Prerequisites for Benchmarking

Benchmarking will not improve performance if the proper infrastructure for a total quality programme is not in place. Unless a corporate culture of quality and the basic components of TQM such as information systems, process control and human resource programmes are in place, trying to imitate the best-in-the-class may very well disrupt operations. The requirements are:

  • Involve the employees who will ultimately use the information and improve the process. Participation can lead to enthusiasm.
  • Relate process improvement to strategy and competitive positioning. Design factors that affect the customer’s purchasing decision.
  • Define your own processes before gathering data or you will be overwhelmed and will not have the data to compare your own processes with.
  • Perceive benchmarking as an ongoing process. It is not a one-time project with a finite start and complete date.
  • Expand the scope of the companies studied. Confining the benchmarking firms to your own area, industry or to competitors is probably too narrow an approach in identifying excellent performers that are appropriate for your processes.
  • Perceive benchmarking as a means to process improvement rather than an end in itself.
  • Set goals for closing the gap between what is existing performance and what can be benchmarked.
  • Empower employees to achieve improvements that they identify and for which they solve problems and develop action plans.
  • Maintain momentum by avoiding the temptation to put study results and action plans on the back burner. Credibility is achieved by quick and enthusiastic action.

1. Code of Conduct for Benchmarking

Benchmarking can be fraught with potential problems, ranging from simple misunder­standings to serious legal problems. In order to minimize problems, it is strongly recom­mended to follow the simple code of conduct scripted by the International Benchmarking Clearinghouse.

Legality: Don’t enter into discussions or act in any way that could be construed as illegal, either for you or your partner. Potential illegal activities include simple actions such as discussing costs or prices if those discussions could lead to allegations of price­fixing or market rigging. The process of how you arrive at prices may be acceptable, while discussion of actual costs and prices may not.

Exchange: Don’t ask questions of your benchmarking partner that you are not willing to answer yourself at least three-fourths to the same level of detail. It helps to fully disclose your level of expectations with regard to the exchange early on in your discussion.

Confidentiality: Treat the information you receive from your partners with the same degree of care that you would for information that is proprietary to your organization. Many orga­nizations may not even want you to disclose that you have had such discussions with them. In this regard, you may want to consider entering into a non-disclosure agreement with your benchmarking partner. You may need to consult your legal staff.

Use of information: Don’t use the benchmarking information you receive from a partner for any purpose other than that for which you have agreed.

Contact: Don’t go beyond the mutually agreed-on procedures that govern whom you will interact with in your partner’s organization. Comply with their wishes and culture.

Preparation: Be prepared for your meetings and exchanges. Doing so increases your effici­ency and effectiveness and that of your partners as well. It promotes an air of professionalism.

Completion: Don’t make commitments you can’t or don’t keep. Complete your work to everyone’s satisfaction including that of your partner.

Understanding: Benchmarking’s golden rule is to treat your partner and their information the way you’d like them to treat you and yours.

The dos and don’ts of benchmarking are given in Table 11.3.

2. Costs of Benchmarking

There are costs to benchmarking, although many companies find that it pays for itself. The three main types of costs are:

Visit costs: These include hotel rooms, travel costs, meals, a token gift and lost labour time.

Time costs: The members of the benchmarking team will be investing time in researching problems, finding exceptional companies to study, visit and implementation. This will take them away from their regular tasks for a substantial part of each day. Therefore, additional staff might be required.

Benchmarking database costs: Organizations that institutionalize benchmarking into their daily procedures find it is useful to create and maintain a database of best practices and the companies associated with each best practice.

3. Guidelines for Successful Benchmarking

Successful benchmarking requires the following:

  • Thorough understanding of one’s own processes
  • Emphasis on industry best practices
  • Company or plant visits (these should be conducted only after research has confirmed that the companies selected are indeed the best among available sources)
  • Selection of appropriate benchmarking partners and techniques
  • The benchmarking partner’s willingness to share information
  • Maintaining confidentiality of critical information
  • Involvement of management and employees in the analysis of best practices
  • Emphasis on practices and processes, not on end results
  • Benchmarking should be a continuous process as the competition is always changing
  • Commitment towards the adoption and implementation of best practices
  • Selection and empowerment of benchmarking teams
  • Willingness to change as per the findings of the benchmarking study
  • The adaptability of the practices should be tested and the implementation results should be verified
  • Strict adherence to the benchmarking

4. Limitations to Benchmarking

Some of the limitations to benchmarking are:

  • Benchmarking is a tough process that needs a lot of commitment to succeed
  • It is time consuming and expensive
  • More often than not benchmarking processes end with the “they are different from us” syndrome or competitive sensitivity that prevents the free flow of necessary information

5. Common Pitfalls in Benchmarking

  • Lack of management commitment and involvement
  • Not applied to critical areas first
  • Inadequate resources
  • No involvement of the line organization
  • Scope not well defined (too many subjects)
  • To many performance measures
  • Critical success factors and performance drivers not understood or identified
  • Potential partners ignored (internal organizations, industry leaders or friendly competitors)
  • Poorly designed questionnaires
  • Inappropriate data collection method
  • Too much and inconsistent data
  • Analysis paralysis; excess precision
  • Communication of findings without recommendations for projects to close gaps
  • Management resistance to change
  • No repeat benchmarking

Source: Poornima M. Charantimath (2017), Total Quality Management, Pearson; 3rd edition.

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