Key Points
- Benchmarking is a means of determining if performance is truly on track.
- Proper implementation of the practice should have detailed data available.
- Make sure to meet with your team to determine which measurements should serve as the basis.
Benchmarking is a way of discovering what is the best performance being achieved – whether in a particular company, by a competitor, or by an entirely different industry. This information can then be used to identify gaps in an organization’s processes to achieve a competitive advantage. Thus it is important for Six Sigma practitioners to:
- Understand fully the purpose and use of benchmarking.
- Understand the difference between benchmarking and competitor research.
- Gain insight to ensure that benchmarking is in alignment with the company’s management objectives.
Benchmarking as a Tool
Benchmarking is a process for obtaining a measure – a benchmark. Simply stated, benchmarks are the “what,” and benchmarking is the “how.” However, this is not a quick or simple process tool.
Before undertaking a benchmarking opportunity, it is important to have a thorough understanding of the company’s guidelines. Some companies have strict guidelines as to what information can be gathered, and whom practitioners can contact to get that information. Depending on the size of the company, practitioners may be surprised at what is readily available in-house.
This is not just a matter of making inquiries to other companies or touring and documenting another company’s facilities or processes. When making use of benchmarking, a company should not limit the scope to its industry, nor should benchmarking be a one-time event.
Benchmarking Versus Competitor Research
While competitor research is neither a better nor a worse practice than benchmarking, the important thing is to understand that there is a difference between the two. Available time and resources will help decide which tool will add the most value. The following table represents experience in dealing with the two practices:
| Differences Between Benchmarking and Competitor Research | |
|
Benchmarking |
Competitor Research |
| Focuses on best practices | Focuses on performance measures |
| Strives for continuous improvement | A bandage or quick fix |
| Partnering to share information | Considered corporate spying by some |
| Needed to maintain a competitive edge | Simply a “nice to have” |
| Adapting based on customer needs after examination of the best | Attempting to mirror another company/process |
Establishing Standards
So, before we dive into the nitty-gritty of how to develop your process, why should you? As with any metric, standards, or processes going in with a plan helps to keep things on track. This isn’t a throwaway endeavor, but one that demands attention and detail to truly succeed.
Three Primary Classifications of Benchmarking
Although there are many forms of benchmarking, they can be classified into three categories – internal, competitive, and strategic.
About Strategic Benchmarking
Going outside one’s own industry is often challenging for a company. Keep in mind, however, that customer satisfaction is driven by critical-to-quality measures that are similar regardless of the industry.
For example, when considering the metric, “wait time,” it does not matter whether waiting for a car repair at a body shop, or to make a deposit in a bank lobby, customers do not want to wait in long lines. Similarly, whether using a telephone help line of a cable company or of a favorite department store, customers do not want to remain on hold. They want their concerns addressed quickly and efficiently.
In 2004, a leading company identified customer satisfaction to have a benchmark of 92 percent. A key dissatisfier was wait time. The gap between an organization’s current customer satisfaction score and the benchmark of 92 percent represents the ultimate goal to strive for in a multigenerational plan
Bottom line: A lot can be learned from going outside one’s own industry because many customer concerns are the same.
Internal Benchmarking
Internal benchmarking is used when a company already has established and proven best practices and they simply need to share them. Again, depending on the size of the company, it may be large enough to represent a broad range of performance (i.e., cycle time for opening new accounts in branches coast to coast). It may also be necessary if comparable industries are not readily available.
Competitive Benchmarking
Competitive benchmarking is used when a company wants to evaluate its position within its industry. Further, this is used when a company needs to identify industry leadership performance targets.
Strategic Benchmarking
Strategic benchmarking is used when identifying and analyzing world-class performance. This form of benchmarking is used most when a company needs to go outside of its industry. Six Sigma often uses Hoshin to ensure that all employees are knowledgeable about the strategic direction of the company. Within a company’s Hoshin plan, goals are established relative to benchmarks set by world-class organizations. Often, these benchmarks are obtained from outside industries.
Steps Involved in Benchmarking
It is important that Six Sigma practitioners have a thorough understanding of their own company’s guidelines before undertaking a benchmarking opportunity. The following is a list of the vital few steps involved in this process. These steps should be tailored based on company policies, resource availability, and the project or process one is dealing with:
1. Understand the Company’s Current Process Performance Gaps
This will help decide what needs benchmarking.
2. Obtain Support and Approval from the Executive Leadership Team
That approval and support will assist with eliminating roadblocks, providing adequate resources, and expediting the benchmark-gathering process.
3. Document Benchmarking Objectives and Scope
This is a necessity for any project.
4. Document the Current Process
Without up-to-date knowledge of the current process:
a. Time and resources can be wasted collecting process documentation and data that already exists.
b. The project may lack focus, purpose, and/or depth.
c. Benchmarking visits may appear to be random exercises in information-gathering.
d. The team could select a partner whose performance is actually worse than that of its own organization.
e. Collected benchmarking data will be difficult to compare “apples to apples” in terms of process requirements.
5. Agree on the Primary Metrics
Measurements are used as the basis of many comparisons:
- Determining the gap between current performance and that of partner organizations.
- Tracking progress from the present (with the current process) into the future.
- Tracking partners’ progress toward their goals.
- Determining superior performance with process improvements.
- Using a measurement systems analysis (MSA):
- These comparisons will be valid only if everyone participating in the study measures performance in the same way – every time.
- It is important to make sure metrics are being established that potential benchmarking partners are probably already tracking or that can be easily derived from existing measurements.
6. The Metrics Should Be Put in Writing
In particular:
- What is being measured?
- How the units of measure will be classified.
- What should be included in the measurement?
- What should not be included?
- How to make any necessary calculations.
- Examples of typical measurements.
7. Agree on What to Benchmark
Everyone must agree on what to benchmark before any gathering initiative to:
- Understand gaps of low performers.
- Understand the impact on customers, associates, and shareholders.
- Prioritize and select one to three metrics to benchmark.
8. Develop a Data Collection Plan
9. Identify Research Sources and Initiate Data Gathering
10. Design a Screening Survey to Assist with Partner Selection
Characteristics of the survey are important:
- Crisp focus on indicators of excellence
- Two pages maximum
- 30 minutes maximum to complete
- Objective, multiple-choice questions
- Communicates the plans, objectives, and resource requirements for the study
- Reflects focus areas for subsequent in-depth questionnaires
11. Determine How to Contact and Screen Companies
12. Design a Detailed Survey to Gather Information
13. Decide if the Gathered Information Meets Original Objectives
14. Conduct a Site Visit
15. Apply the Learnings to Performance Gaps
16. Communicate to the Executive Leadership to Ensure Continued Support
17. Develop a Recommended Implementation Plan with the Process Owner
18. Know When to Update and Recalibrate
Other Useful Tools and Concepts
Looking to make your quality soar to the moon? You might want to see how today’s subject can drive performance improvements over the long term. This is a handy way of keeping track of what your business is doing and how stacks up against the competition.
Additionally, learning how to implement quality assurance schedules is a great way to drive continual improvement in your business. You can’t force out-of-the-box thinking, but you can certainly make space for it.
External Resources for Benchmarking
Some may find it surprising that there is a world of information already gathered and available. While there may be a fee associated with obtaining this information, the fee can easily be offset by the savings in time and resources that come from not having to gather the information needed to meet agreed-upon objectives. Here are some available sources:
1. American Productivity & Quality Center (APQC)
2. APQC Knowledge Sharing Network
3. The Benchmarking Exchange
4. Best Practices, LLC & Global Benchmarking Council
