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BenchmarkingBenchmarking

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Benchmarking isBenchmarking is

Measuring your performance against thatMeasuring your performance against that

of the bestof the best--inin--class companies,class companies,

determining how the bestdetermining how the best--inin--class achieveclass achievethose performance levels, and using thethose performance levels, and using the

information as a basis for your owninformation as a basis for your own

companys targets, strategies, andcompanys targets, strategies, and

implementation.implementation.L.Pryor, Benchmarking: A Self Improvement Strategy, Journal ofL.Pryor, Benchmarking: A Self Improvement Strategy, Journal ofBusiness Strategy,Business Strategy,

Nov.Nov.--Dec. 1989.Dec. 1989.

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BENCH MARKING CONCEPT

What is our

performance level

How do we do it?

What are others

performance level?

Creative

Adaptations

Break Through

Performance

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Types of BenchmarkingTypes of Benchmarking

Comparison:Comparison:

InternalInternal Best in FirmBest in Firm

CompetitiveCompetitive Best in IndustryBest in Industry World ClassWorld Class Best in WorldBest in World

Form:Form:

Performance BenchmarkingPerformance Benchmarking

Process BenchmarkingProcess Benchmarking

Strategic BenchmarkingStrategic Benchmarking

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Performance BenchmarkingPerformance Benchmarking

Analysis of relative business performance amongAnalysis of relative business performance amongcompetitorscompetitors

Comparison is internal or industryComparison is internal or industry Pricing, quality, technical features, performancePricing, quality, technical features, performance

characteristicscharacteristics

Resource commitment lowResource commitment low Usually through 3Usually through 3rdrd party intermediaryparty intermediary

Global Purchasing Benchmarking InitiativeGlobal Purchasing Benchmarking Initiative

Construction Industry InstituteConstruction Industry Institute

Metrics Issue: Do metrics capture the wholeMetrics Issue: Do metrics capture the wholestory?story?

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Process BenchmarkingProcess Benchmarking

Analysis of most effective practices on keyAnalysis of most effective practices on keywork processeswork processes

Comparison is usually World ClassComparison is usually World Class Distribution, order entry, procurement.Distribution, order entry, procurement.

NASCAR pit crewsNASCAR pit crews

Resource commitment is highResource commitment is high

Usually conducted by teams from processUsually conducted by teams from processareaarea

Metrics Issue: What are important metricsMetrics Issue: What are important metricsfor process? (Intent)for process? (Intent)

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Strategic BenchmarkingStrategic Benchmarking

Analysis of alternative competitiveAnalysis of alternative competitive

strategiesstrategies

Comparison is World ClassComparison is World Class Southwest Airlines, Dell ComputersSouthwest Airlines, Dell Computers

Resource commitment is moderateResource commitment is moderate

Usually conducted by benchmarking analystUsually conducted by benchmarking analyst

Metrics Issue: Are metrics comparable?Metrics Issue: Are metrics comparable?

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The Benchmarking ProcessThe Benchmarking Process

Project selectionProject selection Goal and scopeGoal and scope

Understanding current processUnderstanding current process -- metricsmetrics

Selection of partner or clearinghouseSelection of partner or clearinghouse Data collectionData collection -- metricsmetrics

Assessment and recommendationsAssessment and recommendations

Planning the changePlanning the change

ImplementationImplementation

RecalibrationRecalibration update the metricsupdate the metrics

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Xeroxs 10Xeroxs 10-- Step ProcessStep Process

1.1. Identify what is to beIdentify what is to be

benchmarkedbenchmarked

2.2. Identify comparativeIdentify comparative

organizationsorganizations

3.3. Determine dataDetermine data--

collection method andcollection method and

collect datacollect data

4.4. Determine currentDetermine current

performance levelsperformance levels

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5. Project future performance5. Project future performancelevelslevels

6.6. Communicate benchmarkCommunicate benchmark

findings and gainfindings and gainacceptanceacceptance

7.7. Establish functional goalsEstablish functional goals

8. Develop action plans8. Develop action plans9. Implement specific actions9. Implement specific actions

and monitor progressand monitor progress

10. Recalibrate benchmarks10. Recalibrate benchmarks

Xeroxs 10Xeroxs 10-- Step ProcessStep Process

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Benchmarking PitfallsBenchmarking Pitfalls

Project not aligned with competitiveProject not aligned with competitive

strategystrategy

Outcome cannot be adequately measuredOutcome cannot be adequately measured Scope of project too largeScope of project too large

Omission secondary but importantOmission secondary but important

measuresmeasures

Failure to establish a baselineFailure to establish a baseline