Other Performance Measurement Systems Benchmarking

Benchmarking : Term widely used in land surveying. Identify a fixed point and make all other measurements from that point Applied to an organisation, “ Benchmarking is a process to determine who else does a particular activity the best and emulating what they do to improve performance.” “ The systematic process of searching for best practices, innovative ideas and highly effective operating procedures that lead to superior performance. “ Examples : AT&T, Motorola, Rank Xerox, 3M …… have made Benchmarking as a Standard Operating Procedure for the company.

Benchmarking Process : 1.Understand in detail the existing Business Processes 2.Analyse the Business processes of others 3.Compare own business performance with that of others analysed 4.Implement the steps necessary to close the performance gap

XEROX – Eleven step process for benchmarking 1. Identify what to benchmark 2. Identify comparative companies 3. Determine data collection method and collect data 4. Analyse data 5. Determine current performance gap 6. Communicate findings and gain acceptance 7. Establish functional goals 8. Develop action plans 9. Implement specific actions and monitor progress 10. Fully integrate practices into processes 11. Recalibrate benchmarks

Key for successful Benchmarking : A.Focus on the processes critical to your business B.Use Benchmarking in conjunction with strategic planning C.Willingness to admit that you are not the best D.Openness to new ideas from unexpected sources E.Commitment to provide resources and to overcome resistance to change F.Recognise successful benchmarking teams G.Communication to the organisation about the objectives of benchmarking and understanding the benchmarking process H.Process orientation

Benefits of Benchmarking ## Enhanced customer satisfaction ## Cost reduction ## Cycle time reduction ## Higher employee satisfaction ## Gaining professional development ## Establishing professional contacts ## Becoming more competitive ## Accelerated learning ## Team building ## Higher awareness on costs and customer expectations ## Innovative ways of managing operations “ No need to reinvent the wheel “

Types of Benchmarking : A. Strategic Benchmarking Purpose : For realigning business processes. Steps : 1. Analyse core competency 2. Capability to handle change in environment 3. What has made the high performers succeed ? 4. Study winning strategies of highly successful companies 5. Reflect and implement. Example areas : How other companies have dealt with changes in technology, customer requirements…..

B. Competitive Benchmarking : Purpose : To focus on relative performance To close gap with competitors in similar / same businesses Steps : Compare performance characteristics of key products and services Draw benchmarking partners from same sector Do it thro’ third party considering confidentiality Example : Electronics manufacturers comparing with others in same industry Courier companies, Banking companies …..

Process Benchmarking Purpose : For quick results Short term benefits To improve the key processes Steps : ## Prepare process maps for analysis and comparison ## Compare with organisations having best practices Example : Claim processing in an insurance company Grievance handling by a bank Cluster companies of Tier – 1 suppliers to Auto OEMs.

Functional Benchmarking : Functional benchmarking crosses industry boundaries. Business practices can be mutually benchmarked across the industries. Purpose : To improve functional activities and services To achieve innovative and dramatic improvements Steps : ## Draw benchmarking partners from different business sectors ## Compare similar functions ## List the best of the practices. Example : XEROX benchmarking L.L. Beans warehousing operations

Internal Benchmarking : Purpose : To standardise good practices across the company at a fast rate Steps : ## Comparison from within the same organisation ## Business units in different locations ## Look at possibilities for standardisation ## Fewer barriers for data collection and implementation ## Lesser use of resources Example : Multi locational companies. Many auto component manufacturers >>>> Eg; TVS group

External Benchmarking : Purpose : Adopt examples of good practices in other organisations Such good practices not being available within internal business units Steps : ## Analyse external organisations that are best in class ## Learn from those who have the leading edge ## Ensure comparability of data ## Establish credibility of findings Invariably companies benchmarked are leaders in their area. Example : Intel, Fedex, Toyota …….

International Benchmarking : Purpose : To achieve world-class status Steps : ## Best practices existing outside the country are identified and analysed ## Use advancements in information technology to do this ## Results of comparison need to be weighed with national differences ## Needs more time and resources Example : Maruti, Dr. Reddy’s, Ranbaxy ………

General Benchmarking Process Benchmarking Process Benchmark metrics Identify Gap Management Commitment Organisation Commitment Employee Participation Superior Performance Benchmark practices How to close gaps?

Case study in Transit Benchmarking MRTC, Hongkong, carries millions of passengers daily and is one of the largest urban metros in the world but they benchmark as part of the Continuous Improvement Policy. They want to identify the critical success areas of the business and define key performance indicators of each critical success area. Help MRTC, Hongkong to do this.

Critical success areaKey performance indicator A.Financial performance * Total cost / passenger * Operations cost / passenger * Maint. Cost / operation Km * Fare revenue / passenger * Total revenue / Total ops cost B. Efficiency * Passenger Km / Total staff hours * Revenue / Total staff hours C.Asset utilization * Passenger Km / Capacity Km * Capacity Km / Track Km

Critical success areaKey performance indicator D.Reliability * Car operating hours between incidents * Car operating hours / Total hours delay * Trains on time / Total number of trains * Car operating Km / Total incidents E.Service Quality * Total delay hours / 1000 passengers * Journeys on time / Total journeys

Tools for Benchmarking ## Process mapping ## Process performance measurements ## Project management ## Questionnaire ## Interviews ## Observation ## Handling ethical and legal issues

Benchtrending ## Latest approach to benchmarking ## Continuous monitoring of specific processes w.r.t a select group of Benchmarking partners ## In Benchmarking, by the time the performance gaps have been closed, the competition has moved forward to create new gaps ## In Benchtrending, the important trends of customer improvements are identified and continuous actions taken to address them. ## Benchtrending also projects company strengths and the impact of other market factors over time ## Benchtrending considers the structural dimensions too. ## Benchtrending brings out the continuity over a time horizon