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Juhani
Anttila
BENCHMARKING APPROACH, AN ANALYTICAL TOOL FOR IMPROVING BUSINESS PERFORMANCE Abstract Benchmarking is a strong tool for organizational learning when an organization is striving for a superior business performance, excellence. Prerequisites for the effective application of benchmarking include three requirements: Understanding the purpose and the leading principles of the issue, using effective tools and approaches, and applying it in innovative management environments. Process-focused practices in benchmarking ensure a concretely business-integrated approach. The most important benchmarking projects are related to redesigning key business processes. The benchmarking projects are also carried out in a process-like manner. It is worthwhile to utilize generally recognized methodology in developing organizational benchmarking practices and carrying out individual benchmarking projects. Introduction There are lots of material or services available on benchmarking in literature and Internet, or by various training or consulting organizations. However, the key issue is how within a particular organization one might introduce an effectively practiced approach that is really matching with the needs and expectations of one's business. Benchmarking is a method for improving organizational activities
based on learning from others. It is a management tool that supplements
other methods used for performance improvement. Benchmarking is a
more extensive and profound method than market research and competitor
analysis. In fact, there are two closely related activity-concepts
that are, however, using very different principles and tools: Benchmarking is closely connected with process thinking and quality management. Benchmarking objects are primarily business processes or process activities to be improved, but the same principles can also be applied e.g. to benchmarking products. In benchmarking the process in consideration (i.e. the benchmarking object) is systematically studied and compared with another process. The aim is to find better solutions used in some other organization and that can be used for learning and thus for improving the own process performance. The reference may be another process in own organization or in some other partner's organization. A benchmarking project consists of three main areas of actions: Individual benchmarking projects are carried out by the benchmarking
process that is one of the strategic support processes of an organization.
Benchmarking process is described in figure 1. An individual benchmarking
project consists of the phases of figure 2. Figure 1. The benchmarking process Benchmarking is an interactive, open and confidential activity, which is profitable to both partners through win / win principle. In benchmarking particularly processes of different business branches or sectors should be studied because then one may learn something really new that is not yet well-known in one's own business culture or practice. In some cases a properly conducted benchmarking may take months and requires a lot of resources. Benchmarking is often connected with process re-engineering. As a result of benchmarking, the knowledge about the own process(es) is increased, and process performance improved, i.e. strengths (competitive advantages) are enhanced and weaknesses eliminated or decreased. At its best the benchmarking partnership may continue as an ongoing benchmarking cooperation. There are several practical ways to realize and organize a benchmarking
project. These include: The method is selected according to the challenge of the improvement targets taking into account the costs incorporated.
Figure 2. Tasks of a benchmarking project Considering the improvement object for benchmarking Impulses for applying benchmarking may be originated by an organization's business decision based on observations from the performance assessment (e.g. using auditing or performance excellence model methodology), changes in customer needs or competition situation, customer satisfaction measurements, etc. The selection of improvement objects is influenced by the status and criticality of the processes in relation to business. The object should be significant from the organization's mission, vision, and strategic focus point of view. Therefore the management has responsibility in deciding the objects and setting targets for the benchmarking and improvement. Planning a benchmarking project Benchmarking is carried out as a project. Implementation of the project
plan includes: The management accepts the plan and commits itself to its realization. The project group keeps the management up to date when the work proceeds. The project group comprises the owner of the object process, preferably as project manager, and project personnel who in practice is in duty to realize the improvement activities. Moreover the quality manager of the organization may act as a methodology facilitator of the project. It should also be considered the participation of the customer of the process to bring his/her needs immediately to the usage of the project. The use of an outside consultant could also be possible in tasks that call for special expertise or confidentiality such as relating to competitor benchmarking. The members of the project group should have knowledge and skills
of: To ensure a successful realization of the project the members of the group should be trained to take use of the benchmarking procedure. In the planning phase a set of questions to the partner is formulated and tested, and the data collection methods applied are preliminarily agreed upon. That may include literature / Internet searches, questioning by letter, telephone and video conferences, and company visits. Selecting benchmarking partners The target is to find such a process, internal or external, which has features ("Best Practices") desirable to the process to be improved. The selected partner may be a unit of own organization, competitor or a leading company in another industry. In the first phase it is recommended to select the processes within the own company as comparison objects. Thus the risks are smaller and the personnel can be trained and they get experience for external benchmarking. To find partners for internal benchmarking it is possible to take use of the networks of quality managers or process owners. The results of self-assessments (especially when using a performance excellence model methodology) made in different organizations give reference information for selecting benchmarking partners. Quality award winners are good candidates for benchmarking partners. Information sources of external partners include for example: Good international peer-to-peer expert networks may be very useful to find partners for benchmarking. The owner of the benchmarking process supports the selectors in the
acquisition and maintenance of information. It is recommended that
there are several partner-candidates for each benchmarking case to
ensure sufficient choice. Acquiring information and visiting the benchmarking partners A necessary precondition of useful benchmarking is the deep knowledge of one's own process. The process should be defined, documented, and its performance measurable. The assessment (e.g. auditing) of the process gives useful information of the present status of the process before starting benchmarking. Thus, knowing clearly one's own process the benchmarking object and its performance is a prerequisite for approaching partner's corresponding process. The performance indicators should be mainly quantitative so that the processes can be compared as explicitly as possible. Also qualitative information should be utilized as appropriate. However, the amount of information must be limited to essential. Thus, it is also reasonable to take use of such information, which is collected regularly. An important criterion for the selection of performance indicators is their business significance. Performance indicators should be linked to business vision and strategies and emphasize performance improvement. On the other hand the information should be sufficiently general to make the comparison possible. The benchmarking partners should agree upon how the preliminary information is collected and exchanged. To go deeply into the information and its background and to create a strong relation with the partner requires personal meeting(s) with the representatives of the partners. In the beginning of the meetings with benchmarking partners the purpose of the benchmarking visit is stated i.e. what is desired to be found out. The information is collected according to the plan; no information irrelevant to the subject is collected. It is thus ensured, that the targets are reached and that the timetable held. The partner is asked only for such information that one can deliver self correspondingly to the partner if asked for. Generally it is acted so that mutual confidentiality is maintained. It is typical to apply a confidentiality agreement between the partners (see an example in annex 1). In making observations special attention is paid to, in which matters and by which indicator the partner has a better process performance. The observations are recorded immediately. The root causes, premises and procedures of the superiority should be found out. Physical visiting to the benchmarking partner(s) is only a small part of a benchmarking project. However, it may require a lot of practicalities for arranging benchmarking meetings with relevant partners. When visiting a benchmarking partner a systematic and effective approach is beneficial because it is very typical that shortage of time for peer-to-peer communication on site is the most difficult fact. Also one should always keep in mind the different roles and interests of the partners in the benchmarking. Annex 2 represents a method - so called Funnel Method - that has proved useful in practice in communicating with benchmarking partners. In the case of a benchmarking club effective continual exchange of information is essential. In this case also modern information technology may be used effectively; especially interesting new means are so called social networking and collaborative group work software applications. Analyzing information Before taking use of the information, its correctness and validity
should be ensured. The information is analyzed in a way suitable for
the nature of the examined processes. On the basis of information
conclusions are made and goals are set to improve the processes. The target of improvement is, that the performance of the own process
at least reaches and preferably exceeds the performance of the reference
process. Because the reference process will also be improved in the
future, the development of the partner's future performance should
be projected, and which factors influence on it assessed. Very often benchmarking is a part of a process improvement project.
If not, then it is beneficial to carry out benchmarking-based process-improvement
measures according systematic project management practices. At the end of a benchmarking project a final report should be made. Also the benchmarking partners should be informed of the results. The owner of the object process is responsible for the documentation of benchmarking information, results of analysis and process improvements. For the organizational registration purposes the following centrally
maintained information is delivered to the owner of the benchmarking
process: Conclusion Experiences gained through practice have taught what kinds of difficulties
and problems one may face in the implementation of benchmarking. These
have resulted primarily from the following issues: Benchmarking should be applied rather cautiously. Benchmarking is a tool for large-scale projects and even when implemented appropriately, it is rather expensive and laborious approach. However, it may be useful as a learning tool within the framework of the company's ordinary leadership system and quality management approach. Although many reported benchmarking projects are encouraging, benchmarking should nevertheless definitely not be viewed as a remedy in all cases. References 1. Camp Robert: Benchmarking, Quality Press 1989 AGREEMENT ON CONFIDENTIALITY According to this agreement the partners can change confidential
information with each other. Hence the partners have agreed that the
following information is valid during the benchmarking co-operation
and five years since the co-operation has ended. In this agreement all information - technical, commercial or other
information independent of how it is documented - what one partner
delivers to the other partner according to this cooperation is regarded
as confidential. As confidential is also regarded the contact information
of the partners. The partners commit themselves not to deliver confidential information
to a third party, and to store the information acquired in this context
in such a way that a third party cannot access the information. The partner can break the terms of this agreement only by the approval
of the other partner.
Signatures XX Co
The benchmarking
partner FUNNEL PRINCIPLE FOR BENCHMARKING Funnel-principle is useful when used in visiting to a benchmarking partner for learning from the partner's best practices. The method was originally created by Mr. Jorma Kylander, JKC Consulting Oy, Finland for sales negotiations. Funnel-principle supports a systematic and effective consultation practice. It enables to understand the partner's present situation regarding to the topic in question, to listen to his/her argumentations and premises without prejudices, to depict the found out facts as useful for the benchmarking needs as well as to use achieved information for improvement purposes within the benchmarking item. The win / win -achievements are emphasized in using the funnel-principle (see the figure 3).
The funnel-principle consists of the following stages: 1. Effective opening "The first five minutes" Positive start / first impression - Using an effective small talk
2. Listening stage Finding out the present situation of the partner 3. Questioning stage Finding out the information areas necessary for this benchmarking 4. Detailing and facts stage Fact finding - Specifying details of the practices, getting examples
and background information (reasons, premises, etc.) 5. Tailoring stage Tailoring the findings for the purposes of this benchmarking 6. Closing stage Feedback to the benchmarking partner 7. Improvement stage Realizing the improvements as a project
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