Benchmarking Approach and Process

The benchmarking process is relatively straightforward, but steps must flow in a sequence. A number of variations are possible, but the process should follow this general 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 or surpass.
12. Implement change to the process.
13. Monitor results.
14. Update benchmarks; continue the cycle.

These 14 implementation steps are explained in the follow­ing sections. Figure 20.2 is provided to help maintain per­spective and afford clarity.

1. 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, informa­tion 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.

2. Step 2: Baseline Your Own Processes

When a process is baselined, it establishes the starting point for process improvement. The process baseline documents the current state of the process, its steps, and capabilities.

A baselined process will have complete documentation of its inputs and outputs, all of its steps and supporting infor­mation, together with process capability data. This is often called process characterization. Process flow diagrams are a key element of baselining, and provide a graphical picture of how the process works, who is involved, and the sequence of activity and of decision points, and so on. Process capabil­ity provides information on what can be expected from the process under optimal conditions. (For information on Flow Diagrams refer to Chapter 15.)

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 character­ized in terms of process capability, their flowcharts, 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 processes. Most organizations think they know their processes well, but that is rarely the case un­less a deliberate process characterization has recently been done. It is also important that an organization’s processes be completely and accurately documented, not just for its own use but also for the benefit of everyone associated with the process in any way. (See the discussion of flow­charting in Chapter 15.)

3. Step 3: Identify and Document Both Strong and Weak Processes

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 concern should be focused on the weakest pro­cesses and the functions that operate them. The processes that are the weakest are the ones that are most detrimental to competitiveness. They offer the most room for dramatic improvement, perhaps many times over. This is where the benchmarking effort should be focused because incremental improvement would not be sufficient 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 superior to yours, your partner may look 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 documented.

4. Step 4: Select Processes to Be Benchmarked

When you have a good understanding of your own processes and your 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 that you know to be inferior and that you intend to change. Leave the others for incre­mental change through continual improvement—at least for the time being.

5. 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 capabil­ity because it will have to identify a benchmarking partner, and that will require research. Every team should have man­agement representation, not only to keep management in­formed but also to build the support from management that is necessary for radical change.

6. 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 benchmarking 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 at catalog companies that have world-class warehousing opera­tions. If the process to be 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 industries or you might miss the best opportunities for benchmarking. Remember that best-in­class 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 professional 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.

7. 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.

8. Step 8: Form Agreements with Benchmarking Partners

After the team has selected the candidate, 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 provide 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 the benchmarking partner with excessive obliga­tions. Make the partnership as unobtrusive as possible.

9. Step 9: Collect Data

The team has already agreed to discuss a specific process (or processes). Observe, collect, and document everything about the partner’s process. In addition, try to determine the underlying factors, practices, 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, statistics, or various other approaches? Optimally, your process operators should
talk directly with your partner’s operators. It is important to come away with a good understanding of what its pro­cess is (flowchart) and its support requirements, timing, 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 its culture and how it operates. Be open-minded and receptive to new ideas that are not directly associated with the process in question. Observing a different plant culture can offer a wealth of ideas worth pursuing.

10. Step 10: Analyze the Data; Establish the Gap

With the data in hand, the team must analyze them thor­oughly in comparison with the data taken from its own process. In most cases, the team will be able to establish the performance 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 million rather than parts per thousand.

After the team concludes that 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 answering these questions can the team conclude that implementation is possible.

11. 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, implementa­tion 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. In some cases, it may be wise to try the new process in a pilot model. This is not the time for haste. Consider all conceivable contingen­cies and plan to avoid them, or at least be prepared for them. Physical implementation may be accompanied by training for the process operators, suppliers, or customers. Only after thorough preparation and training should an organization implement the change to the new process.

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).

12. Step 12: Implement Change to the Process

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 there may be 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 falls below 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.

13. Step 13: Monitor Results

After the process is installed and running, performance should come up to the benchmark 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 monitoring. Statistical process control can be an invaluable tool for this purpose, as can other types of charting.

14. 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 also 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 constantly strive for continually better performance. However, 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 benchmarking partner. Should that happen, your organi­zation will be sought out as a best-in-class benchmarking partner by others who are trying to bootstrap their perfor­mance. Whether that happens or whether the benchmark is actually surpassed, the important thing is to maintain the goal of achieving best-in-class. Benchmarks must be updated periodically. Stay in touch with the best-in-class. Continue the process. Never be content with a given level of performance.

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 performance relative to their benchmarks. Let continual improvement take over for the best processes, and concentrate bench­marking on the ones that remain weak.

15. Three Phases of Benchmarking

The 14-step sequence introduced above represents the three phases of benchmarking: preparation, execution, and postexecution. Figure 20.2 illustrates the benchmarking process or 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.

Source: Goetsch David L., Davis Stanley B. (2016), Quality Management for organizational excellence introduction to total Quality, Pearson; 8th edition.