The Evolution of Benchmarking

Benchmarking has been around for a long time. In the 1800s, Francis Lowell, a New England colonist studied British textile mills and imported many ideas along with improvements he made for the burgeoning American textile mills.

Formally, benchmarking may have evolved in the 1950s when W. Edwards Deming taught the Japanese the idea of quality control. The method was rarely used in the United States until the early 1980s when IBM, Motorola and Xerox became the pioneers. Xerox is one of the best known examples of organizations that have implemented benchmarking.

Xerox invented the photocopier in 1959, and maintained a virtual monopoly for many years to the extent that its name became a generic name for all photocopiers. However, by 1981, the company’s market shrank to 35 per cent as IBM and Kodak developed high- end machines and Canon, Richo, and Savin dominated the low-end segment of the market. The company was suffering from the “not invented here” syndrome as its managers did not want to admit that they were not the best. The company then instituted the bench­marking process. However, this was initially resisted. When faced with the facts, reaction went from denial to dismay to frustration and finally to action. Once the process began, the company benchmarked virtually every function and task for productivity, cost and quality. The results of benchmarking were dramatic:

• Quality problems were cut back by two-thirds.
• Suppliers were reduced from 5,000 to 300.
• Manufacturing costs went down by half.
• Development time was cut by two-thirds.
• “Concurrent engineering” was practised. Each product development group secured inputs from the design, manufacturing and services department from the initial stages of the project.
• Commonality of parts increased from about 20 per cent to 60-70 per cent.
• Direct labour was cut by 50 per cent and corporate staff went down by 35 per cent while increasing volume.
• The hierarchical organizational structure was pared, and use of cross-functional “Teams Xerox” was established.

Benchmarking created a climate of change and continuous improvement in the organization. Xerox became the only company worldwide to win all the three prestigious quality awards— the Deming Prize (Japan) in 1980, the Malcolm Baldridge National Quality Award in 1989 and the European Quality Award in 1992. The company’s document outsourcing division, Xerox Business Services, also won the Baldridge Award in the service category in 1997. Additionally, over the years, Xerox won quality awards in Argentina, Australia, Belgium, Brazil, Canada, China, Colombia, France, Germany, Hong Kong, India, Ireland, Mexico, the Netherlands, Norway, Portugal, the UK and Uruguay. This success is mainly attributed to the “leadership through quality” initiative, and to the positive intervention of benchmarking practices.

The success of benchmarking at Xerox motivated many companies to implement bench­marking practices. By the mid-1990s, many companies such as Ford, AT&T, IBM, GE, Motor­ola and Citicorp implemented benchmarking practices at their divisions across the world and derived many benefits. During the 1990s, Xerox, along with Ford, AT&T, Motorola and IBM, created the International Benchmarking Clearinghouse (IBC) to promote benchmark­ing and guide other companies across the world in benchmarking efforts. The institute offers information on various companies and best practices through its electronic bulletin board. More than 100 companies joined the IBC to gain access to its extensive database. By 2001, benchmarking had become a common phenomenon in many companies globally. Table 11.1 indicates the evolution of benchmarking.

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