syndrome.

See “outside the box”.

Understand world class/best performance.

Better & Best Practice

Resource issues:

• level of improvement needed

• degree of change organisation can cope with

• time scales

Cultural issues:

• organisational

• local

• national

• international

Innovation

Fast changeover .... Racing pit crews

Emergency room response .... Domino’s Pizza

Programme management .... Yacht crew

Shell casing manufacturing.... Lipstick tube manufacturing

Survival

Example: Supply Management

Company AWorld Class

Supplier lead time 150 days 8 days

Order input time 6 mins 0 min

Late deliveries 33% 2%

Shortages/Year 400 4

Suppliers/Buyer 34 5.3

The process

1Plan

3Analyse

2Collect Data

4Adapt &Improve

Practices Vs Measures

Practices

Measures

What issues emerge

Pain at discovering gaps:

• denial

• disbelief

• dismay

Confidentiality concerns.

Lack of time and resources; 8 - 10 hours per week.

Inertia and resistance to change.

1Plan

3Analyse

2Collect Data

4Adapt &Improve

Phase 1

Plan:

Identifying what to benchmark, selecting theteam, developing a project plan.

What to benchmark

Who are our customers and what are their requirements?

What is the key business process / activity that is most in need of improvement?

How are you performing on the critical success factors in your business?

Where are your competitors gaining ground on your company?

What complaints are your customers making that indicate areas for rapid improvement?

Have your employees made any suggestions for improvements that have not been pursued but have a promise of performance breakthroughs?

Where is improvement required to support organisational goals?

What to benchmark

Or put more simply

“What’s really hurting your organisation?”

1Plan

3Analyse

2Collect Data

4Adapt &Improve

Phase 2

Collect Data:

Develop and understand yourown activities, develop keymeasures, identify benchmarkpartners

Key elements

Develop and understand your own activities.

Develop key measures.

Identify potential benchmark partners.

Determine appropriate collection methods.

Collect data.

Review of the collect phase.

Understanding of own activities

C - cost.

H - headcounts.

A - activities.

R - roles/responsibilities.

T - troubled areas/issues.

S - structure.

It may be useful to MAP the process / activity

to be benchmarked.

Collecting data

• Develop measures

Order Fulfilment

Total cycle time 33 working days = 100%

Operation time 48 hours = 18%

Why?

“To ensure like for like comparison”

Collecting External Data

Who’s good practice?

Collect data

Identifying benchmarking partners

Checks:•Reputation•Awards (EQA, MBNQA)•Companies with continuous excellent results

Questions:

•Which companies?

•Which industries?

•Who can help find

partners?

Information Sources:•Internal experts•Literature•Associations•Consultancies•Universities•Databases•Self Assessment

Collect data byquestionnairetelephone surveysite visit

1Plan

3Analyse

2Collect Data

4Adapt &Improve

Phase 3

Analyse:

Identify causes ofperformance gaps,identify Best Practices,Methods and Enablers.

Analyse phase

Normalise data - scale effects.

Compare performance data and practices.

Identify causes of performances gap.

Project future performance levels.

Identify potential Opportunities for Improvement (OFIs).

Key points.

1Plan

3Analyse

2Collect Data

4Adapt &Improve

Phase 4

Adapt & Improve:

Publish findings, createan improvement plan,execute the plan.

Adapt and improve

Assess applicability of OFI’s.

Develop Improvement Plan.

Develop Communications Plan.

Implement Plans, monitor and review.

Recalibrate.

Review of adapt and improve phase.

Managing Change

Change

VISION

SKILLS

RESOURCES

GOALS & INCENTIVES

ACTION PLAN

CONFUSION

ANXIETY

GRADUAL CHANGE

FRUSTRATION

FALSE STARTS

Conclusions

Success Factors

Do the right study (something important).

Be committed to implement the results.

Choose and empower the right teams.

Know your own process first.

Choose the right partner.

Verify the results of implementation.

General mistakes

Leaving your own process unexamined.

Scope - Parameters too broad.

Metrics V’s Processes / Activities.

Lack of management or team commitment.

Insufficient homework - wrong benchmarking partners.

Ignoring comparison outside your industry.

Failure to follow-up and implement findings.

The value

Benchmarking

Challenges current thinking

Brings an external focus to strategic planning and target setting

Emphasises the need to adopt a process focus

Further Information Contact:

DR ADRIAN GUNDY

+44(0) 28 90737950

adrian.gundy@cforc.org