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  1. 1. Benchmarking
  2. 2. Dr. Zargari Outline  Benchmarking Definition  Benchmarking Background  Why Benchmarking?  Benchmarking, Dimensions & Types  Survey  Benchmarking Process  Benchmarking Essentials  Benchmarking Costs  Benchmarking Ethics  Benchmarking Pitfalls  References
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  4. 4. Dr. Zargari What is Benchmarking?  Benchmarking is the process of improving performance by continuously identifying, understanding, and adapting outstanding practices found inside and outside the organization.
  5. 5. Dr. Zargari What is Benchmarking?  Benchmarking is the process of comparing one's business processes and performance metrics to industry bests and/or best practices from other industries.  Why are others better ?  How are others better ?  What can we learn ?  How can we catch up ?  How can we become the best in our sector ?
  6. 6. Dr. Zargari What is Benchmarking?  Benchmarking is an improvement process that is used to identify best practice within a peer group and facilitate it’s incorporation into your organization. Studying best practices provides the greatest opportunity for gaining a strategic, operational, and financial advantage.
  7. 7. Dr. Zargari What is Benchmarking?  Benchmarking is the continuous search for and adaptation of significantly better practices that leads to superior performance by investigating the performance and practices of other organizations (benchmark partners). In addition, it can create a culture to facilitate the change process.
  8. 8. Dr. Zargari What is Benchmarking?  Best practice refers to techniques, methods or processes that are more effective at delivering a desired outcome.Japanese Word “DANTOTSU” means striving to be the best of the best, captures the essence of Benchmarking.  Incorporating best practice into your organization can lead to greater efficiency and effectiveness and a happier customer.
  9. 9. Dr. Zargari What is Benchmarking?  Benchmarking means to measure the best practices of leading businesses, and learn and adapt them for use in your business. Benchmarking is Making Best Practices Your Daily Practice.
  10. 10. Dr. Zargari What is Benchmarking? (J. McEvilly-2008) Continuous method of measuring and comparing a firm’s business processes against those of another firm. Discover performance gaps between one’s own processes and those of leading firms. Incorporate leading firm’s processes into one’s own strategy to fill the gaps and improve performance.  Benchmarking has three main features:
  11. 11. Dr. Zargari What is Benchmarking?  “An organization’s ability to evaluate its practices against specific business strategies and objectives is critical to leveraging its knowledge capital” (Harper, 1996). Information is there for organizations and it should be evaluated, used, and shared. This is one of the primary goals of benchmarking.
  12. 12. Dr. Zargari Operational Definition of Benchmarking Benchmarking is a technique of identifying, understanding and adapting superior practices from organizations locally and world wide to improve performance and achieve priority business results. Comparing business processes, not only performance measures Improvement, not evaluation External focus Learn from others A structured technique
  13. 13. Dr. Zargari What is Benchmarking?  Benchmarking goes beyond comparisons with competitors to understanding the practices that lie behind the performance gaps. More and more organizations are realizing how much more can be achieved if there is more collaboration between them and leaders in an industry.
  14. 14. Dr. Zargari What is Benchmarking?  Benchmarking is not a method for 'copying' the practices of competitors, but a way of seeking superior process performance by looking outside the industry. When Benchmarking a System, Adapt What You Find, Don’t Just Copy It
  15. 15. Dr. Zargari What is Benchmarking?  Conditions are never identical  You can pick up critical variables and apply them …  Create a system – a comprehensive set of reinforcing practices that are responsible for success Benchmarking = Copying
  16. 16. Dr. Zargari What is Benchmarking?  Benchmarking is not just making changes and improvements for the sake of making changes, benchmarking is about adding value. Benchmarking makes it possible to gain competitive superiority rather than competitive parity.
  17. 17. Dr. Zargari What is Benchmarking?  Benchmarking enables organizations to assess their own performance, compare it with that of others, analyse the gap between the two, identify and make fundamental changes in specific areas, in order to improve and enhance their own performance.
  18. 18. Dr. Zargari What is Benchmarking?  Benchmarking is a tool for continuous improvement of the management of processes in companies to help them to gain world leadership. Benchmark Purpose and Quality Maturity I Learning from success VI National leadership II Borrowing ideas III Best-in- firm IV Beating industry standards V Best-in- class Quality Maturity
  19. 19. Dr. Zargari What is Benchmarking?  In Japan, benchmarking is a part of their manager's job descriptions (Boxwell, 1994). This is one of the ways that the Japanese are able to keep up with and surpass others in industries such as automobiles, motorcycles, electronics, etc.
  20. 20. Dr. Zargari What is Benchmarking?  Benchmarking is critical to formulating a knowledge-based plan of action to achieve objectives. A benchmark is a standard that provides a measuring-stick for relative performance. US Department of Energy
  21. 21. Dr. Zargari Benchmark  A benchmark is an organization recognized for its exemplary operational performance.  There are many benchmarks in the world including: Toyota for Scandinavian Airlines for Motorola for Intel for Honda for Processes Design Training Service Rapid product development
  22. 22. Dr. Zargari Benchmarking and Industries  Relationship between benchmarking and industry type (According to one research done in the UK ):
  23. 23. Dr. Zargari Benchmarking and Organization Size  Moreover a tendency of benchmarking activity is a function of size. A larger organization is more likely to be benchmarking than a smaller one.
  24. 24. Dr. Zargari Actual Benchmarking Examples Las Vegas Casinos Employee theft reduction IBM L. L. Bean Warehousing operations Xerox Indy 500 pit crews Faster plane turnaround time Southwest Airlines Target Firm Improvement Sought Initiator
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  27. 27. Dr. Zargari American Productivity and Quality Center-1988
  28. 28. Dr. Zargari What is Benchmarking?  At its simplest, benchmarking means: "Improving ourselves by learning from others."
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  30. 30. Dr. Zargari Background of Benchmarking  The term benchmarking was first used by cobblers to measure people's feet for shoes. They would place someone's foot on a "bench" and mark it out to make the pattern for the shoes.
  31. 31. Dr. Zargari Background of Benchmarking  Traditionally, the organizations used to enhance their products and performance by focusing on their internal functional activities (Kolarik, 1995). The organization, for example, may use techniques such as Quality Function Deployment to achieve their customer satisfaction.
  32. 32. Dr. Zargari Background of Benchmarking  However, these traditional performance improvement trends seem not to be sufficient for the highly competitive markets (Juran, 1993). A significant technique facilitating improvement of organizational performance at a competitive environment is benchmarking. (Juran, 1993).
  33. 33. Dr. Zargari Background of Benchmarking  In other words external environment and market conditions change rapidly; goal setting which is internally focused can’t be true reflection of customer’s expectations. In-ward Vision Out-Ward Vision
  34. 34. Dr. Zargari Background of Benchmarking  Customers’ expectations are highly liquid and are driven by standards set by best performer. Any product or service just below these standards may not catch the eyes of customer.
  35. 35. Dr. Zargari Continuous and Breakthrough Improvement Time
  36. 36. Dr. Zargari Background of Benchmarking  Benchmarking was originally defined by D.T. Kearns, the CEO of Xerox Corporation, in 1981 as the continuous process of measuring products, services, and practices against the toughest competitors or non-competitors who is the leader in their industry (Kolarik, 1995).
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  38. 38. Dr. Zargari Why Benchmarking?  Survival lies in emulating best and not in lagging behind. Bench marking is time and cost efficient because it involves imitation and adaptation rather than pure invention. Prevents the “Re- inventing the wheel”.
  39. 39. Dr. Zargari Why Benchmarking?  Benchmarking gives us the chance of gaining:  Better Awareness of Ourselves (Us)  What we are doing  How we are doing it  How well we are doing it  Better Awareness of the Best (Them)  What they are doing  How they are doing it  How well they are doing it
  40. 40. Dr. Zargari Why Benchmarking . . . . Cope with Competitive Markets Keep Pace with Science and Technology Changes Innovation In Management Methods Meeting Quality Standards Performance Improvement Creative Thinking Meeting Customers Expectations Benchmarking
  41. 41. Dr. Zargari Three Major Benefits of Benchmarking Product and Process Improvement Cost Reduction Competitive Strategy
  42. 42. Dr. Zargari Product and Process Improvement  In general, by implementing benchmarking activity, organizations can improve their operation process (Slack et al, 2001). For instance, South African Breweries plc had encountered the problem of poor employee skill, which is a significant difficulty to implement the world-class processes. As such, they decided to benchmark strategy from an organization in Geneva. They, consequently, attained the solution (Slack et al, 2001).
  43. 43. Dr. Zargari Cost Reduction  Benchmarking facilitates a reduction of operation costs (Delpachitra et al, 2002). For example, benchmarking helped Australian Financial Institutes to reduce operation costs by outsourcing some operation and alternating distribution channels (Delpachitra et al, 2002).
  44. 44. Dr. Zargari Competitive Strategy  The most significant benefit from benchmarking is that it helps the organization planning and implementing competitive strategies (Kolarik, 1995). In other words, as benchmarking provides an ability to compare and learn from the best practices in any particular industry, organizations can develop their system to achieve competitive advantages or eliminate their competitive disadvantages.
  45. 45. Dr. Zargari Competitive Strategy  Build core competencies that will help to sustain competitive advantage  Access to a variety of markets  Perceived benefit of product or service will increase  Product or service is hard to imitate  Low-cost leader  Target specific shift in strategy  Entering new markets  Developing new products  To create a firm more adaptable to change
  46. 46. Dr. Zargari Why Benchmarking? Benchmarking stimulates seeking new ways of doing things and promotes a culture that is receptive to fresh approaches and ideas. Benchmarking provides opportunities for staff to learn new skills and be involved in the transformation process from the outset.
  47. 47. Dr. Zargari Why Benchmarking? It is an effective ‘wake-up call’ and helps to make a strong case for change. Offers practical ways in which step changes in performance can be achieved by learning from others who have already undertaken comparable changes.
  48. 48. Dr. Zargari Benchmarking Becoming More Common  There are three reasons that benchmarking is becoming more commonly used in industry (Boxwell, 1994).  Benchmarking is a more efficient way to make improvements. Managers can eliminate trials and errors.  Benchmarking speeds up organization’s ability to make improvements. Today, time is of the essence.  Benchmarking has the ability to bring your performance up as a whole significantly.
  49. 49. Dr. Zargari Why Benchmarking? Those who benchmark do not have to reinvent the wheel (Parker, 1996).
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  52. 52. Dr. Zargari Dimensions of Benchmarking  Benchmarking encompasses Total Quality aspects of the organization leading to Business Excellence: . . . . Benchmarking Vision and Mission Organizational Structure Employee Behavior Management Systems Leadership Style
  53. 53. Dr. Zargari What to Benchmark?  In practice, selecting the appropriate activity to benchmark is significant to an effectiveness of benchmarking (Peppard, 1999). As noted by Porter (1985), the process or activities in value chain, which are primary activities (inbound and outbound logistics, operations, marketing and sales, and service) and support activities (firm infrastructure, human resource management, technology development and procurement) should be considered for benchmarking.
  54. 54. Dr. Zargari Types of Benchmarking  On the basis of “What” is being compared with other organizations and “Who” is being compared with our organization, we can classify benchmarking. “What” is being compared with other organizations vs. Who” is being compared with our organization
  55. 55. Dr. Zargari Types of Benchmarking  On the basis of “What” is being compared with other organizations we have four main types. These four major types of benchmarking are evolutionary beginning with product, through to functional (performance), process and strategic benchmarking. Product Performance Process Strategic
  56. 56. Dr. Zargari Types of Benchmarking  On the basis of “Who” is being compared with our organization, we have these categories: Internal vs. External Generic International Best in Class Best of the Best
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  58. 58. Dr. Zargari  The process of designing new products or upgrades to current ones. This process can sometimes involve reverse engineering which is taking apart competitors products to find strengths and weaknesses. 1-Product Benchmarking
  59. 59. Dr. Zargari  Many firms perform product benchmarking when designing new products or upgrades to current products. Providing an external perspective on opportunities to improve products, technology, manufacturing and support processes, the product development process, and engineering practices are core activities of product benchmarking. 1-Product Benchmarking
  60. 60. Dr. Zargari  Performance benchmarking focuses on assessing competitive positions through comparing the products and services of other competitors. When dealing with performance benchmarking, organizations want to look at where their product or services are in relation to competitors on the basis of things such as reliability, quality, speed, and other product or service characteristics. 2-Performance Benchmarking
  61. 61. Dr. Zargari  Assessing relative level of performance in key areas or activities in comparison with others in the same sector and finding ways of closing gaps in performance. 2-Performance Benchmarking
  62. 62. Dr. Zargari  Process benchmarking focuses on the day-to-day operations of the organization. It is the task of improving the way processes performed every day. Some examples of work processes that could utilize process benchmarking are the customer complaint process, the billing process, the order fulfillment process, and the recruitment process (Bogan, 1994). 3-Process Benchmarking
  63. 63. Dr. Zargari  “Process Benchmarking" is generally higher-level and less number-intensive than metrics.  Demonstrate how top performing companies accomplish the specific process in question.  Takes form of research, surveys/interviews, and site visits.  By identifying how others perform the same functional task or objective, firms gain insight and ideas they may not otherwise achieve.  A true value-added feature of benchmarking 3-Process Benchmarking
  64. 64. Dr. Zargari  Process benchmarking - the initiating firm focuses its observation and investigation of business processes with a goal of identifying and observing the best practices from one or more benchmark firms. Activity analysis will be required where the objective is to benchmark cost and efficiency; increasingly applied to back-office processes where outsourcing may be a consideration. 3-Process Benchmarking
  65. 65. Dr. Zargari 3-Process Benchmarking  Wisdom from “Texas Instruments”: “Unless you change the process, why would you expect the results to change”
  66. 66. Dr. Zargari  By process benchmarking companies achieve improvements in key processes to obtain quick benefits. This provides an analysis of best practice processes and functions irrespective of industry or sector. 3-Process Benchmarking
  67. 67. Dr. Zargari  Strategic benchmarking deals with top management. It deals with long term results. Strategic benchmarking focuses on how companies compete. This form of benchmarking looks at what strategies the organizations are using to make them successful. This is the type of benchmarking technique that most Japanese firms use (Bogan, 1994). This is due to the fact that the Japanese focus on long term results. 4-Strategic Benchmarking
  68. 68. Dr. Zargari  This is concerned with comparing different companies' strategies and assessing the success of those strategies in the marketplace. Analyzes the strategies with particular reference to:  strategic intent  core competencies  process capability  product line  strategic alliances  technology portfolio 4-Strategic Benchmarking
  69. 69. Dr. Zargari  Strategic benchmarking is a proactive analysis of emerging trends and options in different markets, processes, technologies and distributions which could significantly affect the strategic direction of economies. It is the broadest form of benchmarking and involves observing how others compete. This type is usually not industry specific, meaning it is best to look at other industries. 4-Strategic Benchmarking
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  71. 71. Dr. Zargari  This refers to the analysis and comparison of one or more units within the same organization. It is often the case when organizations have an in- house best practice area. 1-Internal Benchmarking Sharing opinions between departments within the same organization. Advantage: Easier to implement Easier to access data Disadvantage: External ideas blocked
  72. 72. Dr. Zargari  Where examples of good practices can be found in other organizations and there is a lack of good practices within internal business units. Comparison with external organizations leads to discovery of new ideas, methods, products and services. 1-External Benchmarking The gap between internal and external practices displays the way where to change and if there is any need to change. Advantage: Helps to measure one’s own performance Helps to search for best practices Disadvantage: Takes time Requires support Legal/ethical issues Industrial espionage
  73. 73. Dr. Zargari  Comparisons of business process or functions that are very similar, regardless of industry. 2-Generic Benchmarking
  74. 74. Dr. Zargari  Best-In-Class  Generally, initiator firms will choose to benchmark the best-in-class.  Best-in-class refers to those firms or organizations that have been recognized as the best in an industry based on some criterion.  Objective  The objective of best-in-class is to provide a basis for continual improvement. 3-Best-in-class Benchmarking
  75. 75. Dr. Zargari  Best-of-the-Best  After becoming a best-in-class firm, it may be difficult to gain new insight and information from direct competitors.  Therefore, the next level of improvement is called best-of-the best or best-in-the-world. 4-Best of the best Benchmarking Don’t limit your effort to players inside the industry only!
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  77. 77. Dr. Zargari Types of Benchmarking  There are several other classifications for benchmarking, based on partner type, adoption level and target process, etc. Following are the most used types:  Internal  External  Competitive  Functional  Generic
  78. 78. Dr. Zargari  Competitive benchmarking is the most difficult type of benchmarking to practice. For obvious reasons, organizations are not interested in helping a competitor by sharing information. This form of benchmarking is measuring the performance, products, and services of an organization against its direct or indirect competitors in its own industry. Competitive benchmarking starts as basic reverse engineering and then expands into benchmarking. 1-Competitive Benchmarking
  79. 79. Dr. Zargari  Competitive benchmarking is an analysis of strategies, processes and practices with competitors and companies in the same industry. Therefore, it is industry or business type specific. It is especially beneficial to organizations managing a specialized type of operation. 1-Competitive Benchmarking
  80. 80. Dr. Zargari  Competitive Benchmarking is the continuous measurement of the company’s products, services, processes and practices against the standards of best competitors and other companies who are recognized as leaders. It is also important to remember when using competitive benchmarking that the goal is to focus on your direct competitors and not the industry as a whole. 1-Competitive Benchmarking
  81. 81. Dr. Zargari  Functional benchmarking - a company will focus its benchmarking on a single function to improve the operation of that particular function. Complex functions such as Human Resources, Finance and Accounting and Information and Communication Technology are unlikely to be directly comparable in cost and efficiency terms and may need to be disaggregated into processes to make valid comparison. 2-Functional Benchmarking
  82. 82. Dr. Zargari  Comparative research to seek world-class excellence by comparing business performance not only against competitors but also against the best businesses operating in a different industry. 2-Functional Benchmarking Comparing functions Advantage: Discovering innovative practices Disadvantage: Not suitable for every organization or every function
  83. 83. Dr. Zargari  Benchmarking, originally described as a formal process by Rank Xerox, is usually carried out by individual companies. Sometimes it may be carried out collaboratively by groups of companies (e.g. subsidiaries of a multinational in different countries). One example is that of the Dutch municipally-owned water supply companies, which have carried out a voluntary collaborative benchmarking process since 1997 through their industry association. 3-Collaborative Benchmarking
  84. 84. Dr. Zargari  With collaborative benchmarking, information is shared between groups of firms. It is a brainstorming session among organizations. It is important to realize that not all collaborative efforts are considered benchmarking. It is sometimes called “data sharing." 3-Collaborative Benchmarking
  85. 85. Dr. Zargari  Performing a financial analysis and comparing the results in an effort to assess your overall competitiveness and productivity. 4-Financial Benchmarking
  86. 86. Dr. Zargari Benchmarking Methodology Competitive • Industry leaders • Top performers with similar operating characteristics Functional • Top performers regardless of industry • Aggressive innovators utilizing new technology Internal • Top performers within company • Top facilities within company Best Practice Overlap Look for Benchmarking Opportunities Everywhere
  87. 87. Dr. Zargari Commonly Benchmarked Performance Measures Financial Ratios Productivity Ratios Customer-related Results Operating Results Human Resource Measures Quality Measures Market Share Data Structural Measures
  88. 88. Dr. Zargari Commonly Benchmarked Performance Measures Financial Ratios: Such as ROA or ROI are probably the easiest to obtain and compare. Productivity Ratios: Are useful in measuring the extent to which a firm effectively uses the scarce resources that are available to it.
  89. 89. Dr. Zargari Commonly Benchmarked Performance Measures Customer-related Results: Include customer satisfaction and comparisons of customer satisfaction relative to competitors. Operating Results: Might include cycle times, waste reduction measures, value- added measures, and lead time.
  90. 90. Dr. Zargari Commonly Benchmarked Performance Measures Human Resource Measures: May include employee satisfaction measures, training expenditures, turnover, and absenteeism. Quality Measures: These can include conformance-based quality information such as reject rates, capability information, performance information, or other measures.
  91. 91. Dr. Zargari Commonly Benchmarked Performance Measures Market Share Data: Includes shares in the different markets served by the firm. Structural Measures: Include objectives, policies, and procedures followed by a firm.
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  93. 93. Dr. Zargari Survey (Slide 1 of 3)  In 2008, a comprehensive survey on benchmarking was commissioned by The Global Benchmarking Network, a network of benchmarking centers representing 22 countries. Over 450 organizations responded from over 40 countries. The results showed that:
  94. 94. Dr. Zargari Survey(Slide 2 of 3)  Mission and Vision Statements and Customer (Client) Surveys are the most used (by 77% of organizations of 20 improvement tools, followed by SWOT analysis(72%), and Informal Benchmarking (68%). Performance Benchmarking was used by (49%) and Best Practice Benchmarking by (39%).
  95. 95. Dr. Zargari Survey(Slide 3 of 3)  The tools that are likely to increase in popularity over the next three years are Performance Benchmarking, Informal Benchmarking, SWOT, and Best Practice Benchmarking. Over 60% of organizations that are not currently using these tools indicated they are likely to use them in the next three years.
  97. 97. Dr. Zargari TOP-10 Benchmarking Organizations  The following is a ranking of organizations that are heavily engaged in benchmarking. These organizations have implemented internal benchmarking methodologies to support their entire organizations' efforts to improve their products and services.  These organizations are excellent role models for you to learn how to deploy benchmarking throughout your workgroup, department, division or entire organization. They are leaders!
  98. 98. Dr. Zargari TOP-10 Benchmarking Organizations Organization Ranking Xerox 1 U.S. Army 2 Corning 3 Abu Dhabi Food Control Authority 4 Internal Revenue Service 5 United Technologies 6 DynMcDermott 7 Dubai Municipality 8 Dubai Chamber of Commerce and Industry 9 Allergan 10
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  100. 100. Dr. Zargari Benchmarking in Business Excellence Model Vision Objectives Areas to be Addressed Measurement Indicators QUALITY INITIATIVES Mission Kaizen ISO Six Sigma Benchmarking Suggestion Schemes Quality Circles Professional Circles 5S KM BSC
  101. 101. Dr. Zargari Parties to Benchmarking Relationship  There are two parties to each benchmarking relationship: an initiator firm and a target firm.  The initiator firm is the firm that initiates contact and studies the other firm.  The target firm is the firm that is being studied (also called the benchmarking partner). Initiator Target
  102. 102. Dr. Zargari Benchmarking Process  There are various methods of benchmarking and a variety of methodological processes in benchmarking mechanisms and implementation. Some important organizations have developed their own benchmarking process.
  103. 103. Dr. Zargari Plan •Select Process •Understand Process •Select Partners Act •Communicate actions •Develop improvement plan •Implement •Review Progress Analyze •Collect Data •Establish the gap •Identify process changes •Target future goals General Benchmarking Process
  105. 105. Dr. Zargari Gap Analysis  When done well, benchmarking prominently reveals gaps between the performance of the benchmarker and that of a “best practices” leader, and that leads to developing sustainable competitive advantage.
  106. 106. Dr. Zargari Gap Analysis (Spider chart) Current performance of the host Current performance of the partner Current performance of the host for variable ‘K’. Best of the best (current performance of the partner for variable ‘A’. Total customer satisfaction
  107. 107. Dr. Zargari Methodology of Benchmarking AT&T Vs XEROX
  108. 108. Dr. Zargari Xerox Experience-1 (Brogan, 1994)  The Xerox of today is not the Xerox of the sixties and seventies. During that time period the organization experienced market erosion from competitors, primarily Japanese. These competitors were marketing higher quality products in the United States at the same price or lower as Xerox. Xerox found that the Japanese were able to assemble quality products at a low price. This was hard for Xerox to grasp because they were the first to develop the photocopy and their name had come to be synonymous with photocopies.
  109. 109. Dr. Zargari Xerox Experience-2 (Brogan, 1994)  How could the Japanese be beating them at their own game? Xerox found that they had to regroup. In doing this they made competitive benchmarking a fundamental part of their operations. Xerox began to study other organizations within and out of their industry. By 1983, Xerox had bench marked more than 230 process performance areas in their operation. Identifying the best processes used by others, Xerox adapted them for their own use. This is how they regained their core competency and strategic advantage in the photocopying industry.
  110. 110. Dr. Zargari Xerox 12-Step Benchmarking Process-1  Phase 1: Planning  1. Identify what to benchmark;  2. Identify comparative companies;  3. Determine data collection method & collect data.  Phase 2: Analysis  4. Determine current performance gap;  5. Project future performance levels.  Phase 3: Integration  6. Communicate finding and gain acceptance;  7. Establish functional goals.
  111. 111. Dr. Zargari Xerox 12-Step Benchmarking Process-2  Phase 4: Action  8. Develop action plans;  9. Implement specific actions & monitor progress;  10. Recalibrate benchmarks.  Phase 5: Maturity  11. Attain leadership position ;  12. Fully integrate practices into processes.
  112. 112. Dr. Zargari Benchmarking Process-APQC  American Productivity & Quality Center defines benchmarking process in four steps:  Planning  Data collection  Analysis  Adapting & Improving
  113. 113. Dr. Zargari Benchmarking Process  In benchmarking “metrics" give numerical standards against which a company’s own processes can be compared. Some examples of metric benchmarks are:  Finished-product first-pass yield of 97%  Scrap/rework less than 1% of sales  Cycle time less than 25 hours  Customer lead times less than 20 days  Productivity levels of $150,000 or more per employee  Plant-level ROA better than 15%
  114. 114. Dr. Zargari Benchmarking Process  In benchmarking:  Measure what’s needed, not what’s easy.  Broad measures of performance fail to give you actionable information.  You don’t need a 1000 measures, just find the key indicators that serve as critical factors.  Finding balance is important..don’t let a non- benchmarked metric go bad.
  115. 115. Dr. Zargari Six Principles of Benchmarking  Any acceptable benchmarking should have these six features:  Comprehensive  Credible  Comparative  Performance-oriented  Confidential  Continuous assessment
  116. 116. Dr. Zargari Benchmarking Process  Why businesses are not willing to do multi-step benchmarking?  Takes too long often six to nine months  Its costly  The lessons learned may or may not get translated to practice and improvement Reports that get shelf space, not action Cumbersome process to complete Limits Flexibility - procedures oriented
  117. 117. Dr. Zargari Creative Benchmarking*  Creative Benchmarking:  Start from the customers point of view  List each step of the customers buying experience  Next, determine which factors most influence customers perception of value at each step  Finally, identify companies that excel at each factor – without regard to their industry! * (Derived from the work of Dawn Lacobucci and Christie Nordhielm, Kellogg Graduate School of Management)
  118. 118. Dr. Zargari Fast-Cycle Benchmarking  Fast-Cycle Benchmarking is:  Less elaborate than traditional multi-step  More tactical  What do concrete trucks and pizza have in common?  Useful to Identify specific operation problems or opportunities  Instead of copying from others, use the data to stimulate generation of creative ideas
  119. 119. Dr. Zargari Fast-Cycle Benchmarking  Figure out what you are looking for and bring it in.  Look for practices that can spark ideas, don’t just replicate what you find.  Figure out where benchmarking fits in your tool chest, and make an informed decision about the outcome you are really after.
  120. 120. Dr. Zargari Fast-Cycle Benchmarking  Benchmark companies roughly at your own level!  College physics before high school math doesn’t make any sense…  Forget the world class company (unless you are one!)..find a firm of similar size and situation as yours  Benchmark companies with similar business needs  Common concerns promote a more productive exchange or transportability of the information learned
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  122. 122. Dr. Zargari Benchmarking Essentials Top management support and guidance Aligning benchmarking with the vision and mission Thorough process mapping and documentation Committed and creative benchmarking team Selection of right benchmarking partner Flexible mindset to accept change and findings Integrating benchmarking with other improvement initiatives
  123. 123. Dr. Zargari Benchmarking Essentials Clearly defined purpose Continual analysis & reassessment Appropriate benchmarking methodology Significance of results must be clear Conclusions must be justified by the data Investigation must be systematic A high code of ethics is essential
  124. 124. Dr. Zargari Benchmarking Essentials Must establish & enforce milestones Must report findings to senior management Internal training on benchmarking for company personnel is crucial Professional benchmarking analysts should support studies The process must be institutionalized
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  126. 126. Dr. Zargari Benchmarking Costs  The three main types of costs in benchmarking are: B Time Costs Visit Costs Database Costs
  127. 127. Dr. Zargari Benchmarking Costs  Time Costs - Members of the benchmarking team will be investing time in researching problems, finding best practice companies to study, visits, and implementation. This will take them away from their regular tasks for part of each day so additional staff might be required.
  128. 128. Dr. Zargari Benchmarking Costs  Visit Costs - This includes hotel rooms, travel costs, meals, a token gift, and lost labor time.
  129. 129. Dr. Zargari Benchmarking Costs  Benchmarking Database Costs - Organizations that institutionalize benchmarking into their daily procedures find it is useful to create and maintain a database of best practices and the companies associated with each best practice now.
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  131. 131. Dr. Zargari Benchmarking Ethics  Since the concept of benchmarking can lead to unscrupulous and sometimes unethical behavior, the SPI Council on Benchmarking and the International Benchmarking Clearinghouse have established a general code of conduct (Thompson). The code is as follows:
  132. 132. Dr. Zargari Benchmarking Code of Conduct Do not ask competitors for sensitive information. Do not make them feel that if the data is not shared the benchmarking process will end. If you ask the company for sensitive and valuable information, be prepared to give the same in return. Use an ethical and unbiased third party such as an ombudsman or legal advisor for direct competitor advice. Treat any information obtained from a benchmarking partner as privileged or “top secret” information. Don't give away any information or potential trade secrets without permission.
  133. 133. Dr. Zargari Benchmarking Code of Conduct When benchmarking with competitors, set up certain rules that state that things will not be discussed that give either company a competitive advantage. Establish the purpose is for both parties to improve or gain benefit. Costs should not be discussed. Consult with a legal advisor if any information gathering procedure is in doubt. Do not misrepresent yourself or your organization as being someone or something that you are not. Show that you are committed to the effectiveness of the process. And in doing so maintain a professional and honest relationship with your benchmarking partners.
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  135. 135. Dr. Zargari Benchmarking Pitfalls  Benchmarking is NOT:  Tour visits to other competitors or organizations.  Performance measurement, it’s part of benchmarking process. i.e. competitive analysis.  A cost-cutting exercise.  Imitating others’ practices or processes, it’s “How to” not “What is”.  A public relations exercise.
  136. 136. Dr. Zargari Benchmarking Pitfalls  Failure to consider organizational cultures or circumstances leads to a wrong direction.  Insufficient preparation usually results in MBWAA (management by wandering around aimlessly!).  What are you trying to learn about?  Why do you want to learn it?  What will you do with it to make your processes better once you have it?
  137. 137. Dr. Zargari Benchmarking Pitfalls Lack of sponsorship Unengaged process owner Notion that we are unique Mission, goals, objectives Unconnected Not relating benchmarking to other improvement initiatives Not accepting findings Time and resources overlooked
  138. 138. Dr. Zargari Benchmarking Pitfalls Fear of being seen as “copying” Fear of losing competitive advantage by sharing information Benchmarking trap – benchmark that which is convenient, but may not be important. Excuses such as : We are too small, We are too busy, We are too different, Nobody else does what we do, We do it better than anyone else
  139. 139. Dr. Zargari When not to Benchmark Target is not critical to the core business functions Customer’s requirement is not clear Key stakeholders are not involved Inadequate resources to carry through No plan for implementing findings Fear of sharing information with other organizations
  140. 140. Dr. Zargari Specialized Organizations  There are international organizations specialized in benchmarking services, e.g.,  Global Benchmarking Council  American Productivity and Quality Center  Asian Benchmarking Clearinghouse  Hong Kong Benchmarking Clearing house
  141. 141. Dr. Zargari Final Remarks  Benchmarking does not come as a natural process for many – competitiveness does, but not benchmarking, because benchmarking requires a team approach. In Benchmarking The Key is to “Adapt not Adopt” – Professor Deming
  142. 142. Dr. Zargari Give Benchmarking a Chance - It’s Worth It.
  143. 143. Dr. Zargari REFERENCES  Anderson, B. (1999), “Industrial benchmarking for competitive advantage”, Human Systems Management, Vol. 18 No. 3.  Bogan, C.E. and M.J English (1994), Benchmarking for Best Practices: Winning Through Innovative Adoption, New York: McGraw-Hill.  Boxwell, Robert (1994), Benchmarking for a Competitive Advantage, McGraw Hill, 1994  Delpachitra S. and D. Beal. (2002) “Process benchmarking: an application to lending products”, Benchmarking: An International Journal, Vol. 9, No. 4.  Davies, A. J. and Ashok K. K. (1999), “Why British companies don’t do effective benchmarking”, Integrated Manufacturing Systems, Vol. 10, No.1.  Graham, Anne (1997), “Association Publications: Benchmarking Common Problems,” The Magazine for Magazine Management, v25,
  144. 144. Dr. Zargari REFERENCES  Harper, Kim (1996), “Benchmarking: International Clearinghouse Plays Matchmaker for Companies That Want to Improve,” Arkansas Business, vol.9, (1996).  Hinton M. et al. (2000), “Best practice benchmarking in the UK”, Benchmarking: An International Journal, Vol. 7, No. 1.  Hurmelinna P. et al. (2002), “Attaining world-class R&D by benchmarking buyersupplier relationships”, International Journal of Production Economics, Vol. 80, No. 1.  Juran, J.M. (1993), Quality planning and analysis: from product development through use (Third Edition), United States of America: McGraw-Hill, Inc.  Keegan, R. (1988), “Benchmarking Facts: A European Perspective”, Dublin: Oak TreePress
  145. 145. Dr. Zargari REFERENCES  Kolarik, W. J. (1995), Creating Quality: Concepts, Systems, Strategies, and Tools (International Edition), Singapore: McGraw-Hill Book Co.  Peppard, J. (1999), “Benchmarking, process re-engineering and strategy: some focusing frameworks”, Human Systems Management, Vol. 18 No. 3.  Porter, M.E. (1985), “Competitive Strategy: Techniques for Analysing Industries and Competitors”, Free Press, New York  Ralston D. et al. (2001), “Process benchmarking as a market research tool for strategic planning” Marketing Intelligence & Planning, Vol. 19, No. 4.  http://www.ogc.gov.uk/documentation_and_templates_benchmarki ng.asp  http://www.ebenchmarking.com/
  146. 146. Dr. Zargari REFERENCES  http://www.nhsbenchmarking.nhs.uk/  http://www.berr.gov.uk/dius/innovation/benchmarking- innovation/index.html  Benchmarking for Best Practices: Winning Through Innovative Adaptation, Christopher Bogan and Michael English, McGraw Hill  www.best-in-class.com – Bogan’s website  The International Benchmarking Clearinghouse, www.apqc.org  www.runzheimer.com  The Business Gateway http://www.bgateway.com/index.asp  David Stauffer, (2003) “Is Benchmarking Doing the Right Work?”, Harvard Business School Publishing
  147. 147. Dr. Zargari Mid Term Examination  Attempt any 2 out of 4 Questions  Each Q carries 5 marks  Q1.Elaborate on the 3C’s driving the change.  Q2.Explain the Kodak model of BPR Implementation.  Q3.What are the social changes that the organization should comprehend before BPR implementation.  Q4.What is the difference between Six sigma and BPR.
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