CHAPTER TWENTY

Benchmarking

"[Benchmarking] is the difference between teaching yourself how to hit a golf ball and
taking lessons from Jack Nicklaus."

Steven George¹

MAJOR TOPICS

Benchmarking Defined

Rationale for Benchmarking

Benchmarking Approach and Process

Benchmarking versus Reengineering

Role of Management in Benchmarking

Prerequisites to Benchmarking Obstacles to Successful Benchmarking

Benchmarking Resources

Selection of Processes/Functions to Benchmark

Acting on the Benchmark Data

Perpetual Benchmarking

Benchmarking is becoming an increasingly popular tool among companies trying to become

more competitive, striving for world-class performance. The vast majority of them are
actively engaged in benchmarking. Benchmarking is a part of the total quality process, and
anyone involved in total quality should have a solid understanding of this subject. This
chapter is intended to help readers understand what benchmarking is all about, its benefits,
and its pitfalls. The chapter includes sufficient information to enable any enterprise to make
rational decisions concerning benchmarking, including whether or not to do it, and how to go
about it.

Benchmarking was brought to our awareness through Robert C. Camp's 1989 land- mark
book. Since then a number of variations have developed on the benchmarking theme. We
have benchmarking studies in which there is no contact with an outside

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firm-information gained is strictly from the public domain。There is no question that this
technique can be useful。It is something that the organization should be doing any
way。Sometimes third-party firms specializing in benchmarking studies are contracted for
that work。There is considerable doubt that this is really benchmarking，however。We also
have competitive benchmarking in which a competitor's operation is stud ied from a distance
without the cooperation of the target firm。The aim is to learn some thing that can help
improve process or product quality。Competitive benchmarking uses publicly available
data，and once again，it is possible to contract this work to specialist third-party
firms。This approach，however，doesn't fit our definition of benchmarking。Also in use
are the unstructured plant visits in which the visitor firm has the inten tion of learning
something that will help with its processes or products。This is often called benchmarking
but has more aptly been named“industrial tourism。”Such visits have some value，but
they do not comprise benchmarking。Many other variations exist，but the form of
benchmarking addressed in this book is what has been called cooperative benchmarking，or
process benchmarking，in which key processes are the focus for radical improvement。This
involves a cooperative effort by two firms，the benchmarking firm wanting to bring a
substandard process up to the world-class level of the partner firm's process。

BENCHMARKING DEFINED

Benchmarking has been around since the early 1980s，but it wasn't until the early 1990s that
it became a widely accepted means of improving company performance。In 1985 almost no
benchmarking activity existed among the Fortune 500 companies。By 1990 half of the
Fortune 500 were using this technique。Today companies large and small are finding
benchmarking to be an effective component in their total quality effort。If there is a single
most likely reason for the slow rise in benchmarking popularity，it is a misun derstanding of
the concept-misunderstanding of what benchmarking is，what it is not，and how to do
it。It helps to begin with an examination of what benchmarking is not.
Benchmarking Is Not：
Cheating Illegal
Immoral Industrial espionage
Unethical

All of these misconceptions about benchmarking assume that one party somehow takes
advantage of an unsuspecting competitor by surreptitiously copying the competi tor's product
or processes。Nothing could be further from the truth。Benchmarking involves two
organizations that have previously agreed to share information about processes or
operations。The two organizations both anticipate some gain from the exchange of
information。Either organization is free to withhold information that is con sidered
proprietary。In addition，the two companies need not be competitors。

Benchmarking is the process of comparing and measuring an organization's operations its

internal processes against those of a best-in class performer from inside or outside industry。

A Psychological Barrier to Benchmarking

We as Americans have a lot of psychological baggage to discard before we can successfully
learn from others。Perhaps the greatest is the fear of being seen as'copying。From
kindergarten onward，we have been punished for working together and rewarded for
individual achievement。”Source：Carla O'Dell，foreword to Gregory H. Watson's book
The Benchmarking Workbook Adapting Best Practices for Performance
Improvement（Cambridge，MA：Productivity Press 1992）。xvi。

Benchmarking is finding the secrets of success of any given function or process so that a
company can learn from the information-and improve on it。It is a process to help a
company close the gap with the best-in-class performer without having to“reinvent the
wheel。”

A distinction exists between benchmarking and competitive analysis。Competitive analysis

involves comparing a competitor's product against yours。It compares the fea tures and
pricing of the product。Consumers perform competitive analysis when they compare
competitors'products as they try to determine which brand of VCR，television。or
automobile to purchase。Benchmarking goes beyond that to comparing how the product is
engineered，manufactured，distributed，and supported。Benchmarking is interested not
so much in what the product is and what it costs but rather in the under lying processes used
to produce，distribute，and support it。

Finally，and most important，benchmarking is a tool to help establish where improvement

resources should be allocated。If，for example，it is discovered that three of five processes
are nearly as good as the best-in-class performers，but two are signifi cantly off the best-in-
class mark，the most resources should be allocated to these two。The most benefit for the
dollars invest will come from changing those processes to conform more nearly to the best-
in-class。Relatively little will be gained by drastically changing a process that is already
close to the best there is。Key points to remember about benchmarking are as follows：

-Benchmarking is an increasingly popular improvement tool。

-Benchmarking concerns processes and practices。

-Benchmarking is a respected means of identifying processes that require major change。

-Benchmarking is done between consenting companies that may or may not be com
petitors。

-Benchmarking compares your process or practice with the target company's best-in class
process or practice。

Today Change Is the Only Constant

“The future ain't what it used to be。”
Source：Traditionally accredited to Yogi Berra。
-The goal of benchmarking to find“secrets of success”and then adapt and improve them for
your own application。

-Benchmarking is equally beneficial for both large and small businesses。

RATIONALE FOR BENCHMARKING

Never was Yogi Berra's comment。“The future ain't what it used to be，”as relevant as it
is to modern industry。The future for companies today seems far different from what it has
been since World War II。The first real questions regarding the future and the ability of the
United States to sustain its industrial leadership seem to have resulted from the oil crisis of
1974. By then，the United States had lost much of the commercial electron ics business to
Sony，Hitachi，and Panasonic，but the most important industry in the United States，the
automobile，seemed secure。However，when the oil embargo struck，Americans quickly
traded their big domestic cars for small，fuel-efficient Japanese models。When the
embargo ended，Americans continued buying Japanese cars because at that time they were
better than their American counterparts。The Japanese quickly claimed about 30％of the
U.S. automobile market（and possibly could have gained much more except for voluntary
restraints adopted out of fear that severe trade restric tions would be imposed by
Washington）。Following these events，North America finally started to wake up to the
fact that the world was changing。Whole industries were moving from one part of the world
to another，and most of that movement was to Japan。There was good reason to look at the
Japanese to see what they were doing differently that allowed them to accomplish this。

What was learned，of course，was that by following the teachings of W. Edwards

Deming。Joseph Juran，Ishikawa，Taguchi，Ohno，and other quality pioneers，Japan
had developed vastly superior practices and processes。These resulted in superior manufac
tured goods at competitive prices-everything from motorcycles，to cars，to cameras，to
electronics of all kinds，even to shipbuilding。It took several years of looking at Japan to
realize fully what had happened。For a long time，Western leaders rationalized Japan's
success to low labor costs，the Japanese work ethic versus that of Detroit，lifetime
employment，and other factors。Such rationalizations simply clouded the real issue：the
superiority of the Japanese practices and processes Now that industrial leaders world wide
are aware that better practices and processes can enhance competitiveness，it makes good
business sense to determine where an organization stands relative to world-class standards
and what must be done to perform at that level。That is what benchmarking is designed to
do。

Twenty years ago，benchmarking was a case of comparing North American industry with
the Japanese。Today，benchmarking is a case of comparing your company with the best in
the world。The best in the world for a given comparison may be in Japan，or it may be next
door。It may be your direct competition，or it may be in a completely differ ent
industry。In addition to companies all over the world emulating the Japanese，cus tomers
all over the world are demanding the highest quality in the products they buy。Business as
usual is no longer sufficient。Organizations must be improving always and forever，or they
will be out of business soon and forever。

The rationale for benchmarking is that it makes no sense to stay locked in an iso lated
laboratory trying to invent a new process that will improve the product，or reduce
cost，when that process already exists。If one company has a process that is four times as
efficient，the logical thing for other companies to do is to adopt that process。An
organization can make incremental improvements to its process through continual
improvement，but it might take years to make a 4x improvement，and by then the com
petition would probably be at 6X or better。Benchmarking is used to show which processes
are candidates for continual（incremental）improvement and which require major（one-
shot）changes。Benchmarking offers the fastest route to significant perfor mance
improvement。It can focus an entire organization on the issues that really count。

Some factors that drive companies to benchmark are commitment to total quality，cus tomer
focus，product-to-market time，manufacturing cycle time，and financial performance at
the bottom line。Every company that has won the Malcolm Baldrige Award endorses
benchmarking（see Discussion Assignment 20-1 later in this chapter）。Key points to
remember about benchmarking as it relates to continual improvement are as follows：

-Today's competitive world does not allow time for gradual improvement in areas in which a
company lags far behind。

QUALITY TIP

Look Far and Wide

When you look for best-in-class process owners as possible benchmarking part ners，don't
restrict your search to your own industry。For example，when South west Airlines was
looking for a faster way to offload passengers and cargo and get the planes ready for their
next flights，it benchmarked Indianapolis 500 pit crews。When Xerox needed major
improvements in its warehousing operations，it bench marked L. L. Bean，one of the
world's best catalog sales organizations。IBM ied Las Vegas casinos to find ways to reduce
employee theft。Source：David L. Goetsch and Stanley B. Davis。
Benchmarking can tell a firm where it stands relative to best-in-class practices and
processes，and which processes must be changed。

- Benchmarking provides a best-in-class model to be adopted or even improved on。

-Modern customers are better informed and demand the highest quality and lowest
prices。Companies have a choice to either perform with the best or go out of business。

- Benchmarking supports total quality by providing the best means for rapid，significant
process / practice improvement。

BENCHMARKING APPROACH AND PROCESS

The benchmarking process is relatively straightforward，but steps must flow in sequenceA
number of variations are possible，but the process should follow this gen eral sequence：
1 .Obtain management commitment。

2. Baseline your own processes。

3. Identify your strong and weak processes and document them。

4. Select processes to be benchmarked。

5. Form benchmarking teams。

6. Research the best-in-class。

7. Select candidate best-in-class benchmarking partners。

8. Form agreements with benchmarking partners。

9. Collect data。

10. Analyze data and establish the gap。

11.Plan action to close the gap / surpass。

12. Implement change。

13. Monitor。

14. Update benchmarks continue the cycle。

These 14 implementation steps are explained in turn in the following sections。Figure 20-2
is provided to help maintain perspective and afford clarity

Step 1：Obtain Management Commitment

Benchmarking is not something one approaches casually。It requires a great deal of time
from key people，and money must be available for travel to the benchmarking
partners'facilities。Both of those require management's approval。You expect to gain
information from your benchmarking partner for which it will expect payment in kind;
namely，infor mation from you about your processes。This can be authorized only by
management。Finally，the object of benchmarking is to discover processes to replace yours
or at least to make major changes to them。Such changes cannot be made without
management's approval。Without a mandate from top management，there is no point in
attempting to benchmark。That is why the requirement for management commitment is at
the top of the list。If you cannot secure that commitment，proceed no further。
Step 2：Baseline Your Own Processes

If your company is involved in total quality，chances are good that you have already done
some baselining of processes，because before continual improvement can be used
effectively，and certainly before statistical process control can be applied，the processes in
question must be understood。That is，the processes must be character ized in terms of
capability，their flow diagrams，and other aspects。If this has not been done before，it
must be done now。It is critical that you understand your own processes thoroughly before
attempting to compare them with someone else's。Most people think they know their
processes well，but that is rarely the case if a deliberate process characterization has not
recently been done。It is also important that an orga nization's processes be completely
documented，not just for its own use but for the benefit of everyone associated with the
process in any way。（See the discussion of flowcharting in Chapter 15.）

Step 3：Identify and Document Both Strong and Weak Processes

Strong processes will not be benchmarked initially：continual improvement techniques will

be sufficient for them。Weak processes，however，become candidates for radical change
through benchmarking，because incremental improvement would not be suffi cient to bring
them up to the necessary level in the time frame required。It can be difficult to categorize an
organization's processes as weak or strong。A process that creates 50％scrap is an obvious
choice for the benchmarking list。On the other hand，a process may be doing what is
expected of it and as a result be classified as strong。However，it could be that expectations
for that process are not high enough。It is possible that someone else has a process that is
much more efficient，but you just don't know about it。Never consider a process to be
above benchmarking，no matter how highly it is rated。Concentrate on the weak ones，but
keep an open mind about the rest。If research identifies a better process，add it to the
list。Above all，document all processes fully-even the strong ones。Keep in mind that as
you are looking at one of your benchmarking partner's processes because it is supe rior to
yours，your partner will be looking at your strong processes for the same reason。If the
processes are not well documented，it will be very difficult to help your partner。It is
impossible to compare two processes for benchmarking if both are not fully docu mented。

Step 4：Select Processes to Be Benchmarked

When you have a good understanding of your own processes and the expectations of
them，decide which ones to benchmark。An important point to remember is this：never
benchmark a process that you do not wish to change。There is no point in
it。Benchmarking is not something you engage in simply to satisfy curiosity。The
processes that are put on a benchmark list should be those known to be inferior and that you
intend to change。Leave the others incremental change through continual improvement-at
least for the time being

Step 5：Form Benchmarking Teams

The teams that will do the actual benchmarking should include people who operate the
process，those who have input to the process，and those who take output from it。These
people are in the best position to recognize the differences between your process and that of
your benchmarking partner。The team must include someone with research capa bility
because it will have to identify a benchmarking partner，and that will require
research。Every team should have management representation，not only to keep manage
ment informed but also to build the support from management that is necessary for radi cal
change。

Step 6：Research the Best-in-Class

It is important that a benchmarking partner be selected on the basis of being best-in class for
the process being benchmarked。In practical terms，it comes down to finding the best-in-
class-you-can-find-who-is-willing。Because benchmarking is accomplished by
process，best-in-class may be in a completely different industry。For example，say that an
organization manufactures copy machines。It might consider potential bench marking
partners who are leaders in the copying industry。But if it is a warehousing process that is to
be benchmarked，the company might get better results by looking catalog companies that
have world-class warehousing operations。If the process to benchmarked is accounts
receivable，then perhaps a credit-card company would be a good partner。Processes are
shared across many industries，so don't limit research to like indus tries or you might miss
the best opportunities for benchmarking。Remember that best in-class does not mean best-
in-your-industry，but best regardless of industry for the process in question。If team
members stay up to date with trade journals，they should be able to compile a good list of
potential benchmarking partners。Research should cover trade literature，suppliers and
customers，Baldrige Award winners，and profes sional associations。The Internet offers a
seemingly endless stream of benchmarking information。Team members will find that the
best-in-class processes become well known very fast。

Step 7：Select Candidate Best-in-Class Benchmarking Partners

When the best-in-class have been identified，the team must decide with which among them
it would prefer to work。Consideration must be given to location and to whether the best-in-
class is a competitor（remember，the team will have to share information with its
partner）。The best benchmarking partnerships provide some benefit for both parties。If
the team can find a way to benefit its potential partner。the linkage between the two
companies will be easier to achieve。Even without that，most companies with best-in-class
processes are willing，often eager，to share their insights and experience with others，even
if they gain nothing in return。Indeed，Baldrige Award winners are expected to share
information with other U.S. organizations。

Step 8：Form Agreements with Benchmarking Partners

After the team has selected the candidates，it contacts the potential partner to form an
agreement covering benchmarking activities。It can be useful to have an executive contact
an executive of the target company，especially if there is an existing relationship or some
other common ground。Often the most difficult part of the process is identifying the right
person in the potential partnering company。Professional associations can sometimes pro
vide leads to help the team contact someone in the right position with the necessary
authority。After such a contact has been made，the first order of business is to determine
the company's willingness to participate。If it is not willing，the team must find another
candidate。When a company is willing to participate，an agreement can usually be forged
without difficulty。The terms will include visit arrangements to both companies。limits of
disclosure，and points of contact。In most cases，these are informal。Even so。care must
be exercised not to burden either benchmarking partner with excessive oblig ations。Make
the partnership as unobtrusive as possible。

Step 9：Data Collection

The team has already agreed to discuss a specific process（or processes）。Observe

collect，and document everything about the partner's process。In addition to that，try to
determine the underlying factors and processes：what is it that makes the company
successful in this area？For example，does it employ total productive
maintenance，continual improvement，employee involvement，use of statistics，and
various other approaches？Optimally，your process operators should talk directly with its
operators。It is important to come away with a good understanding of what its process
is（flow diagram）and its support requirements，tim ing，and control。The team should
also try to gain some understanding of the preceding and succeeding processes，because if
you change one，the others may require change as well。If the team knows enough when it
leaves the partner's plant to implement its process back home，then it has learned most of
what is needed。Anything less than this，and the team has more work to do。While you
are in a partner's plant，try to get a feel for how it operates。Be open minded and receptive
to new ideas that are not directly associated with the process question。Observing a different
plant culture can offer a wealth of ideas worth pursuing

Step 10：Analyze the Data; Establish the Gap

With the data in hand，the team must analyze it thoroughly in comparison with the data
taken from its own process。In most cases，the team will be able to establish the gap（the
performance difference between the two processes）numerically-for example，200 pieces
per hour versus 110 pieces，2％scrap versus 20％，or errors in parts per mil lion rather
than parts per thousand。After the team concludes there is no doubt that the partner's
process is superior，other questions arise：Can its process replace ours？What will it
cost，and can we afford it？What impact will it have on adjacent processes？Can we
support it？Only by answer ing these questions can the team conclude that implementation is
possible。

Step 11：Plan Action to Close the Gap or Surpass

Assume the team concluded that the change to the new process is
desirable，affordable。and supportable and that the team wants to adopt the process。In
most cases，imple mentation will require some planning to minimize disruption while the
change is being made and while the operators are getting used to the new process。It is very
important to approach implementation deliberately and with great care。This is not the time
for haste。Consider all conceivable contingencies and plan to avoid them，or at least be pre
pared for them。Physical implementation may be accompanied by training for the opera
tors，suppliers，or customers。Only after thorough preparation and training should an
organization implement the change to the new process.wagos

A second aspect of benchmarking should be kept in mind。The objective is to put in place a

process that is best-in-class。If the team merely transplants the partner company's
process，it will not achieve the objective，although improvements may occur。To achieve
best-in-class，an organization must surpass the performance of the benchmark process。It
may not be possible to do this at the outset，but the team's initial planning should provide
for the development work necessary to achieve it in a specified period of time（see Figure
20-1）。

Step 12：Implement the Change

The easiest step of all may be the actual implementation，assuming that the team's planning
has been thorough and that execution adheres to the plan。New equipment may or may not
be involved，there may be new people，or more or fewer people-but there will certainly be
new procedures that will take time to become routine。Therefore，it should not be a
surprise if initial performance does not equal the benchmark。After people get used to the
changes and initial problems get worked out，performance should be close to the
benchmark。If it is not，an important factor was overlooked，and another visit to the
benchmarking partner may be necessary to determine what it is。

Step 13：Monitor

After the process is installed and running，performance should come up to the bench mark
quickly。Before long，continual improvement should enable the organization to surpass the
benchmark。None of this is likely to happen without constant attention and
monitoring。Never install a new process，get it on-line and performing to
expectations。and then forget about it。All processes need constant attention in the form of
monitor ing。Statistical process control can be an invaluable tool for this purpose，as can
other types of charting。

Step 14：Update Benchmarks; Continue the Cycle

As was explained in step 11，the intent of benchmarking is not only to catch up with the
best-in-class but to surpass，thereby becoming best-in-class。This is a formidable
undertaking，because those with best-in-class processes are probably not resting on their
laurels。They too will continue to strive for continually better performance。How
ever，you are now applying new eyes and brains to their processes，and fresh ideas may
well yield a unique improvement，vaulting your organization ahead of the benchmark.

An important consideration，as you either achieve best-in-class or get close，is that limited
resources have to be diverted to those processes that remain lowest in perfor mance relative
to their benchmarks。Let continual improvement take over for the best processes，and
concentrate benchmarking on the ones that remain weak。

Three Phases of Benchmarking

This 14-step sequence represents the three phases of benchmarking：preparation，execu

tion，and postexecution。Figure 20-2 illustrates the benchmarking process / sequence by
phase and indicates action responsibility for each step。Figure 20-2 also makes it clear that
the final step（14）causes the cycle to start over again at step 2，confirming the never-
ending nature of the benchmarking process for companies that want to achieve or maintain
leadership positions。Key points relating to the 14-step sequence of steps for implementing
benchmarking are as follows：

-Benchmarking requires top management's commitment，participation，and backing。

-It is necessary that an organization thoroughly understand its own processes before
attempting to benchmark。

-The processes that should be benchmarked are those that most need improvement。

-Benchmarking teams must include process operators。

-Benchmark best-in-class，not best-in-the-industry。

-Do not rush into new processes or major changes without thorough，thoughtful planning。

-Do not be satisfied with a zero gap-aim to surpass。

-Carefully monitor new processes or major process changes。

-Benchmarking is not a one-shot process：continue it forever。

BENCHMARKING VERSUS REENGINEERING

Benchmarking involves partnering with the owner of a best-in-class process so that you
might adopt or adapt that process in your operation without having to spend the time and
energy to try to design a duplicate of the superior process。Process reengineering requires
you to do the latter，on your own。Therefore，in cur view，process reengineering should
only be considered when it is impossible to use benchmarking。That could hap pen for a
number of reasons，including these：
(No known process available for benawanung ware）

-Best-in-class not willing to partner

-Best-in-class inaccessible due to geography or expense

If your subject process is unsatisfactory，and you cannot benchmark for any of these
reasons，you may have to resort to reengineering。You should be careful to conside the
reasons for the process being unsatisiactory。It may simply be the wrong process for the
job，or it may be out of statistical control。Reengineering will not solve either of those
problems。Be sure that the process is appropriate and that it is in control.

first。If it is still not producing the desired results，suggesting that it is simply not
capable，then redesigning it through reengineering is a good approach。One disadvan tage
with process reengineering is that there is no guarantee that after spending the time and
resources，you will have a competitive process。That issue does not exist with
benchmarking。With benchmarking you will have observed a competitive process in
action。

When we set out to improve our processes，we normally flowchart them to help us
understand how each process really works and to give us a visual impression of the
steps，people，and functions involved。Improvement typically comes about by chang ing
or eliminating activity in the process that does not add value or consumes too much time or
resources，and so forth。There is an alternative way to go about this and that is to abandon
the current process and replace it with a brand-new process that provides the same
functionality but better，faster，or cheaper。That is process reengineering。

Here is something to think about：If an organization could achieve the same results by either
one of these two routes，which one would stand the best chance for success in the
workplace？We believe the former-let's call it the continual improvement route would be
more readily accepted by the workforce and would be，therefore，more likely to
succeed。Usually the people most closely related to the process have a major input to any
continual improvement initiative，and it will not be perceived as something being forced on
them by some person or group that doesn't really understand the process any way。Whether
justified or not，that is the way process reengineering has come across to workers。It tends
to be radical and sudden，and seldom is consideration given to the human issues。Many
times it is seen as a management tool for laying off workers。It does not have to be that
way，but that is，we think，the way process reengineering is widely perceived today。

We say this to lead into our final thoughts on process reengineering。If you find process
reengineering to be the approach for one of your processes，never let it be a sur prise to
your employees。In keeping with the philosophy we have promoted throughout this
book，it only makes sense to involve the process owners and their internal suppliers and
customers，along with other appropriate employees，in your process reengineering
project。Take advantage of their collective brainpower and diverse perspectives，and in the
doing，their buy-in will be assured。

In summary，if you have a very good process to begin with，use continual improve ment
techniques to make it better。On the other hand，if the process is clearly inferior to some
used by other firms，try benchmarking。When you cannot achieve the kind of improvement
you need from either of those methods，then process reengineering may be required。But
no matter which way you go，be sure to get your people involved。

ROLE OF MANAGEMENT IN BENCHMARKING

Management plays a crucial role in the benchmarking process。In fact，without the

approval and commitment of top management，benchmarking is not possible。Bench
marking is not something that can occur from the grassroots up without management's

direct involvement。Several benchmarking considerations require management's approval

before the process can start：commitment to
change，funding，personnel，disclosure，and involvement。

Commitment to Change

Benchmarking is a serious undertaking for both benchmarking partners。Unless a firm

commitment to change exists-unless the organization fully intends to radically improve its
processes to come up to best-in-class standards-benchmarking should not be
considered。Unfortunately，too many companies jump into benchmarking without that
commitment，with the result that money and personnel are wasted by both parties。In
addition，the hopes and expectations of employees are raised，only to be disappointed
when nothing comes of it。To obtain any real benefit from benchmarking，an organization
must resolve that when a best-in-class process is found，it will do what is necessary to
incorporate it as a replacement（or radical improvement）model for its inferior
process。That，after all，is what benchmarking is about。

Funding

Only management can authorize the expenditure of funds for benchmarking。These funds
will support travel for teams visiting the organizations with best-in-class processes。Teams
are usually composed of five to eight people。Visits may last from two days to two
weeks。Travel destinations are inflexible，dictated by the location of the best-in-class
firms。Clearly，travel expenses can be high。Management must make the funds available
if benchmarking is to be carried out。

Human Resources

In similar fashion to funding，management must make the necessary human resources

available for the benchmarking tasks。Although the costs for the human resources are
usually far higher than for travel，the availability of personnel is seldom an issue except for
the target company。Disclosure
It may not be immediately obvious，but both companies-the benchmarker and the tar get-
disclose information about their processes and practices。Management may be
understandably hesitant to disclose such information to competitors，but what about the
case of the noncompetitor benchmarking partner？Even there，management may be
reluctant，because there can be no ironclad guarantee that information divulged to a
noncompetitor will not find its way to the competition。The other side of the coin is that few
processes or practices remain secret very long anyway。But if the organization has some
unique process that gives it a competitive advantage，the process should be

SELECTION OF PROCESSES / FUNCTIONS TO BENCHMARK

Selection of processes or functions to benchmark would seem to be a straightforward

decision but is in fact one that gives many would-be benchmarkers a great deal of
trouble。If you keep in mind that the purpose of benchmarking is to make a radical
improvement in the performance of a process more improvement than could be made quickly
through continual improvement techniques-it follows that most con cern should be focused
on the weakest processes and the functions that operate them。

The strongest processes are sometimes benchmarked as a means of obtaining report card
against the best-in-class。This is a waste of time and effort，to say nothing of money。on
two counts。First，the organization is proud of this process and has no intention of
replacing it or radically modifying it。What good does it do to determine that the process is
within 10％of best-in-class？It may be intellectually gratifying，but the process will be no
better for the effort。Second，the processes that are the weakest are the ones that are most
detrimental to competitiveness，not those that are in the 90th percentile。Moreover，the
weakest offer the most room for dramatic improvement，perhaps many times over。This is
where the benchmarking effort should be focused。The reason companies get this wrong is
that they are more inclined to talk about what they do right than what they do wrong。When
attempting to benchmark，it is a good idea to leave vanity and pride out of the process。

ACTING ON THE BENCHMARK DATA

At the conclusion of the benchmarking project with your partner，data analysis will have
produced both quantitative and qualitative information。The quantitative informa tion is
effectively the“stake driven into the ground”as the point from which future progress is
measured.It is also used as the basis for improvement objectives。Qualitative information
covers such matters personnel policies，training，management styles and hierarchy，total
quality maturity，and so on。This information provides insights on how the benchmarking
partner got to be best-in-class。

The quantitative data are clearly the information sought and are always used。How
ever，there may be more value in the qualitative information。It describes the atmos phere
and environment in which best-in-class can be developed and sustained。Do not ignore
it。Take it very seriously。Study it，discuss it in staff meetings，and explore the
possibilities of introducing these changes into your culture。
In terms of the process that has been benchmarked，if the partner's process is sig nificantly
superior to your own-and we must assume that it is or it would not have been selected in the
first place-you have to do something about implementing it。Per haps you can modify your
own process with some ideas picked up from benchmarking or，more likely，you can adopt
your partner's process，implementing it to replace yours But whatever is indicated by the
particular local situation，take decisive action and get done。

treated as proprietary and not be subjected to benchmarking。In any event，only man

agement can make the decision to disclose information。

Involvement

Management must be actively and visibly involved in every aspect of the benchmarking
process。Management should be involved in determining which processes are to be
benchmarked and selecting benchmarking partner candidates。Management is in a unique
position to establish the communication channels between the companies，because top
managers tend to affiliate through professional organizations。Dialogue among top-level
managers should be encouraged。

It is important for management to stay abreast of benchmarking events and to make certain
that the effort supports the objectives and vision of the company。Manage ment's ability to
do this is greatly enhanced when it is directly involved。In addition，subordinates will
recognize the importance placed on benchmarking by the degree to which management is
visible in the process。With management active，all levels will be more productive in their
benchmarking activities。

PREREQUISITES TO BENCHMARKING

Before getting involved in benchmarking，an organization should check the prerequi sites-
those philosophical and attitudinal mind-sets，skills，and necessary preliminary tasks that
must precede any benchmarking efforts。

Will and Commitment

Without the will and commitment to benchmark，an organization cannot proceed。Don't

waste time or the time of a benchmarking partner in the absence of a commit ment and a will
to benchmark on the part of the company's top management。

Vision / Strategic Objective Link

Benchmarking requires a strong focus，or it can go off in numerous different directions as

benchmarkers get carried away in their enthusiasm。Before it is started，benchmarking
objectives must be linked to the company's vision and strategic objectives，providing
specific direction and focus for the effort。Failure to do this will almost certainly result in
wasted resources and frustration。

Goal to Become the Best-Not Simply Improved

Nothing is wrong with incremental improvement-unless current performance is far below

world class。However，if an organization is not at the world-class level，incremen tal
improvement may only ensure that it remains inferior to the best-in-class
forever。Benchmarking requires that the goal be to leap to the head of the field in one
radical change，not just to be a few percentage points better than last year。

Openness to New Ideas

If a company is imbued with the“not-invented-here”syndrome，it will have a probiem with

benchmarking。 The chief symptom of that affliction is a shortsighted mind-set that is
characterized by a reluctance to consider other ways of doing things。 Although few will
admit it，many people are reluctant to consider ideas or approaches that are not their own。
Organizations can be like individuals in this regard。 Because the essence of benchmarking
is capitalizing on the work and ideas of others，a company must be open to new ideas for
benchmarking to provide any value。 The benchmarking process may help bring about more
receptivity to new ideas by demonstrating that they really work。

Understanding of Existing Processes，Products，Services，and Customer Needs

it is mandatory that an organization thoroughly understand its own processes，products。

services，practices，and the requirements of its customers so that it can determine what
needs to be benchmarked。 In addition，it is necessary to have a solid understanding of
your process in order to make meaningful measurements against that of the partner。

Processes Documented

It is not enough to understand the processes; they must be completely documented，for

three reasons：

-All people associated with the process should have a common understanding of it，and
that can come only from documentation ..
- A documented starting point is needed against which to measure performance
improvement after benchmarking changes have been implemented。

-The organization will be dealing with people（the partners）who are not familiar with its
processes。 Process documentation will help the partner understand the organization's
processes。 With an understanding of where the benchmarking nization is，the partner will
be better able to help ..

Process Analysis Skills

To achieve an understanding of your own processes，products，and services and to doc

ument those processes，you must have people with the skills to characterize and docu ment
processes。 These same people will be needed to analyze the benchmarking part
ners'processes and to help adapt those processes to the organization's needs。 Ideally。 they
should be employees，but it is possible to use consultants in this role。

Research，Communication，and Team-Building Skills

Additional skills required include research，communication，and team building。

Research is required to identify the best-in-class process owners。 Communication and

PERPETUAL BENCHMARKING

If you have been through a series of benchmarking activities and have implemented changes
that have significantly improved processes , your organization may develop a tendency to
leave benchmarking . After all , there are other things that need attention and resources . But
this can be a costly mistake . At this point , the organization not only has much - improved
processes , but it has developed some valuable benchmarking experience Keep in mind that
best - in - class continues to be a dynamic and ever - changing mosaic Processes are
constantly being improved and altered . In a relatively short time , an organi zation can fall
behind again . To prevent that from happening , the organization must take advantage of hard
- won benchmarking experience and keep the effort moving . This means staying up to date
with the best - in - class through all the means at your disposal , staying current with your
own processes as they are continually improved , and bench marking the weaker processes .
This is a never - ending process .

SUMMARY
1. Benchmarking is a process for comparing an organization's operations or processes with
those of a best - in - class performer .
2. The objective of benchmarking is major performance improvement achieved quickly .
3. Benchmarking focuses on processes and practices , not products .
4. Benchmarking is done between consenting organizations .
5. Benchmarking partners are frequently from different industries .
6. Benchmarking is a component of total quality . 7. Benchmarking must be approached in
an organized , planned manner , with the approval and participation of top management .
8. Benchmarking teams must include those who operate the processes .
9. Benchmarking is not restricted within industry boundaries , but only with best - in class
processes .
10. It is necessary for the benchmarker understand its own process before comparing it with
another . 11. Because best - in - class is dynamic , benchmarking should be seen as a never -
ending process .
12. Management has a key role in the benchmarking process , including commitment to
change , making funds available , authorizing human resources , being actively involved ,
and determining the appropriate level of disclosure .
13. The goal of benchmarking is to become the best - in - class , not simply improved .
14. The intent of benchmarking is to replace an inferior process with one rated best - in class
or to radically improve a process , bringing it up to best - in - class perfor mance and then to
surpass best - in - class .
15. A number of obstacles to successful benchmarking exist , including internal focus ,
overly broad or undefined objectives , unrealistic timetables , improper team compo sition ,
failure to aim at best - in - class , diverted team emphasis , insensitivity toward the partner ,
and wavering support by top management

team building are required to carry out the benchmarking both on an internal basis and with
the partners .

OBSTACLES TO SUCCESSFUL BENCHMARKING

Like most human endeavors , benchmarking can fail . Failure in any activity usually means
that the participant failed to prepare adequately for the venture - failed to learn enough about
the requirements , the rules , and the pitfalls . So it can be with benchmarking . In this section
, some of the common obstacles to successful benchmarking as drawn from the experiences
of dozens of companies are explained .

Internal Focus

For benchmarking to produce the desired results , you have to know that someone out there
has a far better process . If a company is internally focused ( as many are ) , it may not even
be aware that its process is 80 % less efficient than the best - in - class . An inter nal focus
limits vision . Is another firm better ? Which is it ? Such organizations don't even ask the
question . This is complacency - and it can destroy a company .

Benchmarking Objective Too Broad

An overly broad benchmarking objective such as " Improve the bottom - line perfor mance "
can guarantee failure . This may well be the reason for benchmarking , but the team will
need something more specific and oriented not to the what but to the how . A team could
struggle with the bottom line forever without knowing with certainty that it achieved success
or failure . The team needs a narrower target ; for example , " Refine or replace the invoicing
process to reduce errors by 50 % . " That gives team members some thing they can go after .

Unrealistic Timetables nths

Benchmarking is an involved process that cannot be compressed into a few weeks . Con
sider 4 to 6 months the shortest schedule for an experienced team , with 6 to 8 the norm .
Trying to do it in less time than that will force the team to cut corners , which can lead to
failure . If you want to take advantage of benchmarking , be patient . On the other hand , any
project that goes on for more than a year should be assessed ; the team is probably
floundering .

Poor Team Composition

When a process is benchmarked , those who own the process , the people who use it day in
and day out , must be involved . These people may be production line operators or clerks ,
Management may be reluctant to take up valuable team slots with these person nel when the
positions could otherwise be occupied by engineers or supervisors .

KEY TERMS AND CONCEPTS

Benchmarking Benchmarking partner

Best - in - class
Continual improvement Customer focus
Internal focus
Key business process
Malcolm Baldrige Award Performance gap
Process baselining
Process capability
Process characterization Process flow diagram

FACTUAL REVIEW QUESTIONS

1. Define benchmarking .
2. Explain the difference in objectives for continual improvement and benchmarking .
3. List five factors that lead organizations to benchmarking .
4. On which processes should an organization concentrate for benchmarking ?
5. Why is it necessary that top management be committed as a prerequisite to bench marking
?
6. What are the reasons for characterizing and documenting an organization's processes
before benchmarking ?
7. Identify the critical members of the benchmarking team .
8. Explain why it is not enough to simply clone the benchmarking partner's process .
9. Explain the importance of linking the benchmarking objectives with the organiza tion's
strategic objectives . 10. Explain how the " not - invented - here " syndrome can be a
hindrance to benchmark ing effectiveness . II . List and discuss the eight obstacles to
successful benchmarking .

CRITICAL THINKING ACTIVITY

A Competitive Crisis ( Note : This is a purely fictitious case study , both in terms of the
company and the numbers . ) Empire Communications Products is a company of 420
employees engaged in designing and producing telephone equipment for the wireless
telephone industry . It originally spun out of a large communications company 5 years ago as
the wireless phone market began its rapid expansion . Today its major competition is from
the North American , European , and Japanese telecom giants , all of which have now
recognized the market potential and are competing furiously . Empire Communications has
been respected and successful niche market player , even selling some proprietary products
to its big competitors . However , the pressure on profits has become extreme , and the com
pany is searching for ways to cut its costs . The CEO has had his management steering
committee looking into benchmarking as a possible means of making processes more
efficient . It has concluded that the neers and supervisors should certainly be involved , but
not to the exclusion of process owners . The process owners are the ones who know the most
about how the process really operates , and they will be the ones who can most readily detect
the often subtle differences between your process and that of the benchmarking partner .
Teams should usually be six to eight people , so be sure the first members assigned are the
operators . There will still be room for engineers and supervisors .

Settling for " OK - in - Class "

Too often organizations choose benchmarking partners who are not best - in - class , for one
of three reasons :
-The best - in - class is not interested in participating . -Research identified the wrong partner
.
-The benchmarking company got lazy and picked a handy partner .

Organizations get involved in benchmarking when they decide that one or more of their
processes is much inferior to the best - in - class . The intention to examine that best - in -
class process and adapt it to local needs , quickly bringing your organization up to world -
class standards in that process area . It makes no sense to link with a partner the process of
which is just good . It may be better than yours , but if adopted , it still leaves your
organization far below best - in - class . For the same amount of effort , an orga nization
could have made it to the top . Organizations should identify the best and go for it . Only if
the absolute best will not participate can taking second - best be justified . Second - best
should be used only if it is significantly superior to the process in question .

Improper Emphasis

A frequent cause of failure in benchmarking is that teams get bogged down in collecting
endless data and put too much emphasis on the numbers . Both data collection and the actual
numbers are important , of course , but the most important issue is the process itself . Take
enough data to understand your partner's process on paper , and analyze the numbers
sufficiently to be certain that your results be significantly improved by implementing the
new process . Unless the team has been deeply involved in the process , the practical
knowledge to successfully adapt and implement it back home may be lacking . Keep the
emphasis on the process , with data and numbers supporting that emphasis .

Insensitivity to Partners

Nothing will break up a benchmarking partnership quicker than insensitivity that a partner is
doing your organization a favor by giving access to its process . You are taking valuable time
from the partner's key people , and at best you are disrupting the routine of daily business . If
you fail to observe protocol and common courtesy in all transactions , your organization the
risk of being cut off

Limited Top - Management Support

This issue keeps coming up because it is so critical to success at all stages of the bench
marking activity , Unwavering support from the top is required to get benchmarking started ,
to carry it through the preparation phase , and finally , to secure the promised gains .

BENCHMARKING RESOURCES
A number of sources of information can help organizations with their benchmarking efforts .
These cover the spectrum from nonprofit associations to cooperative affiliations to for -
profit organizations that sell information . In addition , of course , there are consult ing firms
with expertise and databases covering all aspects of benchmarking . One of the most
promising ventures is the American Productivity and Quality Cen ter ( APQC )
Benchmarking Clearinghouse The APQC Benchmarking Clearinghouse has been set up to
assist companies , nonprofit organizations , and government in the process of benchmarking .
It works with an affiliation of organizations to collect and dis seminate best practices through
databases , case studies , publications , seminars , confer ences , videos , and other media . A
wide range of benchmarking information is available on the Internet . Just ask your search
engine to find " benchmarking " or " process benchmarking , " and you will probably be
rewarded with more information than you can use . This ranges from arti cles on the subject
to promotions for books and consultants . Colleges list the contents of their libraries that are
related to benchmarking . We would suggest a word of caution . however . Anyone can put
anything on the Web without verification , so it is always a good idea to approach material
from unfamiliar sources with a degree of skepticism . In spite of this , we consider the Web
to a valuable benchmarking resource center . Excellent sources of information for
benchmarking are trade and professional groups . They can often direct organizations to best
- in - class practices , provide contacts , and offer valuable advice . Baldrige Award winners
are committed to share information with other U.S. companies , and they hold periodic
seminars for this purpose . The trade literature publishes a wealth of relevant information ,
including lists of com panies with best - in - class processes and practices . Industry Week is
one example of an excellent source of benchmarking information . Companies such as Dun
and Bradstreet and Lexis - Nexis maintain databases of potential benchmarking partners and
share them for a fee . Consultants and universities that are engaged in benchmarking can
help organiza tions get started by providing initial training , offering advice and guidance ,
and direct ing organizations to benchmarking partner candidates . A word of caution is in
order at this point . Be sure that any information obtained is current . The very nature of
benchmarking makes yesterday's data obsolete . achieve maximum benefit , organizations
must be sure that they are operating on cur rent information