Venture Knowledgist Quality Integration
BENCHMARKING APPROACH, AN ANALYTICAL
TOOL FOR IMPROVING BUSINESS PERFORMANCE
Benchmarking is a strong tool for organizational learning when an
organization is striving for a superior business performance, excellence.
Prerequisites for the effective application of benchmarking include
three requirements: Understanding the purpose and the leading principles
of the issue, using effective tools and approaches, and applying it
in innovative management environments.
Process-focused practices in benchmarking ensure a concretely business-integrated
approach. The most important benchmarking projects are related to
redesigning key business processes. The benchmarking projects are
also carried out in a process-like manner.
It is worthwhile to utilize generally recognized methodology in developing
organizational benchmarking practices and carrying out individual
There are lots of material or services available on benchmarking
in literature and Internet, or by various training or consulting organizations.
However, the key issue is how within a particular organization one
might introduce an effectively practiced approach that is really matching
with the needs and expectations of one's business.
Benchmarking is a method for improving organizational activities
based on learning from others. It is a management tool that supplements
other methods used for performance improvement. Benchmarking is a
more extensive and profound method than market research and competitor
analysis. In fact, there are two closely related activity-concepts
that are, however, using very different principles and tools:
- Benchmarking-activity that is a process for performance improvement
and organizational learning
- Benchmark-activity that is a methodology to compare and analyze
organizations' key performance indicators
The first one of these is more challenging and also demanding.
Benchmarking is closely connected with process thinking and quality
management. Benchmarking objects are primarily business processes
or process activities to be improved, but the same principles can
also be applied e.g. to benchmarking products.
In benchmarking the process in consideration (i.e. the benchmarking
object) is systematically studied and compared with another process.
The aim is to find better solutions used in some other organization
and that can be used for learning and thus for improving the own process
performance. The reference may be another process in own organization
or in some other partner's organization.
A benchmarking project consists of three main areas of actions:
- Finding "gaps" in one's own business performance, e.g.
a problem or challenge in a business process' performance
- Comparing business process activities with the relevant best practices
in other organizations
- Designing and implementing improvement measures
Individual benchmarking projects are carried out by the benchmarking
process that is one of the strategic support processes of an organization.
Benchmarking process is described in figure 1. An individual benchmarking
project consists of the phases of figure 2.
Figure 1. The benchmarking process
Benchmarking is an interactive, open and confidential activity, which
is profitable to both partners through win / win principle. In benchmarking
particularly processes of different business branches or sectors should
be studied because then one may learn something really new that is
not yet well-known in one's own business culture or practice.
In some cases a properly conducted benchmarking may take months and
requires a lot of resources. Benchmarking is often connected with
process re-engineering. As a result of benchmarking, the knowledge
about the own process(es) is increased, and process performance improved,
i.e. strengths (competitive advantages) are enhanced and weaknesses
eliminated or decreased. At its best the benchmarking partnership
may continue as an ongoing benchmarking cooperation.
There are several practical ways to realize and organize a benchmarking
project. These include:
1. Bilateral benchmarking between two partners
2. Benchmarking carries out mutually by several organizations. This
type of benchmarking may also mean a continual cooperation between
the partners ("Benchmarking Club"-activity)
3. Benchmarking carried out between several organizations without
organized cooperation but the activity is facilitated by a particular
benchmarking service provider
The method is selected according to the challenge of the improvement
targets taking into account the costs incorporated.
Figure 2. Tasks of a benchmarking project
Considering the improvement object
Impulses for applying benchmarking may be originated by an organization's
business decision based on observations from the performance assessment
(e.g. using auditing or performance excellence model methodology),
changes in customer needs or competition situation, customer satisfaction
measurements, etc. The selection of improvement objects is influenced
by the status and criticality of the processes in relation to business.
The object should be significant from the organization's mission,
vision, and strategic focus point of view. Therefore the management
has responsibility in deciding the objects and setting targets for
the benchmarking and improvement.
Planning a benchmarking project
Benchmarking is carried out as a project. Implementation of the project
- Object process, sub-processes or activities
- Working methods
- Improvement methodology
The management accepts the plan and commits itself to its realization.
The project group keeps the management up to date when the work proceeds.
The project group comprises the owner of the object process, preferably
as project manager, and project personnel who in practice is in duty
to realize the improvement activities. Moreover the quality manager
of the organization may act as a methodology facilitator of the project.
It should also be considered the participation of the customer of
the process to bring his/her needs immediately to the usage of the
project. The use of an outside consultant could also be possible in
tasks that call for special expertise or confidentiality such as relating
to competitor benchmarking.
The members of the project group should have knowledge and skills
- The business of the company
- The object process
- Process analysis and improvement
- Benchmarking procedure
- Gathering and analyzing information
To ensure a successful realization of the project the members of
the group should be trained to take use of the benchmarking procedure.
In the planning phase a set of questions to the partner is formulated
and tested, and the data collection methods applied are preliminarily
agreed upon. That may include literature / Internet searches, questioning
by letter, telephone and video conferences, and company visits.
Selecting benchmarking partners
The target is to find such a process, internal or external, which
has features ("Best Practices") desirable to the process
to be improved. The selected partner may be a unit of own organization,
competitor or a leading company in another industry. In the first
phase it is recommended to select the processes within the own company
as comparison objects. Thus the risks are smaller and the personnel
can be trained and they get experience for external benchmarking.
To find partners for internal benchmarking it is possible to take
use of the networks of quality managers or process owners. The results
of self-assessments (especially when using a performance excellence
model methodology) made in different organizations give reference
information for selecting benchmarking partners. Quality award winners
are good candidates for benchmarking partners.
Information sources of external partners include for example:
- Process personnel
- Customers and suppliers
- Business partners and competitors
- Annual reports and other company publications
- Libraries, and data bases and Internet
- Experts and associations
- Conferences and exhibitions
- Reports and researches
Good international peer-to-peer expert networks may be very useful
to find partners for benchmarking.
The owner of the benchmarking process supports the selectors in the
acquisition and maintenance of information. It is recommended that
there are several partner-candidates for each benchmarking case to
ensure sufficient choice.
When a few promising candidates are available, the project group gets
acquainted with their business with the aid of available preliminary
information and contacts with the candidates. When an agreement with
some candidate on participating to benchmarking has been reached,
the topics to be considered, contact persons, way of realizing necessary
information acquisition, and other details should be agreed upon.
It should be also agreed, what matters are not handled. Those may
relate e.g. to the prices of products, pricing principles, and detailed
market or customer information.
Acquiring information and visiting
the benchmarking partners
A necessary precondition of useful benchmarking is the deep knowledge
of one's own process. The process should be defined, documented, and
its performance measurable. The assessment (e.g. auditing) of the
process gives useful information of the present status of the process
before starting benchmarking. Thus, knowing clearly one's own process
the benchmarking object and its performance is a prerequisite for
approaching partner's corresponding process.
The performance indicators should be mainly quantitative so that
the processes can be compared as explicitly as possible. Also qualitative
information should be utilized as appropriate. However, the amount
of information must be limited to essential. Thus, it is also reasonable
to take use of such information, which is collected regularly. An
important criterion for the selection of performance indicators is
their business significance. Performance indicators should be linked
to business vision and strategies and emphasize performance improvement.
On the other hand the information should be sufficiently general to
make the comparison possible.
The benchmarking partners should agree upon how the preliminary information
is collected and exchanged. To go deeply into the information and
its background and to create a strong relation with the partner requires
personal meeting(s) with the representatives of the partners. In the
beginning of the meetings with benchmarking partners the purpose of
the benchmarking visit is stated i.e. what is desired to be found
The information is collected according to the plan; no information
irrelevant to the subject is collected. It is thus ensured, that the
targets are reached and that the timetable held. The partner is asked
only for such information that one can deliver self correspondingly
to the partner if asked for. Generally it is acted so that mutual
confidentiality is maintained. It is typical to apply a confidentiality
agreement between the partners (see an example in annex 1). In making
observations special attention is paid to, in which matters and by
which indicator the partner has a better process performance. The
observations are recorded immediately. The root causes, premises and
procedures of the superiority should be found out.
Physical visiting to the benchmarking partner(s) is only a small
part of a benchmarking project. However, it may require a lot of practicalities
for arranging benchmarking meetings with relevant partners.
When visiting a benchmarking partner a systematic and effective approach
is beneficial because it is very typical that shortage of time for
peer-to-peer communication on site is the most difficult fact. Also
one should always keep in mind the different roles and interests of
the partners in the benchmarking. Annex 2 represents a method - so
called Funnel Method - that has proved useful in practice in communicating
with benchmarking partners.
In the case of a benchmarking club effective continual exchange of
information is essential. In this case also modern information technology
may be used effectively; especially interesting new means are so called
social networking and collaborative group work software applications.
Before taking use of the information, its correctness and validity
should be ensured. The information is analyzed in a way suitable for
the nature of the examined processes. On the basis of information
conclusions are made and goals are set to improve the processes.
Improving the object process
The target of improvement is, that the performance of the own process
at least reaches and preferably exceeds the performance of the reference
process. Because the reference process will also be improved in the
future, the development of the partner's future performance should
be projected, and which factors influence on it assessed.
In the improvement plan the measures and the timetable are defined.
The management should approve the plan and commit itself to the measures.
Very often benchmarking is a part of a process improvement project.
If not, then it is beneficial to carry out benchmarking-based process-improvement
measures according systematic project management practices.
At the end of a benchmarking project a final report should be made.
Also the benchmarking partners should be informed of the results.
The owner of the object process is responsible for the documentation
of benchmarking information, results of analysis and process improvements.
For the organizational registration purposes the following centrally
maintained information is delivered to the owner of the benchmarking
- Name of the object process
- Benchmarking partners
- Persons participated
- Usage of resources
- Time schedule of implementation
- Time schedule of the improvement measures.
This information is useful for following-up the effectiveness of the
organizational benchmarking activities as a whole.
Experiences gained through practice have taught what kinds of difficulties
and problems one may face in the implementation of benchmarking. These
have resulted primarily from the following issues:
- One has not understood one's own business clearly enough, e.g. one's
process practices have been vague or ambiguous
- The approach has been superficial, i.e. analytical means have not
- External company visits have been emphasized too strongly, or practiced
only as technical tourism
- One has not been able to apply the best external practices innovatively
and instead they have merely been copied and others' medium-grade
practices have been imitated
- Benchmarking has been viewed as a new management doctrine or an
Benchmarking should be applied rather cautiously. Benchmarking is
a tool for large-scale projects and even when implemented appropriately,
it is rather expensive and laborious approach. However, it may be
useful as a learning tool within the framework of the company's ordinary
leadership system and quality management approach. Although many reported
benchmarking projects are encouraging, benchmarking should nevertheless
definitely not be viewed as a remedy in all cases.
1. Camp Robert: Benchmarking, Quality Press 1989
2. Finerty Terry: Beyond Benchmarking: European Quality, 1994, Vol
1 No 1, p. 12-17
3. GOAL/QPC Research Committee: Benchmarking, Research Report, 1991,
4. Smith Steve: Revealing the Hidding Potential, European Quality
1994, Vol 1 No 6, s. 48-50
AGREEMENT ON CONFIDENTIALITY
XX Co and
have made the following agreement on changing benchmarking information.
According to this agreement the partners can change confidential
information with each other. Hence the partners have agreed that the
following information is valid during the benchmarking co-operation
and five years since the co-operation has ended.
In this agreement all information - technical, commercial or other
information independent of how it is documented - what one partner
delivers to the other partner according to this cooperation is regarded
as confidential. As confidential is also regarded the contact information
of the partners.
The partners commit themselves not to deliver confidential information
to a third party, and to store the information acquired in this context
in such a way that a third party cannot access the information.
The partner can break the terms of this agreement only by the approval
of the other partner.
Place and date
FUNNEL PRINCIPLE FOR BENCHMARKING
Funnel-principle is useful when used in visiting to a benchmarking
partner for learning from the partner's best practices. The method
was originally created by Mr. Jorma Kylander, JKC Consulting Oy, Finland
for sales negotiations.
Funnel-principle supports a systematic and effective consultation
practice. It enables to understand the partner's present situation
regarding to the topic in question, to listen to his/her argumentations
and premises without prejudices, to depict the found out facts as
useful for the benchmarking needs as well as to use achieved information
for improvement purposes within the benchmarking item. The win / win
-achievements are emphasized in using the funnel-principle (see the
Figure 3. Funnel principle for benchmarking
The funnel-principle consists of the following stages:
1. Effective opening "The first five minutes"
Positive start / first impression - Using an effective small talk
Short company presentations
What is the idea of this benchmarking and how to do it
2. Listening stage
Finding out the present situation of the partner
Activate the partner to speak - Using effective "opening question(s)"
Being a good listener
Making notes effectively
Using appropriate techniques for promoting the conversation
Understanding and recognizing one's own and partner's personality
Creating a pleasant atmosphere
Using a professional interview techniques
3. Questioning stage
Finding out the information areas necessary for this benchmarking
Using right types of questions - Using "umbrella questions"
Activating the partner
Finding out the key issues of the partner's practices
4. Detailing and facts stage
Fact finding - Specifying details of the practices, getting examples
and background information (reasons, premises, etc.)
Using right types of questions - Using detailed "focus questions"
Listening to the partner
Steering the conversation to the needs of this benchmarking
Summarizing the findings
Agreeing on the next possible meeting or contacts for further considerations
5. Tailoring stage
Tailoring the findings for the purposes of this benchmarking
Solutions for the benchmarking needs
Considering the benefit(s) for this benchmarking case
6. Closing stage
Feedback to the benchmarking partner
7. Improvement stage
Realizing the improvements as a project
material has been presented in different forms in differerent seminars
or conferences, e.g. in London, UK 1998, Singapore 1998, and Kiev,