2.3 Best Practice benchmarking:
This requires an organisation to seek out the undisputed world leader in the process that is critical to business success – regardless of sector or location (Codling, 1992). Once best practices have been identified, organisations face the complex task of understanding, adapting and implementing these in their own organisation. For example, when Zerox wanted to improve their billing process they went to banking and credit card organisations, because they believed that these types of organisations have the most effective, large scale systems to prevent errors arising in their billing documents (Zerox, 2001). Table 2.3 below identifies the key advantages and disadvantages of Best Practice benchmarking:
Table 2.1; Summary of key advantages & disadvantages of best practice benchmarking. Source; Adapted; Zairi, 1998:75
2.4 The Benchmarking Process:
Whatever type of benchmarking an organisation chooses to implement, it is logical that a sound methodology must be employed for implementation to be successful.
Since benchmarking first became popular in the late eighties, many methodologies have been proposed by various authors and organisations (Camp, 2001). Zairi & Leonard (1994), cited; Fridley et al, (1997) benchmarked fourteen benchmarking process models and highly rate the first, and most commonly adopted approach; the Xerox model, which Robert Camp developed, and eventually published in 1989. Camp’s model follows five stages and ten steps, as shown in model 2.1 below. Other models developed subsequently follow a very similar pattern; Zairi & Leonard (1994), cited; Fridley et al, (1997) state that all of the processes they examined contain planning, analytical, integration and action phases. Therefore it is reasonable that Camp’s model is an acceptable example of the type of methodology an organization should pursue when implementing any type of benchmarking activity.
Model 2.1: The rank Xerox benchmarking process. Source; Adapted: Zairi, 1998:15
During the initial Planning stage, the objective is to prepare a plan for the benchmarking process. The second, stage, Analysis, helps organisations to understand competitor’s strengths and to assess their own performance against these strengths. (Zairi, 1998:16). Thirdly, the Integration stage seeks to document the current performance gap and identify the critical success factors (CSF’s) that must be achieved to close or exceed this gap (Fridley et al, 1997). The Action stage refers to the implementation of the re-designed processes and practices in the organisation. Finally, the Maturity stage seeks to test the results of the benchmarking activity to determine whether the organisation has attained a better market position and market share (Zairi, 1998:16). During this stage an organisation can measure the success of their benchmarking activities from a marketing perspective, deciding whether or not benchmarking should become an element of their ongoing strategic management process.
3 WHY IMPLEMENT BENCHMARKING?
Advocates of benchmarking argue that the activity brings about newness and innovative ways of managing operations, which encourages employee empowerment and teamwork, improves quality and is customer focused (Zairi, 1998:14). It establishes goals that raise productivity levels within an organisation so that they become equal to or better than competition (Zairi, 1998: 14), thus providing a competitive advantage to improve an organisation’s market share and position. Unlike other performance improvement methods, benchmarking is special because it often involves comparison with external organisations rather than a stand-alone internal analysis (Waller, 1999: 774). Other common approaches to performance improvement include Business Process Reengineering (BPR) and, within Europe, adherence to International Quality Standards (ISO9000).
3.1 Business Process Re-engineering:
Benchmarking operates on a comparative basis to identify improvements; comparing what is currently done in an organisation to what could be done to maximise performance and productivity, to achieve continuous, incremental improvements.
In contrast, BPR seeks to destroy the process design activities that are currently going on and start all over again with a clean slate (Waller, 1999), to achieve radical, breakthrough improvements. Advocates of BPR argue that improvements and change in organisations should be pushed through in a revolutionary manner by radically redesigning processes to achieve dramatic improvements in performance (Hammer, 1990, Cited: DeWit & Meyer, 2002:251).
3.2 ISO9000:
Similarly to benchmarking, ISO9000 seeks to continually improve processes to achieve a higher level of quality, resulting in increased customer satisfaction. ISO9000 focuses upon eight quality management principles to prevent quality failures, which advocates of ISO9000 believe that, if applied effectively, will result in increased satisfaction for customers and other interested parties (Hoyle, 2003). However, in contrast to benchmarking, ISO9000 is based upon the implementation of standards set by and controlled by a single external, organisation, to be implemented internally by individual organisations. Table 3.1 below examines the key characteristics of benchmarking, in comparison to BPR and ISO9000.
Table 3.1: benchmarking, BPR & ISO9000 compared. Sources; Adapted; Zairi, 1998, DeWit & Meyer, 1999 & Hoyle, 2003
3.3 Benchmarking, BPR & ISO9000 compared:
The above table highlights many differences and similarities between benchmarking and alternative performance improvement methods. How these different methods should be managed has been the subject of much debate throughout the past decade.
Some argue that the philosophies behind benchmarking and BPR are diametrically opposed positions (Dewit & Meyer, 2002: 238) and therefore cannot be integrated; benchmarking is reflective of Japanese “Kaizen” philosophy. Kaizen philosophy follows the Japanese belief that improvements should be made one step at a time, incrementally to minimise cost, reduce risk and ensure the performance is continually improving. This is contrary to the argument put forward by advocates of BPR who suggest that change should be rapid and “breakthrough” to achieve results, suggesting that the two methods cannot possibly work together harmoniously as an integrated method.
In contrast to this argument, other authors suggest that benchmarking and BPR embrace many common ideas and goals and could therefore be implemented as an integrated improvement method; both encourage employee empowerment, teamwork, quality, change and customer focus (Salegna & Fazel, 1996), therefore when radical breakthrough is required in an organisation, BPR should be implemented and benchmarking should be implemented as a complementary method to ensure improvement continues after BPR has taken place.
From another angle, in contrast to my own belief that benchmarking is reflective of the Japanese “Kaizen” philosophy, Andersen (2003) suggests that, in reality benchmarking and BPR are not two isolated approaches to process improvement, but that benchmarking is simply the initial phase of a Business Process Re-engineering project.
There is sufficient literature to counter this suggestion and argue that the benchmarking process follows a “start to finish” methodology and is therefore a method for process and practice improvement in its own right, which shares more similarities with Kaizen philosophy than BPR philosophy.
In reality, none of these arguments are right or wrong; some organisations, such as Xerox have had phenomenal success using the benchmarking approach (Camp, 2001), others, such as Ford have had similar success with the BPR approach (Hammer, 1990, Cited: DeWit & Meyer, 2002:251), and some have chosen to integrate the two approaches to achieve improvements.
Whichever approach an organisation might pursue, both methods have generally been welcomed across industry throughout the previous two decades. ISO9000 on the other hand has not received such levels of acclamation. Many have criticised the European International Quality Standards for focusing too much upon documentation rather than practice, being too bureaucratic, too costly and providing no guarantee that a company that is certified provides a quality service or product (Waller, 1999:105).
Many organisations view ISO9000 not as a proven method for process and practice improvement, but as a set of standards and regulations an organisation must comply with in order to receive accreditation to an influencing governing body.
However, ISO9000 does share significant similarities with benchmarking and is used by some organisations as a means of carrying out benchmarking; Toyota view their continued outstanding ISO9000 results as an indicator that their internal processes and practices are superior to most other organisations and can therefore be recognised as “best practices”. They allow their processes and practices to be documented for use by other organisations, through the ISO9000 certification body, as a means of benchmarking against Toyota as a best practice organisation. To summarise, Toyota suggest that ISO9000 should not be seen as an improvement method in its own right, but that it should be utilised by organisations as a benchmarking tool (Devey, 2003).
The above discussion highlights the key similarities and differences between the various approaches and also supports the credibility and validity of benchmarking as an ongoing strategy and management activity to improve organisational performance.
4 BENCHMARKING IN ACTION.
So far we have used current literature to outline the key theories involved in benchmarking and to justify the validity and credibility of benchmarking as a process and practice improvement method. However, the real test of the benchmarking method lies in real life practice in organisations. Therefore, it is necessary to identify current cases demonstrating different examples of the use of benchmarking, identifying the different approaches used and the issues surrounding successful implementation.
A logical starting point is to look at where benchmarking began; therefore the first case study examines how Xerox coordinate and implement benchmarking today. The second case study examines the Japanese approach to benchmarking, in a case study conducted at Toyota UK. The final case study looks at how benchmarking can be applied in a service context, examining how the Warwickshire Ambulance service have applied benchmarking in the context of major structural change and performance improvement in a highly competitive area of the public sector (Holloway et al, 1999).
4.1 Benchmarking at Rank Xerox:
Today Xerox has institutionalised benchmarking. It is being done almost all of the time in the organisation but particular circumstances do highlight themselves when there is a particular need for benchmarking. If Xerox receive poor customer feedback, or poor results in any other performance indicator, they seek to identify a better practice elsewhere and implement it at Xerox. Xerox now integrate benchmarking into their Total Quality Management (TQM) program, but highlight that it can just as easily be done by itself, as Xerox did when their benchmarking activities first began in 1979. For all benchmarking activities, Xerox follow Robert Camps methodology, described in section 2.
Xerox highlights the importance of finding the right partners. A team of people who work with, or own the process, so that a good knowledge base exists, normally coordinates the benchmarking activity. Between brainstorming and talking to customers they compile a candidate list then perform secondary research on each candidate to develop a shortlist of partners. Each candidate is then triangulated to validate the source by asking for recommendations from external consultants, for example. Finally, Xerox will then go to favoured candidates and ask them to demonstrate their process to confirm the credibility of the information gained.
Internal benchmarking –
Xerox emphasise that organisations do not have to wait until the best partner is found to begin the benchmarking process. Xerox still begin with internal benchmarking whilst eternal partners are being sourced. Xerox have 65 marketing districts across the USA, essentially doing the same thing. Some perform well, some do not, so Xerox seek to identify differences in the way they work, benchmarking against the best performers.
External benchmarking -
Xerox still perform competitor benchmarking as they did in their first benchmarking project in 1979, however, today, because of the national quality award, which specifically requires benchmarking, organisations are becoming more interested in sharing information under well-defined guidelines.
For industrial benchmarking, Xerox team up with many different partners in manufacturing, service and public sectors, finding that the unique and innovative practices they need to remain competitive exist away from their own industry.
Best-practice benchmarking -
Finally, for best practice benchmarking, Xerox look at each business process in isolation to find the best practices for each. Xerox make good use of site visits, going to other organisations to seek out best practices and welcoming others to visit Xerox to examine their own processes and practices.
Xerox emphasise that once the benchmarking activity is complete for a specific processes it doesn’t finish there. Xerox then seek to go one better and improve the process further to develop best practices at Xerox.
Case study information taken from “The change project; Robert Camp interview” at
www.well.com/user/bbear/camp.html
4.2 Benchmarking at Toyota:
Similarly to Xerox, Toyota integrates benchmarking into its TQM program, known throughout Toyota as the Toyota Production System (TPS). The reference to production does mean that such activity is restricted to the factory floor. TPS can be applied to any kind of productivity or process output across the organisation. Toyota believe that knowledge is the basis for rational decision-making, promoting benchmarking as a knowledge management tool to identify best practices and to gain an understanding of how one's product, process, system, or organisation compares to the best-in-class (Devey, 2003).
Internal benchmarking –
Toyota performs internal benchmarking at two levels; firstly, within each plant, similar processes are compared to one another to identify the most efficient solution, which is then implemented across the plant. Similarly, across plants, all types of processes, not just manufacturing, are continually performance measured against one another. Those who do not perform that well are invited to visit best performing plants to benchmark against their processes and implement the results in their own plants. Similarly to Xerox, Internal benchmarking is always performed by the people who own the process because Toyota believe that this not only motivates and empowers employees, but that they also have greater knowledge of the process than anybody else.
External benchmarking -
Toyota also performs competitor benchmarking at two key levels. Firstly, the original Xerox approach is adopted; stripping down “best in class” competitor products to compare them to their own, measuring the gap between Toyota and the best in class and seeking to create a product that is even better than the current best in class. Secondly, Toyota use global data surveys, such as the JD Power associates automotive survey to measure their results against competitors, seeking to benchmark against the number one vehicle for each category and become equal to or better than this.
Best practice benchmarking –
Indisputably, Toyota have the most efficient and effective automotive production system in the world. Because of this, more often than benchmarking against others, Toyota are approached by competitors and other organisations from completely different industry sectors who wish to benchmark against Toyota. Toyota welcome other organisations who wish to visit their site to benchmark against Toyota, believing that most organisations are only interested in copying what works for others and adopting similar systems or processes in a follow-the-leader mentality. Toyota’s approach to its own best practice benchmarking is different; Toyota identify best practices and improve upon them by considering constraints that would limit their benefit to Toyota, given Toyota’s individual circumstances. Because of this, competitors may implement similar systems to that seen in Toyota today, but by the time they have done this, Toyota will have improved even further, allowing them to hold their competitive position as the most the most efficient and effective automotive manufacturer in the world.
Case study conducted by Claire Lindley at Toyota UK with Nick Devey, General Manager of the Car Manufacturing Division in March 2003.
4.3 Benchmarking in Warwickshire Ambulance Service:
Warwickshire Ambulance Service became an NHS trust in April 1994 and suddenly faced tough competition in terms of performance measurement and expectation. Because of this, Warwickshire have adopted a “total quality philosophy”, becoming innovative and flexible in their operations. Under the patient’s charter, Warwickshire Ambulance Service are required to report their performance against national targets for arrival at a scene of call-out. The ambulance service are also measured against the time spent at the scene, various financial indicators and the number of complaints and appreciations against them each year.
At the beginning of the benchmarking program, Warwickshire ambulance service was lagging behind most other trusts on most performance indicators.
The ambulance service benchmarked against other trusts, which they define as internal benchmarking. In addition to this they also partnered with the Police and Fire service in their own area who provide a similar service, as well as finding commercial partners, such as TNT who are under similar response time and service pressures.
Despite problems with comparability, the ambulance service established a joint head quarters with the fire service for greater collaboration and sharing of good practice to provide a more integrated service, seeing response times and time spent at scene significantly reducing. Reflecting the beliefs of Xerox and Toyota, the benchmarking program is carried out and implemented by teams of people who work on each process on a daily basis to achieve the best possible results.
One problem the ambulance service has seen is a significant lack of integration between operational benchmarking and financial benchmarking. This is put down to the presence of “them and us” syndrome between the organisation’s financial expertise and the people performing operational roles within the ambulance service. They also highlight that financial experts tend to focus heavily upon figures, whilst operational employees focus upon practical results, resulting in a conflict of interest between the two parties.
The benchmarking program is still ongoing at Warwickshire Ambulance Service; so far they seen some very good results such as the integration of the ambulance service with the fire service and response times and time spent at scene figures that are far more comparable with the leading ambulance service. The Warwickshire Ambulance Service is currently seeking to integrate financial and operational benchmarking teams more and more to overcome current problems to improve further and achieve even better results in the future.
Case study information taken from “A case study of benchmarking in the national health service”, Francis, Hinton & Holloway, 1999.
FUTURE DIRCTIONS IN BENCHMARKING.
Developing best practice benchmarking features as a critical activity in the business world to achieve a competitive advantage (Jarrar, 2002). This type of copying, adapting and learning from other’s best practices is not only becoming legal and ethical, but virtually mandatory for future success (Jarrar & Zairi, 2001).
5.1 Predictions by Zairi & Jarrar (2001 & 2002):
Recent studies by key benchmarking authors Zairi and Jarrar (2001 & 2002) propose that the following findings will map out the future of benchmarking:
- Benchmarking has spread to across many geographical and industry sector boundaries and will continue to grow in the future. Benchmarking is frequently applied across manufacturing and service industries in both public and private industry sectors. Benchmarking is applicable to organisations irrespective of their location, size or industry sector.
- Benchmarking is no longer restricted to improving product and service quality; benchmarking is frequently used to increase the efficient use of utilities within an organisation and to improve measures to protect the environment in an era when increasing pressure is being put on organisations to develop environmental policies and procedures to improve their competitive position (Zairi, 1998:204).
- Benchmarking is increasingly being used to improve management and leadership practices and to influence strategic planning and decision-making in addition to improving operational and process practices.
- The increasing use of IT means that more information, in both width and depth is available to more people faster than ever before. This will undoubtedly lead to more and faster best practice transfer in the future.
- Organisations are seeing the benefit of collaboration and cooperation more and more, having fewer worries about business ethic and confidentiality. This will also result in more best practice transfer in the future.
- Benchmarking is increasingly becoming an integral part of “the way organisations do business”.
- Benchmarking is increasingly being integrated with other management tools such as BPR, TQM and ISO standards. In particular, most organisations now apply benchmarking as an integral part of TQM for continuous improvement.
5.2 Predictions by Camp and Andersen (2001):
Robert Camp and Bjorn Andersen (2001) carried a similar study during 2001. Their findings support and triangulate those highlighted by Jarrar and Zairi but in addition, Camp and Andersen also propose that the following findings will map out the future of benchmarking:
- Some changes have occurred in the practice of benchmarking over the last decade; in early benchmarking the focus was on performance measures, often of competitors and for the purpose of setting more ambitious targets. The focus has now shifted increasingly towards how non-competitors and industrial best practices improve business processes.
- Approximately 75% of organisations now have formal benchmarking programs following a formal methodology, similar to the Xerox methodology highlighted in section 2.
- Increasing importance is placed upon the involvement of people at all levels of the organisation in benchmarking programs and the commitment of senior management to the benchmarking program.
- Emphasis is moving further and further away from internal and competitor benchmarking towards the adaptation of best practices to suit the unique requirements of the organisation.
- The use quantitative methods such as performance metrics is becoming increasingly popular because it is easier to measure and evaluate benchmark gaps using such methods. Ease of access to such methods is increasing rapidly as IT and communications advance further. Online metric and measurement systems also allow organisations to evaluate their performance against best practices in the context of their own circumstances without having to go out and find partners.
- This type of benchmarking has been encouraged by governing bodies such as the Department of Trade and Industry (DTI) who believe that such initiatives will help SME’s to increase competitiveness and scientific excellence in order to generate higher levels of sustainable growth and productivity in a modern society (SBS corporate plan, 2001, Cited: Matykiewicz, 2001) because it is low cost and requires minimal resources.
- However, researchers such as Matykiewicz and Yarrow (2001), of the Newcastle Business School, believe that the benefits of metric benchmarking are limited, arguing that such methods do not consider the practices that enable the results to occur. Research of greater depth such as site visits and understanding how processes fit with the organisational environment are required to gain significant long term improvements (Matykiewicz, 2001).
Information adapted from; Jarrar, Y. F., (2002), Future Trends in Benchmarking for Competitive Advantage: a Global Survey, Jarrar, Y. F., & Zairi, M., (2001), Benchmarking: A survey on Global Trends & Andersen, B., & Camp, R. (2001), The state of Benchmarking: Current Position and Future Development of Benchmarking, and Matykiewicz, L., (2001), An investigation into whether diagnostic benchmarking is a potentially significant contributor to an SME’s achievement of service excellence
5.3 Conclusions:
To conclude, benchmarking and other measurement systems are increasingly becoming a necessity for organisations to be competitive in a tough, global business environment where the pace of corporate, political, economical and consumer changes is continually accelerating (Jarrar, 2002). Benchmarking provides organisations with a useful tool to stay equal to or better than competitors and for the most successful global organisations; it is integral part of TQM programs and business strategy, planning and management.
6 REFERENCES.
Textbooks:
Champy, J., (1995), Re-engineering Management; the Mandate for new Leadership, London, Harper Collins Publishers
Codling, S, (1992), Best Practice Benchmarking; the Management guide to Successful Implementation, Bedfordshire, Industrial newsletters Ltd
DeWit, R., & Meyer, R. (1999), Strategy; Process, Content Context, (2nd Edition), London, Thompson Business Press
Hoyle, D., (2003), ISO9000:2000; an A-Z guide, Oxford, Butterworth-Heinemann
Oakland, J. S., (1989), Total Quality Management, Oxford, Butterworth-Heinemann
Waller, D. L. (1999), Operations Management; A supply Chain Approach, London, Thompson Business Press
Zairi, M. (1998) Effective Management of Benchmarking Projects, Oxford, Butterworth-Heinemann
Web Pages & Articles:
Andersen, B., & Camp, R. (2001), The state of Benchmarking: Current Position and Future Development of Benchmarking
Best Practice Enablers; CVOC Best Practices at: http;/isds.bus.1su.edu/cvoc/learn/ bpr/mprojects/bp/bpbasics.html, accessed 24th April 2003
Fazel, F., & Salenga, G. (1996), An integrative approach for selecting a TQM/BPR implementation plan, Illinois, State of Illinois University
Fridley, J.L., Jorgensen, J.E., & Lamancusa, J.S. (1997), Benchmarking; a process basis for teaching design, Pittsburgh, Frontiers in Education Conference
Jarrar, Y. F., (2002), Future Trends in Benchmarking for Competitive Advantage: a Global Survey, Cranfield University
Jarrar, Y. F., & Zairi, M., (2001), Benchmarking: A survey on Global Trends, Cranfield University
Matykiewicz, L., (2001), An investigation into whether diagnostic benchmarking is a potentially significant contributor to an SME’s achievement of service excellence, Newcastle Business School
“The change project; Robert Camp interview”, 2001; , accessed 24thApril 2003.