Benchmarking: Ten Practical Steps with Review Points

Benchmarking: Ten Practical Steps with Review Points

By Pradeep Mahalik

In a continuous process improvement program, benchmarking is the regular, systematic measuring of an organization's own products, services or processes against those of the recognized best practitioners in the world. The information collected about a company's own processes analyzed in relationship to the best-in-class practices provides insight into the actions the company can take to improve its performance. Indeed, benchmarking analysis can even provide metrics by which an organization can measure its success in adding value to its business and work processes.

Benchmarking is a management tool for process improvement which takes into account an organization's performance measurement. It also is a learning and sharing process inside the organization that continually improves processes by motivating culture change based on the idea the company is can be among the best in the world.

The Benchmarking Steps
In any benchmarking process, it is essential to follow a systematic and structured approach. It is best if the project is carried forward by trained and dedicated cross-functional teams so that all aspects of the process are properly discussed at all phases, analyzed for any opportunities and improvement actions are initiated.

Four phases are involved in a normal benchmarking process – planning, analysis, integration and action. And in the four phases are 10 practical steps that can help any Lean Six Sigma practitioner involved in a benchmarking a process.

1. Planning Phase

Being the initial phase, this is a most important phase. Any mistakes, errors or incompleteness in this phase generally affects the rest of the phases. Sufficient time and attention has to be devoted during the phase to ensure that it becomes as error-free as possible, and hence makes the rest of the phases more effective and efficient.

Step 1: Identify Opportunities and Prioritize (What to Benchmark) – The involvement of top management in this particular step is crucial. Top management must decide which processes are critical to the success of the company. This should be the top down approach of selecting the projects from the processes. Once a shortlist of processes to be benchmarked is ready, the processes need to be prioritized as per a predetermined set of criteria to fulfill to the requirements of all customers, especially the end customer. Customers' ciritcal-to-quality requirements (CTQs) are studied properly to prioritize the processes.

Step 2: Deciding the Benchmarking Organization (Whom to Benchmark) – The next step in the process is to decide the organization whose processes will serve as the benchmark. Obviously some companies, like direct competitors, will not be available as places to gather certain types of benchmark data. Several organizations should be selected for study. Information on their processes should be gathered from various sources and the most suitable organization selected. It is always important to ensure that more detailed information about the selected organization will be accessible and that the comparison with the organization's process will be relevant and useful.

Step 3: Studying the Superior Process – This step is perhaps the most important, most difficult and the most time consuming activity in the total process of information/data collection. Because many times the information on processes and procedures followed at another company are confidential, it is not always easy to gather authentic information, even after making a planned and approved visit at another organization. The preparation for collecting necessary information has to be planned in such a way that either one visit or a proper authentic data collection source can provide all the details, within a reasonable time period.

The following questions can be asked to review the planning phase of a benchmarking effort:

What are the key business processes?
Where exactly are the greatest improvement potentials?
What are the functions where improvements are most essential?
Are all members of the benchmarking project team familiar with the vision, mission, long-term goals of the organization, and its prevailing business environment and the competitive situation?
Have the critical success factors for the organization been identified?
Do all processes require benchmark or only the most critical?
Can all or some of the processes be improved without benchmarking?
Have the ways of measuring the processed been decided?
Have the owners of the processes to be benchmarked been involved in the project?
Have the processes been prioritized based on the scope of improvement?
Have the set of predetermined criteria for prioritizing the processes been decided in advance, based on the company's success factors and the competitive business environment?
Has a level of benchmarking been decided?
Has the team compiled a list of possible organizations having best-in-class standards to be used for comparison?
Has the information about all possible organizations to compare been collected?
Is the method of collecting information systematic?
Will it be possible to access information about a chosen organization's the best-in-class process?
Is the organization's best-in-class process likely to be innovative?
How has it been decided to collect data on the best-in-class process?
How superior are the results of the process of the chsoen organization?
To what extent are the practices of the organization with the best-in-class process different?
Are there basic differences in the structure of the process?
How effectively can the process be adapted?
What would be the cost of changing the company's current process and what resistance can be expected?
What are the potential benefits if the process is modified as per the best-in-class process?

1. Analysis Phase

This phase, comprised of two steps, involves the analysis of all the information and data collected in the pPlanning phase. All the people closest to the process selected for benchmarking should be deeply involved in this phase.

Step 4: Finding Reasons and Devising Improved Processes – The project team should find out the reasons for better results from the benchmarked processes. This has to be done after the information from the best-in-class organization has been collected and analyzed. Based on the analysis, an improved process should be developed.

Step 5: Goal Setting for Improved Processes – The project team's next step is to set goals for the improvement of the company's existing process. These goals can, and probably should, be stretch goals that will result in a process even better than the other organization's best-in-class process.

The review points for this phase are:

Do the project team's members have both analytical skills and creativity and innovation?
Has a gap analysis been done between the performance of the company process and the benchmarked organization's process (look for effectiveness, efficiency and responsiveness)?
Have the performance gaps in the company's process as compared to the benchmarked process been identified and analyzed?
Have the reasons for better performance been brainstormed?
Have the reasons been tried to find out by comparing process definition documents?
After comparing the descriptive process documents, have the flowcharts of the two processes been compared and analyzed?
Have the work processes at benchmarked organization been studied and compared with the company's processes? Have they been observed at the operator level?
Have the impact of the differences in work practices been fully studied?
Does the team have proposals for making changes in the processes?
Has the team been able to develop an improved process?
Have senior management and/or interested parties in the organization been convinced by the project team that the superior benchmarked process should be adapted by the team company?
Has the revised process been tried to ensure the adaptability?
Have the successes of the revised process been documented properly for any horizontal deployment or replicate it in other processes?
To get senior management's commitment, have the improvements been converted to financial gains?
Have the cost-benefit analysis been conducted on the proposed revision of the process?
Has the team proposed new performance goals, which can be attained with the revised process?
Has senior management confirmed its knowledge and agreement about all of the above?

1. Integration Phase

This phase also is comprises of two steps. This phase is a connector between the earlier two stages, planning and analysis, and the final phase, action. This phase moves forward by only if the results of earlier phases have been well accepted by management. This phase also secures the commitment of the management on the recommended action plan. As acceptance of proposed process revisions by the company is necessary for the success of the project, this phase is obviously important.

Step 6: Communicating Findings and Gain Acceptance – The proposals for the improved processes should be presented to senior management and the head of the departments to gain approval of the proposed changes. Unless total approval and commitment is secured, there will be hindrance in the implementation of the actions plans.

Step 7: Establish New Functional Goals – When the proposed revisions to the processes are accepted, the acceptance of the revised functional goals is the next big logical step.

The questions to be asked in this phase are:

Has it been decided to whom findings are to be communicated?
Have finding been communicated to senior management so that its approval can be obtained for the implementation of the recommendations?
Have finding been shared with all the departments involved in the process so that they understand and accept the proposed changes in the process?
Have all suppliers of the inputs to the process been informed?
Has the impact of the revised process on quality of the output of the process been communicated to the customer?
Have different types of communication for different audiences been decided upon?
Is there an effort to insured that the communication will be understood properly by all concerned and has been accepted by all?
Have the revised process and the proposed performance goals been approved by senior management?
Have sufficient steps been taken to find out the gaps in every concerned departments or processes of any reservations or difficulties in implementation?
Have all the issues raised by all concerned or departments been addressed properly?
Has there been any amendment in the proposed process which has been accepted by all?
Have the performance goals been converted to operational goals which are SMART (specific, measurable, aggressive , relevant, timely)?
Have operational goals been prioritized and the direction been set for implementation?
Has the impact of change on those elements prior to and those subsequent to the process been studied properly?
If any changes are in the requirements of inputs from prior processes, has proper care been taken to change the process to meet the requirement needs?
Has senior management approved of all the points mentioned above?

1. Action Phase

The last phase in the process has three steps. This phase is where the improvements parts have been taken into consideration. Ultimate benefit to a company from benchmarking is judged by how well this particular phase has been carried out in the company. The last step of this phase, "Keep the Process Continuous," implies the same.

Step 8: Develop Action Plan for Implementation – After the improved process is accepted by all concerned or likely to be affected by it, a detailed action plan is drawn with all key activities taken as inputs. The detailed action plan should carry the important things like time line, responsible individuals to carry out the tasks, any short-fall in the completion of tasks and what stretch targets taken to compensate the short-falls and, etc. Those responsible should be committed enough to ensure that the tasks and assignments are completed on time.

Step 9: Implement Specific Actions and Monitor Progress – While those who must complete assignments on schedule have a responsibility, so does senior management that has to be committed enough to ensure proper coordination of various activities, monitor the progress of implementation plan and work as a barrier-remover in the implementation process. When the revised process is in place, a complete report has to be prepared, showing the benefits of the revised process compared with the expectations at the time of approval of the proposed revision of the process.

Step 10: Keep the Process Continuous – The successful completion of one project can lead to an important milestone for the organization. The next step would be bringing in additional and more ambitious projects, benchmarking with the best approach. While carrying out the total activities, a mechanism or a system has to be built in to review the performance of the improved process periodically to ensure that the benefits are retained. The process has to be a continuous one and should move at a constant speed and should never be neglected.

The review points for this phase are:

Has the team developed an action plan to implementation the changes proposed?
Has the team written down the changes required for implementing the new process and work practices?
Has the team arranged the activities in sequence and decided the sequence as per the order of priority based on the importance?
Have the tasks and assignments been made to the right people in the organization?
Have commitments from the team members, their superiors and all concerned to carry out the assignments been secured?
Are there different teams for implementation and analysis of the changes (people good at analysis are not always be good at implementation)?
Has the new process been ensured by changing all documents like specifications, standard operating procedures, work instructions, etc.?
Does everyone know that the improvement is permanent?
Has the team or senior management developed a mechanism to review the competitive positions periodically in the total implementation process?
One of the biggest advantages of benchmarking is the extent of improvements the organization makes by learning from the processes of others. A better and proven process can be adapted, with suitable modifications for company requirements, with less time invested for inventing new methodologies. Benchmarking also uncovers new ways of improving a company's own processes by motivating actions learned from studying and experiencing those organizations with best-in-class processes.