All successful companies are constantly benchmarking their competition. They have to know what they have to match up with day-in and day-out if their company is going to be successful - James Dunn
Process improvement projects often require an understanding of how competitors and leading businesses in other industries operate in order to improve their current practices, using the benchmarking technique. In the course of this exercise, process changes with the potential of delivering superior competitive advantage and increased business efficiency are identified and implemented.
Benchmarking is usually done to understand how other companies achieve success with the objective of using that information to launch beneficial projects within the organisation.
Benchmarking may also be described as a hunt for best practices. Best practices are processes that have consistently delivered superior results over time and are recognised by industry experts as effective. The idea of what constitutes best practice is however, subjective in the sense that what works for one company may not necessarily work for another. Careful thought should be given to the environment and peculiarities of the organization (e.g. regulatory requirements) which make its processes different from those of the benchmark.
This post is a compilation of practical tips that can be applied to any benchmarking exercise.
- Document existing processes end-to-end so that the scope and areas of improvement can be fully assessed. Full process flows should be captured to avoid missing out on critical aspects of business processes. When a process flow is completely mapped out, it helps to identify potential bottlenecks, constraints affecting its efficiency and the process steps that would benefit from benchmarking.
- Start by identifying potential areas of improvement so that the benchmarking exercise can focus on these. Identify which processes need to be benchmarked and in what order. Will you be reviewing an entire process or a step in the process? Will you be reviewing all the processes in the organization or within a certain department? The processes chosen for benchmarking should be measurable to allow for an easy comparison of results.
- Determine the benchmark. The benchmark can be a single company or a group of companies to be studied for the exercise. Don’t limit yourself to examining only the processes of organizations within your industry. When selecting which company to use as benchmark, take note of the peculiarities of your environment and organization since some practices or steps cannot be duplicated in all environments. If you select benchmarks that operate within the same environment as your organization, the results are more likely to be relevant.
- Pay close attention to how you will gather data. Will it be through primary or secondary research? How will data storage, analysis and presentation of results be handled? See if you can establish contact with persons in suitable organizations with minimal logistical and legal challenges, especially in relation to data collection.
- Gather data. Data can be gathered by conducting site visits and interviews; studying internal publications of target organizations; conducting surveys to understand how the target organization operates or contacting professional associations that store data relating to the business of the target organization, to mention a few. You may also gain useful insights from consultants and industry experts.
- Analyze for gaps. Create a chart that compares the practices of the benchmark with your organization and combine the best practices to form an ideal process.
- Predict future trends. Do some research on the future performance in the industry both with and without the proposed changes. This will arm management with insight to make decisions on whether to go ahead or not with the planned changes.
- Present your findings and recommendations for approval.
- Obtain management support before implementing any changes. Ensure that any planned changes from the benchmarking exercise have been assessed in terms of costs, benefits and whether or not the organization can handle the change.
- Carry all stakeholders along to prevent resistance. Stakeholders should understand the impact of planned changes and be allowed to give feedback.
- Develop an action plan. A feasible action plan should be developed to guide implementation. Identify all the tasks that need to be completed and the necessary resources.
- Recalibrate. Benchmarking is not a one-time event but one that needs to be done to adapt to industry changes, regulations and improvements. Processes will need to be recalibrated to ensure that a sense of complacency is not perpetuated within the organization.
- Monitor results and performance continuously. The results of the benchmarking exercise should be monitored and improved as industry demands and customers’ requirements evolve. It's also necessary to agree with key stakeholders on which metrics to use as a basis of comparison between process versions. Everyone in the team should measure process performance the same way to avoid conflict.
The benchmarking exercise can be as simple as conducting secondary research to understand how other businesses operate or contacting leading firms directly via primary research methods to understand their practices. The main benefit for businesses is that it can result in quick benefits and improvements if properly handled.
Picture Attribution: “Best Practice Sign Indicates Better And Efficient Procedures” by Stuart Miles/Freedigitalphotos.net