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A programme for benchmarking.

Introduction

This checklist is for managers new to benchmarking or for those wishing to review their current benchmarking practice.

Benchmarking is a powerful tool for organisations seeking continuous improvement. It is an essential part of many change programmes, including total quality management and business process reengineering. It is a challenging technique to use and requires careful management and a high level of commitment. Used effectively, it can provide organisations with a continuous competitive advantage, aid the setting or extension of performance goals, focuses on and accelerates change and can motivate staff by showing what is possible.

Various types of benchmarking exist, including:

* Internal benchmarking--the measurement and comparison of practices with similar practices in other parts of the organisation.

* Industry or competitive benchmarking--industry-specific comparisons made either between direct competitors or with target companies making dissimilar products in the same industry.

* Functional or non-competitive benchmarking--the direct comparison of a function in two or more organisations, which may or may not be in the same industry.

* Generic or best practice/world class benchmarking benchmarking of the best practice of recognised world class organisations.

Most organisations can use either one or a mixture of these.

National Occupational Standards for Management and Leadership

This checklist has relevance to the following standards:

B: Providing direction, unit 2

E: Using resources, unit 4

Definition

Benchmarking is the ongoing structured process of identifying, understanding and adapting outstanding practices of industry leaders to help an organisation improve its performance and achieve and sustain competitive advantage.

Action checklist

1. Plan your study

Identify the critical performance factors at which you wish to excel and from these select the broad areas in which to benchmark. Focus on those activities which are of real importance to your organisation, avoiding the irrelevant, or those activities chosen simply because they are easy to measure.

Select a small number of related processes to benchmark. Do not be too ambitious at this stage, particularly if this is the first benchmarking project your organisation has undertaken. When selecting processes to benchmark remember the critical success factors--benchmarking must have the support of senior management, be part of organisational strategy, and be based upon a sound understanding of your own processes.

Consider the legal and ethical issues of competitive benchmarking. Confidentiality and data security are important issues for benchmarking partners and groups.

2. Identifying personnel

Select a benchmarking team and a team leader. Most benchmarking is done by teams to take advantage of the range of skills and knowledge that they can offer--either use an in-place work group, a cross-functional team or a functional team (six members is an average team size). Although much work will be carried out by the benchmarking team, it is advantageous to encourage the participation of all staff, as benchmarking may identify gaps in performance which will in turn require radical change anywhere within the organisation. The involvement of process owners ensures they are part of the evaluation process and can become the champions of change.

3. Examine the process(es) to be benchmarked

Document the process(es) to be benchmarked to gain an understanding of the activities involved. Simple flow charts can be useful aids to help define the inputs to, and outputs from, the process. It is possible that a number of elements could be measured, so it is important to determine those which are true indicators of performance.

4. Data collection

Data are required in order to make a comparison between organisations or parts of an organisation. This may be in the form of statistics, ratios or detailed case studies and descriptions. As the key to the success of benchmarking projects the data collection process should be carefully planned. Only collect the data required for the decision making process: collecting too much data can be as bad as collecting the wrong data.

5. Identify benchmarking partners

Consider internal sources (different departments, divisions or companies within the organisation) and external partners (competitors, similar industries or best practice/world class performers). Sources that can help in identifying partners include trade and industry journals, market research reports, government studies, databases, suppliers, customers, corporate networks and study tours.

Consider contacting a benchmarking clearing house or a joint interest group. Organisations interested in benchmarking are listed under "Useful addresses". Solicit the participation of partners. Organisations are often willing to become involved if they can see that they will also benefit from benchmarking--it should after all be a two-way process. You must be willing to share data and findings as well as respecting confidentiality if requested.

6. Plan and implement the comparison exercise

Identify the hard and the soft issues which need to be measured. Hard issues include ratios, time and costs. Soft issues might include management style, communications, or customer focus.

Prepare an action plan. Identify who will collect the data, from where and when. An appropriate survey or interview guide should be developed by the benchmarking team. Questionnaires can be sent by post, completed over the telephone or via site visits. Decide which is the most appropriate for your requirements.

Collect the data. It is easy to underestimate the time needed to collect the data--err on the side of caution when arranging fact-finding interviews

7. Collate the data from your organisation and its benchmarking partners

Draw up a matrix of performance indicators from your benchmarking partners (the use of spreadsheets and databases can help the analysis).

Compare your current performance against the data. Identify where your organisation misses certain elements, fails to match the targets of others and generally needs to improve. The benchmarking team should try to identify the causes of these failures and, with relevant additional staff, plan to remedy them. It is useful to research case studies of best practice, as they can form useful aids to help communicate the objectives of change.

Involve process owners in setting goals to close, meet and exceed the gaps in performance. The benchmarking team should develop detailed action plans, ensuring measures of success are included.

8. Plan and action improvements

When business benefits resulting from change have been identified, communicate the benchmarking findings. By demonstrating benefits, support for change will be greater.

Implement the plan, making use of 'process champions' throughout the organisation as catalysts for change. It is at this stage that resources will need to be committed, so it is essential to have senior management support for the project.

9. Monitor and review

Monitor whether the study met its objectives; the impact of the improvements on the organisation; the evidence of a change in the process; the value of the changes to the organisation; the willingness and the barriers to change.

Evaluate the success of the project. Decide if further change is required.

Select the next process to benchmark. Maintaining momentum is one of the most challenging problems in benchmarking.

How not to manage benchmarking

* don't be too ambitious at the start, nor underestimate the need for willingness to change and openness for new ideas

* do not view benchmarking as a tool for providing short-term gains

* remember that benchmarking can fail for a number of reasons, including a lack of commitment, focus or resources.

Additional resources

Books

Best practices in planning and management reporting: from data to decisions, David A J Axson

Hoboken NJ: John Wiley, 2003

Effective knowledge management: a best practice blueprint Sultan Kermally

Confederation of British Industry

Chichester: John Wiley, 2002

Identifying best practices in benchmarking, Jacky Holloway and others

Chartered Institute of Management Accountants

London: CIMA Publishing; 1999

Benchmarking best practice, Rachel Gooch and Paul Suff

Industrial Relations Services

London: Eclipse Group, 1999

Effective management of benchmarking projects: practical guidelines and examples of best practice, Mohamed Zairi

Oxford: Butterworth Heinemann, 1998

Benchmarking textbook, Sylvia Codling

Aldershot: Gower, 1998

The benchmarking sourcebook: how to find the right benchmarking partners, Michael Cross

London: Batsford, 1998

This is a selection of books available for loan to members from the Management Information Centre. More information at: www.managers.org.uk/mic

Internet resources

The European Benchmarking Code of Conduct

www.benchmarking.gov.uk/content/documents/codeofconduct.doc

The European Code of Conduct has been produced to guide benchmarking encounters and to advance the professionalism and effectiveness of benchmarking in Europe. Adherence to the Code will contribute to efficient, effective and ethical benchmarking

The Benchmarking Network in the United Kingdom

www.benchmarkingnetwork.com/uk/UK.html

The Benchmarking Network website contains details of the services offered by the network who work in collaboration with organisations throughout the world in undertaking benchmarking studies. This comprehensive website covers the application of benchmarking within many sectors of business.

Organisations

Best Practice Club

39 Cambridge Place, Cambridge, CB2 1NS

Tel: 01223 355955 www.bpclub.com

Centre for Interfirm Comparison

32 Thomas Street, Winchester, Hampshire, SO23 9HJ

Tel: 01962 844144 www.cifc.co.uk
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Title Annotation:Checklist 060
Publication:Chartered Management Institute: Checklists: Operations and Quality
Geographic Code:4EUUK
Date:Jun 1, 2006
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