Lesson 04 Benchmarking PDF

LESSON 04: BENCHMARKING SAIF ULLAH KHAN IMS – UNIVERSITY OF PESHAWAR This Photo by Unknown author is licensed under CC BY-NC-ND BENCHMARKING  Benchmarking is the systematic search for best practices, innovative ideas, and highly effective operating procedure...

LESSON 04: BENCHMARKING SAIF ULLAH KHAN IMS – UNIVERSITY OF PESHAWAR This Photo by Unknown author is licensed under CC BY-NC-ND BENCHMARKING  Benchmarking is the systematic search for best practices, innovative ideas, and highly effective operating procedures. – Besterfield and others.  Benchmarking is the practice of a business comparing key metrics of their operations to other similar companies.  Benchmarking is the measurement of the quality of an organization's policies, products, programs, strategies, etc., and their comparison with standard measurements, or similar measurements of its peers. This Photo by Unknown author is licensed under CC BY-SA-NC OBJECTIVES OF BENCHMARKING 1. to determine what and where improvements are called for, 2. to analyze how other organizations achieve their high- performance levels, 3. to use this information to improve performance. This Photo by Unknown author is licensed under CC BY-SA BENCHMARKING CONCEPT TYPES OF BENCHMARKING 1. Internal benchmarking 2. External benchmarking 3. Functional benchmarking 4. Process benchmarking 5. Product benchmarking 6. Strategic benchmarking INTERNAL BENCHMARKING  Sharing opinions ADVANTAGES DISADVANTAGES between departments within the same Easier to implement External ideas blocked organization. Easier to access data EXTERNAL BENCHMARKING Advantages Disadvantages  Comparison with external organizations to Helps to measure one’s own Takes time discover new ideas, performance Requires support methods, products and Helps to search for best practices Legal/ethical issues services. Industrial espionage  The gap between internal and external practices displays the way where to change and if there is any need to change. FUNCTIONAL BENCHMARKING  Investigate the performance of core business functions.  Comparative research to Advantages Disadvantages seek world-class excellence by comparing Discovering innovative Not suitable for every business performance practices Organization not only against competitors but also against the best businesses operating in different industry same field or activity (functions to be benchmarked) PROCESS BENCHMARKING  Applies to business processes.  Breaks the functions down into discrete area that are the target of benchmarking.  It is more focused study than functional benchmarking This Photo by Unknown author is licensed under CC BY-NC-ND PRODUCT BENCHMARKING  Reverse Engineering or competitive product analysis.  Assessing competitor product concept, cost, strengths and weakness. STRATEGIC BENCHMARKING  How companies compete, identify the winning strategies that have enable high-performing companies to be successful in their marketplaces. (difficult to share strategy but information available from customer, common suppliers and public domain). This Photo by Unknown author is licensed under CC BY BENCHMARKING PROCESS 1. Decide what to benchmark. 2. Understand current performance. 3. Plan for benchmarking. 4. Study others. 5. Learn from the data. 6. Use the findings to set benchmark 1. DECIDE WHAT TO BENCHMARK  It must be done quickly, and it should not be too large. 1) Begin with the thinking about mission of the organisation and the Critical Success Factors for achieve mission of own organisation. 2) Track which process is causing the most trouble. 3) Identify which the process contributes most to customer satisfaction. 4) Identify the process that does not perform upto mark. 5) Understand the most competitive pressure on the firm. 6) Identify processes or functions that have most potential for differentiating the firm from others. This Photo by Unknown author is licensed under CC BY-SA 2. UNDERSTANDING CURRENT PERFORMANCE Thoroughly study and document the current performance of the organisation. Use flow diagram, cause and effect diagram to understand each aspect of performance. Attend all inputs and outputs carefully. Interview and take comments from the working people who know the work or process most. Quantify the measure of performance. These data would be the baseline for benchmarking. This Photo by Unknown author is licensed under CC BY-SA-NC 3. PLANNING Remember benchmark planning is a learning process. It is better to use information in the public domain to focus the inquiry and to find appropriate benchmark partner. This Photo by Unknown author is licensed under CC BY-SA 3. PLANNING (HOW TO SELECT THE BENCHMARK FIRM) Make a short list of possible benchmark partners using: 1) Publicly available information, such as trade journals, magazines, internet etc. 2) Study success story articles, technical information's, and regular lists of top performing organisations. 3) Numerous database firms are also available today. 4) Standard ratios are available for all publicly traded firms form stock exchange. 5) Government agencies also compile large quantities of industry information. 6) Business contacts also very good source. This Photo by Unknown author is licensed under CC BY-SA 4. STUDY OTHERS  Benchmarkers may use internal sources, data in public domain and original research to collect information about other competing firms.  Original research may be done by questionnaire, site visits, and focus group techniques.  One can use a combination of techniques too. 5. LEARNING FROM THE DATA  Identify the gap between the performance or process of benchmark firm and your own firm.  Identify the depth of gap.  Identify the reasons for the gap.  Determine the differentiating process/ function/ performance/ product characteristics etc of best-in-class firm.  Determine the benefit of following best-in-class practices of the benchmark firm. This Photo by Unknown author is licensed under CC BY-SA 6. USE THE FINDINGS. Communicate the gap to operating people and motivate them to bring change. Translate the intended change into goals, objectives and action plans. Generic steps for developing action plan: Specify tasks to be done. Make a sequence of tasks. Determine resource needs. Establish task schedule. Assign responsibility for each task. Describe expected results. Specify methods for monitoring results. This Photo by Unknown author is licensed under CC BY-SA PITFALLS OF BENCHMARKING  Benchmarking is not a panacea. It is an improvement tool.  It is copy of others, not an original action.  It is not a substitute of innovation. This Photo by Unknown author is licensed under CC BY-SA-NC