Posts Tagged ‘Benchmarking’

Drawbacks of Benchmarking with other organizations

While Benchmarking is undoubtedly an important tool in facilitating “best practice” into your organization (for more information on the background to the process check out our article on Introduction to Benchmarking) there are plenty of pitfalls which if your not careful can result in your benchmarking activity being unsuccessful.

In this article we’ll look at 5 common problems with benchmarking with other organizations.

1 – Comparing like for like

One of the major problems for benchmarking across multiple organizations is ensuring that you compare like for like. It’s important that you remove any subjectivity and look to compare processes and metrics that are easily measurable and with quantifiable data and results at both ends.

2 – Open book review

Unsurprisingly benchmarking organizations within your own business sector can be complex due to the unwillingness to share data for fear of impacting competitiveness. This is a very real issue and can often lead to benchmarking activities underperforming as there is an unwillingness to share best practice. This is one of the prime reasons why many organizations opt to either utilize industry organizations/associations or benchmark outside of the industry.

3 – How best practice is best practice

Remembering the primary reason for benchmarking is to facilitate the movement of best practice into your organization it goes without saying that you need to be really sure that best practice is best practice – a smaller sample group, incorrect measures, an inability to capture the process enabler can all result in a failure to either incorrectly establish best practice

4 – Single Business or industrial sector Benchmarking

Too many companies fail to establish the correct organization to benchmark with – remember it’s all about best practice – selecting any old company simply wont do – one consideration is whether to benchmarking against a single business or an industrial association or group. The latter may offer a better approach as they are more likely to provide an industry sector understanding of best practice and most likely have established benchmarking initiatives.

5 – Finding the “best practice driver”

Finding the activity that results in best practice can be difficult – from initially establishing – through use of metrics – better performance the next step is to find out (through a process/system etc) what is causing it. This can be more difficult than it sounds and can require thorough analysis of the process – getting it wrong can lead to two specific problems – the cause of the best practice is incorrectly established and secondly if transferred into the organization will fail to deliver the expected improvements.

Best Practice Benchmarking – using analytics and process to drive best practice

Benchmarking is a process of comparing your organizations processes and procedures against others – this is carried out to facilitate the flow of best practice into your organization in order for it to improve efficiency and maintain its place in the marketplace.

There are a number of different types of benchmarking this includes

Internal Benchmarking – often deployed in large organizations this form of benchmarking targets areas of the company that are more efficient than others. This helps organizations maintain standards and uniformity across the organization.

Competitive Benchmarking – this form of benchmarking is used for analyzing your performance within the context of your marketplace – by analyzing yourself against your competitors actions can be taken to improve performance and mitigate the risk of non-competitiveness

While Competitive Benchmarking offers, for many, the greater incentive – i.e. keeping up with the market and mitigating competitors – it also offers the most challenges – for example – you can’t just stroll into your competitors and ask to see how they outperform you!

Given this issue – trade organizations have flourished as they offer a way for a market to share best practice in a non-threatening environment ensuring that where best practice is shared – those who are outperforming in the marketplace get a deeper understanding of their competitive advantage. However it goes without saying that competitive benchmarking remains the hardest to get right.

Another form of benchmarking is Strategic Benchmarking – this is slightly different to facilitating best practice into an organization rather it becomes an assessment of an organizations goals, technologies, and business model to identify further opportunities for change.

Whichever method is used where organizations are looking to facilitate change – benchmarking offers a proven approach. Many organizations continue to look at this aspect and use benchmarking as a cost driver – a tool to reduce overhead while many take an opposing view and utilize it to secure their position in the marketplace. Whatever the objective implementing benchmarking makes change inevitable – this shouldn’t be feared – organizations that embrace change are more likely to be those that innovate and create value for both their customer and their organization.

Benchmarking – searching for enablers in other organizations that boost performance

Benchmarking is the process of measuring activity within your organization to that of a peer (either within the organization, within the market or outside the marketplace). Benchmarking is utilized to facilitate the transfer of best practice into the organization initiating the benchmarking.

The key to successful benchmarking is identifying appropriate processes that can be measured (and compared). A process is a series of steps and activities that turn an input into an output.

Benchmarking requires a level of analysis and is reliant on collecting measurements of the process being benchmarked. Processes will therefore need to generate data that can be collated and deployed as a metric. For example if we look at a manufacturing process it will consist of a series of steps from the printing of a work pack or job list, through to issuing raw material through to the manufacturing process itself. Each activity within the process could be analyzed to form a detailed view of the process and facilitate highly effective benchmarking at a detailed level.

Once data has been collected on the process – benchmarking requires that assess and investigate results that indicate better performance in your selected peer group. Where areas of better performance can be seen the rationale behind these needs to be determined. What are the enablers that result in these efficiencies?

An enabler is something that can influence the outcome or effectiveness of a process. For example in a manufacturing process where a piece of metal is bent into a particular shape enablers could be considered to be:

Condition of the raw material
Condition of the pressing machine
Training and experience of the machine operator
Process and work-instructions on activity

Enablers, or the quality of the enabler, can have a dramatic impact on a process. Benchmarking often highlights the use of these enablers to achieve increased levels of performance – the benchmarking organization can then determine the opportunities to integrate these into existing processes.

Benchmarking Research

The benchmarking process, capturing best practice and incorporating it into your organization, has become a crucial management tool in both business improvement and market competitiveness perspectives. 

The benchmarking process is fairly straightforward (see our article on Benchmarking Basics) but for those looking for Benchmarking reports, books or research material there are a number of online resources that you can utilize.

We’ve setup this page as a placeholder – somewhere to put the best Benchmarking resource links – we’ll update this page as we get more resources so be sure to check back regularly or subscribe to our RSS feed to get informed of updates.  If you have a Benchmarking resource you want to promote please use the comments section below.
What is Benchmarking

http://en.wikipedia.org/wiki/Benchmarking
http://www.ogc.gov.uk/documentation_and_templates_benchmarking.asp

Benchmarking Case Studies & Industry Examples

http://www.cibse.org/pdfs/Bechmarking%20at%20CHMC.pdf Healthcare Case Study

Benchmarking Associations

http://www.asbabenchmarking.com/ – Automotive
http://www.sixsigmabenchmarking.com/6sadba.html – 6Sigma Benchmarking Association
http://www.asd-europe.org – Aerspace & Defence Association
http://www.afbc.org/ – Finance & Banking
Benchmarking Books

Using Internal Benchmarking to drive business improvement and corporate change

For many large organizations driving business improvement and change represents a significant challenge. There are a variety of management tools available to instigate and track improvements many of which (such as six sigma) stem from initiating change through the need to fix business problems in the production process. – businesses however don’t need to leave it until something goes wrong to target improvements – though locating “best practice” processes innovation can be incorporated.

Benchmarking is a popular business tool used to highlight areas of best-practice and facilitate their introduction into your organization (for more information check out our introduction to benchmarking article). Often used in peer groups of like minded organizations to assess processes and systems – benchmarking can be very effective when used internally to.

Areas of excellence exist in all organizations and benchmarking is an excellent method of highlighting these, and holding them up as “best class” examples for improvement projects to strive towards. Internal benchmarking can then facilitate the dissemination of the efficient processes and procedures through the organization – bringing everyone to the same level.

It’s important to remember the context of internal benchmarking and you mustn’t expect the same opportunities for change as with external benchmarking, as you may miss certain innovations in the marketplace, but it can represent an excellent method of introducing benchmarking and providing one the ground training prior to launching external initiatives.

Advantages of internal benchmarking

• Common culture, language, data
• Access to data is consistent across all participants
• Shared view and buy in of benchmarking process
• Highlights areas of business that outperform on a level playing field

Disadvantages of Internal Benchmarking2

• Develops complacency
• Fails to highlight true “best practice”
• Fails to take competition in the marketplace into account.

Introduction to Benchmarking

Almost all businesses are engaged in some form of business improvement activity – ensuring that your business can stay one step ahead of the competition through optimized business processes, systems and policies is integral to both maximizing your profits and satisfying your customers.

But how do you ensure that your business operates to the “best practice” standard?
Benchmarking is a business tool that is used to adapt “best practice” from peers (which may be within or outside the organization) and facilitate improvement in business performance and increase the value add to its customers.

The process of Benchmarking centres on the process of comparing business activities and methods to those that are considered “best in class”. Identifying the gap between current activity in your organization and “best in class” can help facilitate the production of an improvement plan that can lead the benchmarking company to optimize it’s processes and procedures.

Benchmarking is now commonplace and is an everyday activity in many organizations. One of its key benefits is that it forces organizations to review the outside environment and take account of the market and changes that are taking place. To that end, Benchmarking should be viewed as an ongoing process that takes place throughout the business lifecycle and be central to an organizations continuous improvement program.

The benchmarking process itself is fairly straightforward.

1/ Identify your processes
2/ Agree what you’ll benchmark
3/ Agree who you’ll benchmark against
4/ Analyze the chosen processes in your peers
5/ Develop a gap analysis
6/ Develop an improvement plan/activity plan
7/ Review progress and re-benchmark.

Check out the benchmarking presentation for our benchmarking introduction – Benchmarking ppt (Right Click File and choose File save as).

Benchmarking strategy

The process of Benchmarking refers to identifying processes, procedures and systems assessing your performance among a peer group, identifying best practice and then incorporating it into your organization.

Benchmarking can be used when undertaking strategic planning as it directly relates to the execution of strategy through processes, systems and policies. Benchmarking can help in the assessment of organizational goals and whether they can be met.

Perhaps crucially through selecting the appropriate peer group benchmarking can directly feed back into organizational planning as key activities and initiatives within the marketplace can be incorporated into goals and targets. This is especially true when the peer group is a trade association or trade group. The challenge here is visibility of performance and methods – and while “Best practice” can be subjective capturing it statistically in a competitive market environment can be difficult.

The actual process for benchmarking isn’t overtly complicated in that it requires a series of steps to be completed and some upfront decision making in what will be assessed.

The key steps are:

1/ Being clear in what you’re benchmarking – backed up with data and metrics
3/ You select the right peer group to benchmark from – you are able to back up best practice with data and choose the right partner(s) to benchmark with
4/ You follow up your benchmarking with an improvement activity to bridge the gap between current status and best practice
5/ You regularly undertake benchmarking to ensure that you keep abreast with your peers.

The key to using benchmarking for strategy is appropriate ties between the benchmarking team and strategic planning – used correctly benchmarking can support strategy assumptions and drive decision making to target improvements and initiatives that will support strategic goals.

Benchmarking Healthcare

Benchmarking is a widely used business tool which is used in industry to monitor the performance of an organization within its peer group and to facilitate the introduction of best practice into the benchmarking business.

Typically benchmarking takes the form of measuring and comparing certain indicators between companies and feeding the results into an improvement program. Benchmarking is playing an increasingly important role in the service sector and is now commonplace in customer focused organizations and is now also widespread in healthcare.

Traditional benchmarking in industry will often formulate around strategic goals and targets coupled with meeting customer requirement– common benchmarking studies might include

* Operating cost vs turnover
* Direct vs Indirect headcount
* On time delivery to customer
* Customer satsifaction

Healthcare benchmarking applies the same principles in that it looks to identify best practice within a peer group and then assesses the healthcare organization against that identifying gaps or areas of concern.

Stages in Benchmarking Healthcare

Benchmarking has a defined process which when followed correctly can provide better results than a “scatter gun” approach of measuring the wrong indicators with the wrong peer group which could result in a failure to improve. The UK’s NHS identified a six stage program for healthcare benchmarking

1/ Identify Best Practice
2/ Assess organization against best practice
3/ Develop improvement plan based upon results
4/ Regularly review status against best practice
5/ Disseminate improvements and review action plan
6/ Implement regular Assessments and peer reviews.

Stage 6 is crucially important as processes and systems do not stand still and working practice evolve from for example the introduction of new technology or methods of care – Benchmarking should therefore be a continuous activity with periodic reviews of activity and peer groups.

In their study the NHS identified various areas for benchmarking and considered four key areas when carrying out analysis

1/ Staffing – processes and systems around the personnel involved in the healthcare facility
2/ Patient Care Involvement – ensuring the voice of the customer (in this case the patient) is taken into account and used in continuous improvement practices.
3/ Education and Training – Healthcare personnel have the relevant skills and training to deliver patient needs
4/ Policies and Procedures – appropriate policies and procedures are in place within the healthcare organization

These four areas were used as the leading indicators when particular clinical areas were assessed, they were then broken down into contributing factors – for example patient care involvement was seen as a number of factors such as information sharing, interpersonal skills, empowerment which could be individually assessed to build up to an overall score. By focusing the benchmarking strategy on a clear goal “The patient” – subsequent improvement activity and its effectiveness could be tracked back to delineated requirements and focussed assessment.

Healthcare organizations have an important advantage over their industrial counterparts – peer groups which many businesses struggle to develop to support benchmarking activities are readily available in healthcare – with deliverables and processes common across the sector benchmarking opportunities are readily available – there has been a significant increase over the last 10 years in healthcare associations around the world who look to benchmarking to help improve patient care and tackle the problem of rising costs.

The NHS benchmarking initiative is an intriguing case-study for anyone that wants to learn more about benchmarking – their implementation shows a robust method coupled with strict guidelines for assessment. A wide support network and government recognition of the importance of disseminating best practice among healthcare professionals has led to benchmarking healthcare being a cornerstone of clinical care improvement.

Resources

http://www.nhsbenchmarking.nhs.uk/default.asp?content=steering
http://www.healthinsite.gov.au/topics/Benchmarking_and_Best_Practice
http://www.abhc.org/

Benchmarking Procurement

Benchmarking is the process of identifying and understanding outside practices to help improve your own or your organizations performance. This includes comparing your practices and procedures to examples of best practice with your peers. Benchmarking helps facilitate the introduction of best practice into your organization by identifying the gap between best practice and your existing processes. Such improvements can better help satisfy customer requirements and Cost, Quality and Delivery.

Benchmarking can be very beneficial to supply chain organizations as it provides a direct and quantifiable comparison of performance. Typical areas such as supplier management, delivery performance, cost can be compared to other organizations highlighting process efficiencies that can be incorporated into the benchmarking company.

What are the typical steps in Benchmarking supply chain?

1/ Identify the processes to be benchmarked
2/ Identify the resources to carryout the benchmarking
3/ Identify peers which to benchmark against
4/ Collect data
5/ Analyze data and develop a gap analysis

The importance of metrics in Benchmarking Procurement

When undertaking benchmarking initiatives it’s imperative that your method includes reviewing quantifiable metrics – benchmarking should not be subjective. For most businesses that will mean reviewing performance metrics – bear in mind these metrics need to be easily transferable (i.e. that the measures means the same in each business and that you are comparing “apples with apples”). An example of an easily transferable metric is “on time delivery” – this is a universal measure that all procurement organizations are aware of and one that is usually easy to obtain data for.

So what other common benchmarking measures should we consider? This is usually down to the individual organization however we have some examples below. You might also want to consider the purpose of procurement – for example purchase order processing, supplier performance, Supplier sourcing, Purchasing cost – considering what functions your purchasing department carries out will help you determine what you’ll want to benchmark and subsequently improve

Example opportunities when Benchmarking Procurement.

1/ Numbers of Purchasing staff
2/ Value of spend under procurement control vs Total costs
3/ Supplier on Time Delivery
4/ Supplier Quality
5/ Total Number of suppliers
6/ Cost of raising an order
7/ Time taken to pay a supplier

A common failure when benchmarking is where organizations fail to capitalize on examples of “best practice”. This occurs where the shortfall between your organizations performance and that which you would like to attain does not result in improvement activity and you fail to capitalize on opportunities presented.

Also, benchmarking is not a short term initiative – Benchmarking requires dedication and regular review – markets change and peer performances change as innovation and business improvement activities result in changes to business activity – Benchmarking therefore should be an ongoing process and results reviewed regularly (bear in mind you should do this anyway to keep track of your improvements!).

Internal Benchmarking Procurement

While many organizations choose to benchmark an organization with external peers – where the opportunity exists organizations should consider internal benchmarking. Many procurement departments are structured into separate teams whether that’s strategic vs operational or individual commodity teams – benchmarking different organizational teams can highlight areas of best practice within a single organization and show how far removed they are from corporate targets/goals.