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Benchmarking is the process of identifying best practice in relation to both products including and the processes by which those products are created and delivered. The search for "best practice" can take place both inside a particular industry, and also in other industries
Benchmarking is used to measure performance using a specific indicator (cost per unit of measure, productivity per unit of measure, cycle time of x per unit of measure or defects per unit of measure) resulting in a metric of performance that is then compared to others.
Also referred to as "best practice benchmarking" or "process benchmarking", this process is used in management and particularly strategic management, in which organizations evaluate various aspects of their processes in relation to best practice companies' processes, usually within a peer group defined for the purposes of comparison. This then allows organizations to develop plans on how to make improvements or adapt specific best practices, usually with the aim of increasing some aspect of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to improve their practices.
The objective of benchmarking is to understand and evaluate the current position of a business or organisation in relation to "best practice" and to identify areas and means of performance improvement.
THE BENCHMARKING PROCESS
Benchmarking involves looking outward (outside a particular business, organisation, industry, region or country) to examine how others achieve their performance levels and to understand the processes they use. In this way benchmarking helps explain the processes behind excellent performance. When the lessons learnt from a benchmarking exercise are applied appropriately, they facilitate improved performance in critical functions within an organisation or in key areas of the business environment.
Application of benchmarking involves four key steps:
Benchmarking should not be considered a one-off exercise. To be effective, it must become an ongoing, integral part of an ongoing improvement process with the goal of keeping abreast of ever-improving best practice.
TYPES OF BENCHMARKING
There are a number of different types of benchmarking, as summarised below:
Most Appropriate for the Following Purposes
Where businesses need to improve overall performance by examining the long-term strategies and general approaches that have enabled high-performers to succeed. It involves considering high level aspects such as core competencies, developing new products and services and improving capabilities for dealing with changes in the external environment.
Re-aligning business strategies that have become inappropriate
Performance or Competitive Benchmarking
Businesses consider their position in relation to performance characteristics of key products and services.
Benchmarking partners are drawn from the same sector. This type of analysis is often undertaken through trade associations or third parties to protect confidentiality.
Assessing relative level of performance in key areas or activities in comparison with others in the same sector and finding ways of closing gaps in performance
Focuses on improving specific critical processes and operations. Benchmarking partners are sought from best practice organisations that perform similar work or deliver similar services.
Achieving improvements in key processes to obtain quick benefits
Businesses look to benchmark with partners drawn from different business sectors or areas of activity to find ways of improving similar functions or work processes. This sort of benchmarking can lead to innovation and dramatic improvements.
Improving activities or services for which counterparts do not exist.
Involves benchmarking businesses or operations from within the same organisation (e.g. business units in different countries). The main advantages of internal benchmarking are that access to sensitive data and information is easier; standardised data is often readily available; and, usually less time and resources are needed.
There may be fewer barriers to implementation as practices may be relatively easy to transfer across the same organisation. However, real innovation may be lacking and best in class performance is more likely to be found through external benchmarking.
Several business units within the same organisation exemplify good practice and management want to spread this expertise quickly, throughout the organisation
Involves analysing outside organisations that are known to be best in class. External benchmarking provides opportunities of learning from those who are at the "leading edge".
Where examples of good practices can be found in other organisations and there is a lack of good practices within internal business units
Best practitioners are identified and analysed elsewhere in the world, perhaps because there are too few benchmarking partners within the same country to produce valid results.
Globalisation and advances in information technology are increasing opportunities for international projects. However, these can take more time and resources to set up and implement and the results may need careful analysis due to national differences
Where the aim is to achieve world class status or simply because there are insufficient"national" businesses against which to benchmark.
BENEFITS OF BENCHMARKING
Benchmarking is a common practice and sensible exercise to establish baselines, define best practices, identify improvement opportunities and create a competitive environment within the organization. Benchmarking helps companies:
Gain an independent perspective about how well they perform compared to other companies
Clearly identify specific areas of opportunity
Prioritize improvement opportunities
Set performance expectations
Monitor company performance and manage change
Integrating benchmarking into the organization will result in valuable data that encourages discussion and sparks new ideas and practices. However, the approach to benchmarking can be just as important as the data. The most successful companies incorporate benchmarking into the culture by engaging key decision makers and personnel throughout the process. A benchmarking process with team focus:
Improves understanding of the real opportunities and their priority at all levels
Minimizes resistance to change and garners support for action
Fosters a spirit of enthusiasm to do better than the external benchmark
Promotes discussion based on data rather than assumptions or emotion
Benchmarking at its best is used as a tool to help companies evaluate and prioritize improvement opportunities.
Performance management is the current buzzword and is the need in the current times of cut throat competition and the organizational battle for leadership. Performance management is a much broader and a complicated function of HR, as it encompasses activities such as joint goal setting, continuous progress review and frequent communication, feedback and coaching for improved performance, implementation of employee development programmes and rewarding achievements. The process of performance management starts with the joining of a new incumbent in a system and ends when an employee quits the organization. Performance management can be regarded as a systematic process by which the overall performance of an organization can be improved by improving the performance of individuals within a team framework. It is a means for promoting superior performance by communicating expectations, defining roles within a required competence framework and establishing achievable benchmarks.
BENCHMARKING AND PERFORMANCE MANAGEMENT
Benchmarks for Productivity
Employees should know exactly how much work they are expected to do in a work day. The optimum situation is when this productivity can be measured, such as in producing a number of units. Even non-manufacturing productivity can be measured, however, in terms of sales, publicity articles written, contacts initiated successful negotiations and so forth. Set specific benchmarks in any area of productivity in which you want to measure an employee's effectiveness.
Benchmarks for Quality
Quality of work must be a part of a performance appraisal. Establish levels of expertise you expect, and use those as benchmarks. You can measure error rate in products produced, customer satisfaction and effectiveness of projects against a standard you establish. This can be stated as a percentage. Example: Employee meets quality standards 85 percent of the time.
Benchmarks for Living Up to Company Values
Each company should have a mission statement and a set of values by which it operates. Your performance appraisal can assess how often and how well an employee lives up to those values. Set a benchmark that demands compliance in the neighborhood of 90 percent of the time, and see how your employees are aligned with company values.
Benchmarks for Product or Service Effectiveness
If your product or service does not live up to certain standards, you will soon be out of business. This is at least partially the responsibility of employees. Evaluate employees against a product or service effectiveness by making them responsible for improvements. You can set benchmarks for making improvements, such as: Employee contributes quality improvement suggestions frequently. The word "frequently" would be your benchmark in this case, and though it is somewhat subjective, at least it gives you a starting point for evaluations.
Technology innovation is the process through which new (or improved) technologies are developed and brought into widespread use. In the simplest formulation, innovation can be thought of as being composed of research, development, demonstration, and deployment, although it is abundantly clear that innovation is not a linear process - there are various interconnections and feedback loops between these stages, and often even the stages themselves cannot be trivially disaggregated. Innovation involves the involvement of a range of organizations and personnel (laboratories, firms, financing organizations, etc.), with different institutional arrangements underpinning the development and deployment of different kinds of technologies; contextual factors such as government policies also significantly shape the innovation process.
Benchmarking of Innovation
i) Number of patents in 'triadic' patent families
ii) Number of companies having introduced new or significantly improved products or processes
iii) Business' assessment of innovation activity:
Extent to which new product designs are developed locally
The effect of innovation in generating revenue
Extent to which new products and processes are developed.
i) Import of foreign technology. Measures import of licenses, patents, know-how, research and technical consulting.
ii) Business assessment of application of new technology.
iii) Number of companies with co-operation arrangements on innovation activities with other enterprises or institutions
Change management is a systematic approach to dealing with change, both from the perspective of an organization and on the individual level. A somewhat ambiguous term, change management has at least three different aspects, including: adapting to change, controlling change, and effecting change. A proactive approach to dealing with change is at the core of all three aspects. For an organization, change management means defining and implementing procedures and/or technologies to deal with changes in the business environment and to profit from changing opportunities.
Successful adaptation to change is as crucial within an organization as it is in the natural world. Just like plants and animals, organizations and the individuals in them inevitably encounter changing conditions that they are powerless to control. The more effectively you deal with change, the more likely you are to thrive. Adaptation might involve establishing a structured methodology for responding to changes in the business environment (such as a fluctuation in the economy, or a threat from a competitor) or establishing coping mechanisms
ANSWER 3 (B)
Benchmarking allows organizations to determine how to make improvements or adopt best practices, usually with the aim of increasing one or more aspects of performance. The "high tide" of exemplary performance, when captured and shared through replicable processes and procedures, "raises all ships." The process and major actions shown in the figure below has evolved over time based on our experience working with the government and non profit programs. The key outcomes and phases in the process are summarized below:
Phase 1: Identification and Understanding.
Key outcome: an actionable plan that is specifically tailored to help the program, organization, or network improves performance and achieves important outcomes.
Phase 2: Measurement and Analysis.
Key outcome: a report that highlights the process being benchmarked, the study methodology, and the best practices and promising innovations unearthed. Each report will distils practices into actionable items
Phase 3: Adaptation.
Key outcome: a charter or actionable plan for incorporating the study practices into the program or organizational culture, including step-by-step procedures and timelines, when appropriate
Phase 4: Implementation.
Key outcome: implement the plan identified in the previous phase. The plan may include technical assistance, training courses, workshops, resources for a community of practice website, etc
Phase 5: Evaluation and Improvement.
Key outcome: evaluation and validation for practices, ability to re-classify practices and distill new best practices based on new program results.
â€¢ Costs associated with conducting a benchmarking study:
- Direct labour for team members
- Data gathering/data analysis
- Research to identify potential benchmarking partners
- Publication and distribution of final report
â€¢ Costs occasionally associated with conducting a benchmarking study:
- Training on specific skills and tools
- Long-distance telephone and fax charges
- Travel expenses
- Consultant fees for third-party competitive benchmarking
â€¢ Improving processes critical to our business
- Enhanced customer satisfaction
- Cost reduction
- Cycle time reduction
- Enhanced employee satisfaction
â€¢ Establishing market-driven goals
â€¢ Gaining professional development and personal enthusiasm from seeing "the best" in action
â€¢ Identifying additional opportunities for improvement beyond the scope of the benchmarking project
â€¢ Establishing professional contacts
â€¢ Challenging "the way it's always been done"
â€¢ Becoming more competitive
â€¢ Shortening the process improvement cycle itself (accelerated learning)