Benchmarking, Salvador Trinxet Llorca
Book: Key management models
Author: Steven ten Have Wouter ten Have, frans Stevens and Marcel van der Elst with Fiona Pol- Coyne
Editorial: Prentive Hall , Financial Times
The big idea
Benchmarking is the systematic comparison of organizational processes and performances in order to create new standards and/or improve processes. There are four basic types:
-internal – benchmarking within an organization, e.g. between business units;
-competitive – benchmarking operations and performance with direct competitors;
-functional – benchmarking similar processes within the broader range of the industry;
-generic – comparing operations between unrelated industries.
All types of benchmarking can be very rewarding: they can provide new insights into strengths and weaknesses of (parts of) an organization, illustrate possible improvements, objective norms, new guidelines and fresh ideas.
When to use it
Much has been written on the methodology of the benchmarking process. Most variations on the basic elements of the methodology are the result of including situational characteristics or explanatory factors to account for differences, forward-looking industry analyses or simply practical issues that arise in certain industries or in communication between benchmarking partners and analysts.
Benchmarking entails the following (sometimes overlapping) steps:
– Determine the scope.
– Choose the benchmark partner(s).
– Determine measure(s), units, indicators and data collection method.
– Collect data.
– Analyse the discrepancies – get facts behind the numbers.
– Present the analysis and discuss implications in terms of (new) goals.
– Make an action plan and/or procedures.
– Monitor progress in ongoing benchmark
Ideally, the benchmarking partner is considered to be performing at least equally as well or better. Potential partners are often identified through industry experts and publications.
Quite often, differences in products, processes and management make comparison difficult, if not impossible. Berenschot uses the BETTI® Benchmark model, depicted in the figure. This particular variation of benchmarking accounts for explanatory factors or situational characteristics that define the company’s situation, e.g. a complex product or very wide assortment. Performance indicators can be adjusted using the situational characteristics, to allow for a ‘fair’ comparison and derive the improvement potential for each particular performance indicator.
An example of such an explanatory factor is product complexity. If your company has a higher product complexity, e.g. in terms of number of parts or actions, than that of the benchmark partner, that could (partially) explain a lower on-time completion reliability. Not only can an analyst use multiple benchmarks to derive an approximation of the ‘benchmark’ for your company, the very determination of the explanatory factor triggers an improvement opportunity. In this example, a lower number of parts or actions could increase on-time completion reliability.
Site visits to the benchmark partner, as well as mutual interest in the benchmarking project increase the rate of success of benchmarking significantly. Warning: the buzzword to describe unprepared or non-specific benchmarking visits is ‘industrial tourism’.
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