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Weekly Updates* Ongoing process, not a one-time project - Some organizations have difficulty treating benchmarking as an ongoing process: It should not be viewed as a onetime project. In addition, some companies think a tactic not invented by them may be inferior. Furthermore, some companies do not benchmark because it exposes their weaknesses. Another common problem with benchmarking is failing to expand the scope of companies studied. It's best to benchmark companies in all industries, including those outside the user company's industry.
Costs of benchmarking
One benchmarking myth is that it's too expensive. Benchmarking does come at a price, but costs vary considerably. Usually there are travel expenses and indirect costs - including employee time devoted to team meetings and travel - but with careful planning, benchmarking costs can be kept to a minimum.
A way to control costs is to tackle benchmarking one step at a time. It is not an extremely difficult or complex process: Companies can reduce financial stress by examining one process at a time. Actually, costs can be controlled if the company benchmarks in degrees and defines very narrow areas to explore.
To minimize costly meeting and travel time, a company must work efficiently and communicate effectively. The company should do its homework and know specific problems before employees visit other companies. The trip should be clearly defined: what to look for and what to accomplish. Make this information known to the other company and, since benchmarking is a two-way street, it's important to understand the other company's needs and decide what you're willing to share with them.
Another benchmarking misconception is the cost of giving other companies too much total quality processes information. Employees providing information should be smart about it and not give away the heart and soul of the company. As a whole, distributing information and processes helps our country become more competitive in the global marketplace.
In a 1995 survey of benchmarking exchange members, benchmarking was one of the top five most popular current business processes. Resources and information are now more affordable and accessible. In 1992, the average cost of conducting one benchmark study was $50,000. By 1996, the average cost had dropped to $5,000. With the cost of benchmarking falling rapidly, its use is increasing. The knowledge gained is well worth the small investment.
Adapting to the benchmarking process
It's often assumed benchmarking is essential for only a small number of businesses; this is not the case. Benchmarking is useful for all types of businesses. Measurement - benchmarking's key aspect - lets a company know where it stands today and where it will be tomorrow. This is extremely important in all business settings - whether manufacturing or service-oriented. Whether dealing with products or processes, it allows businesses to strive for continuous improvement.
As mentioned earlier, many companies use the benchmarking process: Avon Products, Exxon Chemical, Microsoft, Ford, and General Motors. But Xerox is known as the pioneer of benchmarking. By benchmarking, Xerox cut quality problems by two-thirds, cut manufacturing costs in half; cut development time by two-thirds; and - while increasing volume - cut direct labor by 50 percent and corporate staff by 35 percent. All improvements were not a direct result of benchmarking: The improved process and climate indirectly improved the rest of the organization.
General Motors (GM) compares itself to the best-in-class company. This benchmarking shows GM where they are going wrong and that it is possible to do it better. The company compared its labor hours per vehicle to Ford's: GM had 30 labor hours per vehicle; Ford only had 19 - a dramatic gap. GM also benchmarked from Toyota. Toyota was superior in four areas: defects per vehicle, warranty cost per vehicle, order response time, and fasteners per car. GM needed to improve in all these areas for future success. The company also looked at Suzuki, regarded as a leader in properly painting vehicles the first time. Finally, GM looked at NUMMI in three areas: external JIT parts, internal JIT parts, and fastener part numbers.
Andersen Corp. is a manufacturing benchmark because of its mass production techniques to assemble uniquely tailored items. Andersen was an essential mass producer of windows in the past, and as people's needs changed, so did Andersen's processes. Andersen did its best to keep up with changing market demands. As a result, Andersen's so-called best practices have placed them at the leading edge of the window market.
No company is number one in every area. When a company benchmarks, it looks at different companies for different reasons. Table 1 shows the best-in-class companies - where American companies go to benchmark.
Implications on management and employees
Benchmarking requires feedback and participation from all levels of an organization. Managers implement the process and train employees to know and understand the process. In order to benchmark effectively, a company needs a strong strategic focus and some flexibility to achieve the goals set forth by management. Perhaps the most important aspects of effective implementation are adequate planning, training, and interdepartmental communication.
Benchmarking is an applied discipline. It cannot be learned by taking a class or reading a book. It's a hands-on learning experience. The drawback to this process is mistakes are inevitable. However, senseless mistakes are avoided by setting goals and following the rules to achieve them. Companies that benchmark identify specific areas of weakness, and find solutions to turn them into strengths. But for the benchmarking process to be successful, an organization needs these general requirements:
* Senior management interest and support:
* A solid understanding of the organization's operations and requirements for improvement:
* Openness to change and to new ideas;
* Willingness to share information with benchmarking partners; and
* Dedication to ongoing benchmarking efforts.
At Sprint Corp., it's executive support that made benchmarking successful. According to Jeff Amen, Sprint's benchmarking manager, "It's worked for us because of the executive commitment to allow it to be the rigorous process it has to be. For those in the organization who want a quick fix, benchmarking is not what they choose to do. It's not just the site visits or picking up the phone - there's the rigor involved as well. We've tried it the incorrect way and realized that maybe we need to listen and let it be done the right way."
From a different perspective, Anthony Rainey says the following actions are needed for benchmarks to be effective:
* Benchmarks must link operations to strategic goals;
* The benchmark system has to integrate financial and non financial information in a way that is usable by management and employees;
* The real value of benchmarks is their ability to focus efforts on core-business functions related to customer requirements; and
* Benchmarking must provide added value to the user. Reports should not be used for the sake of measuring, but rather to help people manage, make decisions, assess past performance, and plan future performance.
The benchmarking process must also follow some ethical and legal guidelines. This ensures the company's practices are considered morally and ethically correct.
* Avoid talking about topics or areas that involve pricing or competitively sensitive costs.
* Don't ask competitors for sensitive data.
* Don't share proprietary information without clearance.
* Have an impartial third party assemble and present competitive data without company names attached.
* Do not disparage a competitor's business or operations to outsiders based on benchmarking data.
Conclusion
The essence of benchmarking is the process of identifying the highest standards of excellence for products, services, or processes, and then making the improvements necessary to reach those standards - commonly called "best practices." The justification lies partly in the question, "Why reinvent the wheel if I can learn from someone who has already done it?" C. Jackson Grayson Jr., chairman of the Houston-based American Productivity and Quality Center, reports an incredible amount of interest in benchmarking.
Benchmarking is a way to move away from tradition. It carefully dissects the organization into segments, and then removes and inserts pieces to account for changing environments. Changes occur once the process has started, and will continue to change and mold the organization for as long as individuals are continuously striving to make it better. If these individuals lose the ability to analyze and make changes, they begin to lose ground.
According to McNair and Leibfried, "If you want to maintain the status quo, then don't benchmark. If you want to remain where you are, secure in the knowledge that you are doing the best that you can, don't benchmark. If reality checks are not your cup of tea, don't benchmark. Benchmarking will open an organization to change, and to humility. Benchmarking provides the stones for building a path toward competitive excellence and long-run success."
There is no doubt that benchmarking is here to stay. Any company should benchmark if it wants to attain world-class competitive capability, prosper in a global economy, and above all, if it wants to survive. These trends are not an option for companies anymore; they should be done by all who want to remain competitive. If a company chooses not to communicate, set goals, or work toward world-class competitive capability, it will gradually face extinction or radical upheaval. Obviously, this is not a goal any company strives for. All companies strive to be profitable, competitive, and successful. Benchmarking can help any company succeed-as long as it is applied correctly.
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