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Weekly UpdatesEXECUTIVE SUMMARY
The focus of this article is to show how a thorough understanding of organizational strategy and deployment of the strategy into consistent functional strategies is critical for improving the effectiveness of a benchmarking process. The article examines the impact of managerial positions and organizational sizes on utilization of strategic and operational benchmarking performance measures. Statistical results indicate evidence of misalignment between organizational mission and goals, competitive priorities, and manufacturing performance objectives. Evidence of miscommunicatian among managers at various levels, lack of proactive strategy to develop organizational core competencies, and inconsistent decisions with respect to managerial positions and organizational sizes is also the result of the article. Successful resolution of such inconsistencies is crucial before committing resources to benchmarking activities.
Key words: Integrated, Benchmarking, performance Measures.
INTRODUCTION
Benchmarking can be defined as a process where an organization tries to learn from the best-inclass organizations, determines how the best-in-class achieve those performances, and utilizes the best practices to their own organization (Watson, 1992, 1993; Camp, 1989; and Whiting, 1991). During the last two decades, world-class organizations have utilized benchmarking to improve aspects of their competitive advantages such as cost, quality, delivery, and customer service. Bogan and English (1994) stated benchmarking as a flexible tool that can be used for gradual continuous improvement, as well as for major changes of process reengineering. Benchmarking is an effective means for learning and change because it exposes employees to new approaches, systems, and procedures (Welch, 1993; Kuebler, 1993). Deming (1982) and a number of other quality advocates (Graham, 1993; Ishikawa, 1985; Venetucci, 1992) have strongly recommended the use of benchmarking as an essential component of continuous improvement.
The use benchmarking as an effective quality improvement tool was started by Xerox in the early 1980's to overcome severe international competition. Also, since 1987, benchmarking has been a major component of the Malcolm Baldrige National Quality Award criteria. According to Began and English (1994), since 1987 out of a total of 1000 Baldrige points benchmarking have consistently influenced more than 500 points. No other quality elements such as process management, employee involvement, and quality planning, have had such a broad influence on the Baldrige criteria than benchmarking. More recently, the practice of benchmarking is being widely used for six sigma process and for organizations seeking ISO 9000 certification.
LITERATURE REVIEW
Since the early 1980's, application of banchmarking in various areas of businesses ranging from manufacturing to health care, marketing, supply chain, human resources, and accounting have been widely reported. Harrison (1999) presents a detailed analysis of the evolution of different aspects of benchmarking activities. A comparison of the Xerox and Kodak benchmarking process has been reported by Bogan and English (1994). Although the two benchmarking methods utilize different number of steps, their overall logic is quite similar. Zairi and Whymark (2000) report successful results of the application of benchmarking at British Royal mail. Applications of benchmarking to world-class purchasing and to U.S. service sectors have been reported respectively by Newman, Hanna, and Duffett (1995) and Roth et al. (1997). The use of benchmarking as an effective organizational learning tool has bean presented by Sange (1990), Garvin (1993), Ford and Evans (2001), Smith (1997), Hambly (1997), Watson (2001), Chan and Paetsch (1995), O'Dell and Grayson (2000), and Evans and Dean (2003). A comprehensive list of legal and ethical issues of benchmarking is presented by Brue and Greg (2002), Vaziri (1992), and Bogan and English (1994).
Although the content of the above articles is diverse, their primary focus, however, has been on short term financial and operational aspects of benchmarking. These articles generally address the technical aspects of departmental benchmarking along with limited success stories. As argued by Furey (1987), Goldwasser (1995), Kaplan (1992) and Talluri and Vazacopoulus (1998) benchmarking is more than comparative analysis of financial and operational measures from one company to another. To be effective, benchmarking activities need to be integrated into organizational strategy and the process employs a broad range of performance measures consistent with organizational strategy.
The intent of this article is to examine organizational strategy and evaluate consistency of the decisions at various organizational levels. Investigating the impact of managerial positions and organizational sizes on the deployment of strategic and operational benchmarking performance measures is another objective of the article. Specifically, the focus of the article is to answer the following questions:
1. Are organizational goals and objectives consistent with their core competencies?
2. Are organizational competitive priorities consistent with their goals and objectives?
3. Are organizational competitive priorities consistent with their core competencies?
4. Are manufacturing performance objectives consistent with organizational competitive priorities?
5. Are managerial positions and deployment of benchmarking performance measures consistent?
6. Are organizational sizes and deployment of benchmarking performance measures consistent?
BENCHMARKING AND INTEGRATED PERFORMANCE MEASUREMENT
Total quality management (TQM), just-in-time systems, globalization, and a number of other important events during the last two decades have helped organizations to recognize the importance of integrated performance measurement in managing complex processes. Since performance measurement is at the core of organizational success, managers across various industries have recognized the importance of managing processes and the truth that what gets effectively measured is what gets managed and improves. As mentioned earlier, special focus of Malcolm Baldrige National Quality Award and ISO 9000 on benchmarking and performance measurements is a clear indication of the critical role of these elements in managing and improving organizational processes.
Traditionally, benchmarking activities in the past have focused on performance measurements that contributed primarily to short-term financial results. How the organization achieved those results and their impact on the entire organization was secondary Eccles (1991) and Eccles and Nohria (1992). Today, managers understand that focus on short-term financial results without consideration to overall organizational strategy could produce devastating long term results. As a result, organizations are learning to manage the system in a way that crosses traditional departmental boundaries. In this new horizontally integrated system, organizations need to accept a long-term perspective and to utilize an integrated financial and nonfinancial performance measures to carefully improve the competitiveness of the entire organization. The approach requires that benchmarking organizations develop a complete understanding of their own integrated business strategy and deployment of the strategy into functional strategies. This process will ensure that there is a consensus within the organization about long term and short-term performance measures that are consistent with organizational mission and goals Day (1992), Papke-Shields et at. (2000), and Madigan (1992). By using measurable results with focus on the entire organization, integrated performance measurement is able to determine progress toward long term goals and objectives
METHODOLOGY
A questionnaire-based mailed survey was used to examine the above questions. The part of the survey related to this article contains a series of questions on the use of strategic and operational benchmarking factors. Strategic questions are concerned about organizational mission and goals, as well as attitude toward customers, competition, technology, globalization, TQM, and employee developments. Operational items are related to specific technical performance measures such cost, quality, and delivery.
The target population for this study consisted of manufacturing firms in Midwestern United States. A sample of 500 manufacturing firms with more than 50 employees was chosen from manufacturers' directories of the states of Illinois, Indiana, Ohio, Michigan, and Wisconsin. The sample covers organizations in a variety of industries ranging from fabricated metal, communication, electronics, automotive, toots, chemicals, rubber, and paper products. In addition to general organization and managerial profile items, the survey contained series of questions regarding organizational goals and objectives, competitive priorities, manufacturing performance objectives, and manufacturing action plans. Out of 91 completed surveys received, 84 surveys were usable resulting in a response rate of 17 percent.
The survey data indicates the majority of respondents had various high level managerial positions from organization with less than 500 employees. Presidents and vice presidents accounted for 29 percent and plant managers accounted for 30 percent of the sample. About 35 percent of the sample had other managerial positions such as operations/production managers, quality managers, and the remaining 6 percent were production line supervisors. In terms of manufacturing experience, about 28 percent of the respondents had between 10 to 20 years and 60 percent had more than 20 years of manufacturing experience.
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