The State Of Benchmarking

Interest in benchmarking has virtually exploded since 1979 when Xerox introduced it. Today, benchmarking as a tool, is widely used. Along with the increased use of benchmarking,, the focus of benchmarking studies has gradually shifted. In early studies, the focus tended to be on performance measures, competitors and ambitious targets. Recent studies have examined how non-competitors and industrial outsiders learn to improve business processes. Comparison of performance measures has developed into learning about best practices. In fact, some authors have used the term bench learning: There also has been a trend to use benchmarking in a more coherent fashion and link it more closely to an organisation's strategy. Some large organisations have established formal benchmarking efforts.

 

Assessing and projecting

To understand the current state of benchmarking and project its developments, a survey was conducted among a cross-section of organisations. The survey was structured to gain insight into emerging benchmarking developments like capturing, sharing, and dissemination of best practices and the influence of technology - including computers, databases, and networks on benchmarking.

Survey respondents were asked about the current and futures use of benchmarking. Questions were grouped into eight topics, and respondents were asked to rate the importance of the issues raised in the topic. A 10-point scale was used where 1 represented the least important and 10 represented the most important. The questionnaire instructed the respondents to force rank the topics from 1 (high priority) to 8 (low priority). This was intended to reflect where additional benchmarking efforts and resources were likely to be spent.

Overall findings

The eight topics were sorted according to ascending mean importance rating. This resulted in the charts shown in Figure 1. All eight topics rated fairly high the lowest being 5.6 on a scale from 1 to 10. The highest rated item scored 7.8. Thus, the difference between high and low was a mere 2.2 points.

An equivalent chart, displaying the mean ranking of each topic, is shown in Figure 2.Compared to the importance ratings a higher degree of discrimination was found in the ranking data. The highest ranked item scored 2.9. and the lowest 5.9. This was expected as the questions had to be force ranked.

Formal benchmarking effort

Looking closely at the importance ratings, two issues stand out on the high importance end. The existence of a formal benchmarking effort was perceived as essential. This issue also was ranked high, which was a little surprising, as about threefourths of the organisations said a formal program had already been established. On the other hand, many of these were said to have been just recently formed, which might explain why it is an area considered likely to receive additional resources.

Transfer of best practices

The other highly rated topic addressed mechanisms for transferring best practices revealed through benchmarking. About 75 per cent of the respondents indicated a need for a formal process in this area. This question also elicited the strongest wording in the entire questionnaire. The issue ranked highest, 2.9 which probably represents one of the most significant findings in the survey. Developing a process and mechanisms for transferring best practices is an area of high concern. Some work has been done to address the issue, such as Gabriel Szulanski's Transfer of Best Practices Project from INSEAD,The European School of Business Administration, but there is a need for development.

Other initiatives ranked as moderately important topics, including total quality management (TQM), business process management, benchmarking training, and the use of networked PCs for benchmarking.

Issues on the low end of the importance rating included requirements before proceeding with benchmarking and the use of on-line database and dialogue services. These, however, were ranked higher than the respective importance ratings. These services were said to be used infrequently and of medium usefulness, which might explain the low importance. The higher ranking might reflect an expected increase in the use and benefits of such services as they are further improved and extended.

Findings for the individual questions

The following observations were made after reviewing the survey answers.

Transfer of best practices An overwhelming majority of the respondents indicated a compelling need to establishing a formal process for the transfer of best practices. This is to avoid duplication and replicate best practices globally. It's viewed as a top priority that has not been seriously addressed.

No respondent claimed to have solved the problem, however. Mechanisms that organisations currently use in include informal exchange during meetings and other networking activities, Lotus Notes, newsletters, and stored comments. As this is a priority issue that many organisations indicated they would put resources into, this is an area within benchmarking that is likely to be further developed during the next few years. This belief also is substantiated by the fact that academia has taken an interest in the issue.

Formal benchmarking efforts With regard to formal benchmarking efforts, again as much as 75 per cent claimed to have formed them, albeit some just recently. For those without a formal effort, benchmarking activity was reported to be sporadic, part of a larger initiative, and used when needed, often as a fact-finding tool. In the organisations where formal efforts had been been established, some sort of central competency functioned as a driving force. Tasks completed by such a competency included benchmarking training, search for and maintenance on best practices, and implementation of incoming benchmarking requests. The high ranking might indicate that the practice of formal efforts will be further developed, thus more strongly lining benchmarking to strategy and other improvement efforts in organisations.

Training - Most of the respondents claimed to have established formal benchmarking training programs. Two major types of training included manager awareness training and benchmarking team training. Most of the training was of two days duration and given on a just-in time basis. About half of the organisation had developed training course material in-house, while the rest mainly relied on external consultants for training delivery.

On-line services Another medium-ranked question pertained to the use of on-line. Internet-type services for internal or external dialogue on best practices. Only four respondents reported not using any such services, 13 accessed the International Benchmarking Clearinghouse Network, nine used The Benchmarking Exchange, while five had access to other internal or external services. Many organisations, however, pointed out that these services were used infrequently. The relative high ranking of this issue could indicate an expected increase in the use of such services, perhaps as a consequence of an increased need to find benchmarking partners for various business processes.

The next question in order of ranking covered the use of networked PCs for benchmarking. A predominant finding revealed most organisations had a high number of PCs connected to both internal and external networks. About half were using some groupware software, mainly Lotus Notes, but some were using Mosaic and E-mail systems. Furthermore, approximately two-thirds were, in some capacity, using these items for benchmarkingmainly for information sharing and dialogue handling, information requests and resinous, and outside information searches.

When asked about the use of on-line databases, only one fourth of the respondents answered they were not using any such services. The predominant use included the International Benchmarking Clearinghouse database and The Benchmarking Exchange, mainly for contacts, partnering, and data searches. Many people have expressed doubts about the benefits of such best practice databases, and the low ranking seemed to confirm that this is not an area of high importance to benchmarkets.

Other requirements before benchmarking The second-to-last ranked issue dealt with requirements, other than benchmarking training, that had to be satisfied before proceeding with benchmarking. The major emphasis was that the process in question had been mapped, that the benchmarking team was trained and that a managements sponsoe was present. Some emphasis was put on confidentiality agreements and the existence of a project plan. Training in information research and project management were among the requirements. There was some mention of the need for information searches, cycle time analysis, and survey design. The low ranking reflects that resources have been committed to this area, and no further developments have been predicted.

Conclusions

The most significant conclusion of the survey found that the mechanisms for the transfer of best practices within an organisation is truly a high-priority issue.

Large organisations seem to have experienced major problems in disseminating best practices found in benchmarking studies to other areas of the organisation. Such problems limit the outcome of benchmarking and result in a less-effective use of resources put into benchmarking studies and a loss of opportunity for the adoption of best practices throughout the organisation. This is obviously an area for further work and research.

The use of computers in benchmarking, both for information sharing internally and externally, and for partnering and searching for best practices seems to be growing. On the other hand, direct contact with other companies and first-hand observation of best practices still seem to be the preferred methods. Some development within this area does, though, seem to be expected.

Formal efforts for benchmarking in general and for benchmarking training specifically, were also highly important areas likely to be further developed. These might be signals that benchmarking is about to be increasingly institutionalised and become an integral part of business.