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Benchmarking Benchmarking: Shared Learnings for Excellence
American Productivity & Quality Center (APQC), July 1997, Pages: 77
During the past decade, benchmarking has proven to be an effective
tool for achieving business objectives. Customers today demand excellence.
In response to this hunger for top-quality products and services,
companies are searching for “best practices” they can use to design new
processes. No one has the time or resources to reinvent solutions, so
organizations benchmark for new ideas and new insights to give them the
competitive edge.
Seven key findings resulted from this comprehensive study on organizations’
current benchmarking practices. The findings fall into three
general categories: process improvement, resources, and commitment.
The findings will be explored further, with graphs and company examples,
in the remainder of this report.
Process Improvement
1. Benchmarking is most powerful when it is part of a larger change
initiative as a continuous improvement tool.
2. Only a few organizations that benchmark have a formal process in
place to widely transfer knowledge of best-practice data, though many
informal vehicles are used. The research confirms that benchmarking is most powerful when considered and used as a tool in the continuous improvement
toolbox. It is most successful if it is part of a larger change initiative. In
response to this, the study identified seven reasons that organizations
use benchmarking to support a larger change initiative.
Nearly a quarter of the respondents use benchmarking as part of
the Malcolm Baldrige National Quality Award assessment process for
internal improvement. The Baldrige criteria identify the need to look
outside one’s organization, which often prompts the use of benchmarking.
This correlates with Apqc’s 1995 survey results where 24 percent
of the respondents were using the assessment to identify benchmarking opportunities.
Organizations in our study also admit they don’t have a “formal”
process in place to transfer knowledge of best-practice information,
though 42 percent say they have some approaches in place. Many times
the findings are shared just within the project team or department and
not spread throughout the organization. The majority of the advanced survey group indicate they are moving toward developing a formal method of knowledge transfer.
3. Organizations rarely budget specifically for benchmarking. Costs
are included in project budgets.
4. The majority of surveyed organizations have a benchmarking
group that provides assistance, training, and guidance when
needed or asked.
5. The primary challenges to benchmarking are time and resources.
Benchmarking resources play a large part in the success of an organization’s
benchmarking efforts. Without the time and resources devoted
to the project, it’s difficult to receive the benefits from such a powerful
opportunity for improvement.
Respondents to current survey reveal that more than 60 percent
of our respondents spend less than 20 percent of their time benchmarking.
They hold all kinds of titles such as benchmarking champion,
project manager, and benchmarking designated participant. In today’s
fast-paced world with limited time and resources, organizations cannot
benchmark everything. Companies are selectively choosing benchmarking
when they can show it will directly impact the organization’s
profitability.
Survey results also uncovered that companies are rarely tracking the
financial measures from benchmarking studies per se. Companies are now
integrating benchmarking into the larger context of continuous improvement
and rarely budgeting for benchmarking separately. Instead, benchmarking
costs-and benefits-are rolled into specific project budgets where
benchmarking is perceived to be a tool that affects the bottom line.
Commitment
6. Senior management is supportive of any tool that enhances the
bottom line.
7. Practitioners plan to continue using benchmarking at about the same
pace in the future.
Just as in the case with resources, benchmarking studies are doomed
to fail without commitment from within the organization. Survey
respondents reveal that senior management tends to support overall
process improvement, which typically includes benchmarking. The
main goal is that it affects the bottom line or accomplishes the mission
of the organization. In work helping organizations conduct benchmarking, it has
been challenging to provide executives the yardsticks or “benchmarks”
they so desperately want to calibrate their organizations’ performances.
This information leads to goal setting for the future. The challenge is not
to collect the information but to help executives understand the context
and processes that produced those numbers. Many times the information
is misinterpreted and not used in the proper manner.
Two of the case studies included in this report are excellent examples
of senior management support and understanding of benchmarking.
At Bell Canada, for example, customer data confirmed that bench-marking was the appropriate improvement methodology to identify breakthrough enablers for significant change. As a result, the benchmarking team had the full support of the executive champion to begin the benchmarking study. “Because we had support from top management, it was easier,” says Bell Canada’s benchmarking facilitator. “Everything came together to contribute to the success of this benchmarking project.” Amgen also was fortunate to garner executive commitment for benchmarking. In fact, Amgen’s senior leader, Stan Benson, was so
supportive of benchmarking that he asked each of his functional departments
to think about what they wanted to benchmark for improvement.
“Our vice presidents were very impressed by the results from
our first benchmarking study,” says Amgen’s team leader. “We’re fortunate
to have that kind of support.” Benchmarking practitioners in the survey say they plan to continue using benchmarking at about the same pace in the future, though it varies from one organization to the next. Benchmarking
will be used by more people in the next few years because it is fundamentally
a process of learning and change that is quickly becoming
assimilated into how organizations adapt and improve. And through its
foreign partnerships with organizations like European Foundation for
Quality Management and the Hong Kong Benchmarking Clearinghouse, sees benchmarking spreading more rapidly around the globe. “Our members want us to help their far-flung locations have the same access and assistance that their U.S. operations enjoy,” O’Dell says.
Two of the case studies included in this report, TNT UK Ltd. and
GE Medical Systems (Gems), serve as perfect examples of benchmarking
outside the United States. TNT UK illustrates an informal
European approach to benchmarking that concentrates on implementing
recommendations quickly. TNT focuses on getting results
rather than documenting the process due to the competitive nature of
its ever-changing industry. The case study on Gems provides some context for adapting best practices to create a global organization. Before benchmarking, Gems consisted of three independent logistics organizations around the world
that collectively were not world class. After implementing its global
process teams and global champions, the organization has saved a total
of $21 million in facility, personnel, and inventory reductions. Its number
of warehouses have decreased by half, and Gems has the capability
to view 99 percent of its inventory. Culturally, Gems is communicating around the world on a daily basis and proving to be a happier organization. Benchmarking truly turned this global organization around with real global solutions.
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