1. THE BENCHMARKING OVERVIEW
19 September 2006
Prepared by: Kiw Sook Fuang
Lalitha Velayutham Yong Kim Lan

2. Content Introduction Definitions Why use benchmarking?
Functions of benchmarking
Types of benchmarking
Approaches to benchmarking
Benefits of benchmarking
Seven steps to benchmarking
Critical success factors
Benchmarking’s rules
What benchmarking is not?
NPC benchmarking model
Benchmarking through Community of Practices (CoP)

3. If you know your enemy and know yourself, you need not fear the result of a hundred battles.
-Sun Tzu (500 B.C.)

5. 1. What is benchmarking? Benchmarking is a continuous process of
Comparison
Projection
Implementation

6. It involves: Comparing:
Organization and its parts with the best organizations, regardless of the industry or country
Business processes with the best similar processes in any or all industries to define best value
Production processes with the best similar processes in any or all industries to define best value
Organization's products and services with those of the best competitors
Different types of equipment to select the best value equipment for the specific application

7. Implementing defined best practices
Projecting future trends in best practices and proactively leading to these trends
Meeting and exceeding customer/consumer expectations

8. Here is what benchmarking will do:
Help the organization learn from the experiences of others.
Show the organization how it is performing in comparison to the best.
Identify the organization's weaknesses and strengths.
Help the organization prioritize its improvement activities.
Provide the organization with proven corrective action plans.

9. 2. Some definitions of benchmarking
Robert C. Camp, in his book Benchmarking - The Search for Industry Best Practice That Lead to Superior Performance, has defined benchmarking as
The process of continually researching for new ideas, methods, practices and processes, and either adopting the practices or adapting the good features, and implementing them to obtain the “best of the best”.

10. David T, Kearns, chief executive officer of Xerox Corporation, defines benchmarking as
The continuous process of measuring products, services, and practices against the toughest competition or those companies recognized as industrial leaders.

11. "a point of reference from which measurements may be made."
Webster's Ninth New Collegiate Dictionary defines benchmarking (benchmark) as
"a point of reference from which measurements may be made."
and
"something that serves as a standard by which others may be measured"

12. For our purposes, benchmarking can he defined as
A systematic way to identify , understand, and evolve superior products, services, designs, equipment, processes, and practices to improve an organization's real performance.

13. BENCHMARKING
Benchmarking is a never-ending discovery and learning experience that identifies and evaluates best items in order to integrate their best features into an organization's items.
Improvements in effectiveness, efficiency, and adaptability will maximize their value -- an added contribution to the organization.

14. Competitive benchmarking originally was viewed as simply purchasing competitive products to compare them with the ones manufactured by the purchasing organization.
This process (competitive product test and disassembly) is only a small part of the larger benchmarking activity.

15. Benchmarking & detective work
The benchmarking process is a lot like a detective story, and the person doing the benchmarking operates a lot like a detective.
He or she must search through the many clues available in the public domain to find leads, then dissect these leads to define root causes.
Once the many clues are understood, they fall together to give the benchmarking team the best-value future-state solution.
It can be an exciting and enlightening adventure.

16. Benchmarking tools Competitive shopping Competitive analysis
Reverse engineering
Disassembly analysis

17. 3. Why use benchmarking ? To set challenging but realistic goals
To define how goals can be accomplished
To define gaps between the organization's performance and its competitors' performance
Because a breakthrough improvement is required to stay competitive

18. Other reasons
Because the organization is losing its market share and needs to turn around
Because overhead costs are running too high
Because the Malcolm Baldrige Award requires that benchmarking be done
Because the competition's quality is much better
Because the competition is bringing product to market much faster

19. Because one function in the organization is trying to impress upper management
To overcome management's complacency by exposing inaccurate perceptions
To test the soundness of the organization's strategy
To define competitors' future strategies and resource investment plans
Because there is a need to supplement the organization's ideas with fresh thoughts

20. The two primary reasons for using the benchmarking process are
Setting goals
Identifying how the goals can be accomplished

21. In the past, goals were usually based on the organization's (or the item's) past performance .
This very limited use of internal vision made or little correlation between the organization's goals and the ultimate standard of excellence.
Occasionally, the organization's goals exceeded what was achievable, but more commonly they fell far below what had been, at could be, achieved.
The unique value of the benchmarking process is that it not only tells you how good you can be, it also tells you how to change the way you are doing business so that you can be that good.

22. 4. Functions of the benchmarking process
Two functions of the benchmarking process –
Comparative analysis (the what)
What good is defining the gap between your organization and your competitors or world- class organizations if you do not know how to improve your processes to narrow the gap?
Product / system knowledge (the how)
Knowing that you are inferior, but not being able to improve, just discourages everyone.

23. 4a. Providing the "WHAT"
Without the ability to measure, you cannot control your organization.
Obtaining quantitative data is absolutely essential in the pursuit of becoming, and then staying, world class.
There is no real debate over the importance of measurements.
We know that in order to operate effectively, we must be able to measure.

24. What should be measured in the benchmarking process?
How fast
How good
How much vs Where
When
How long
Size, shape, form, and fit

25. Use ratio measurements
To encourage free exchange of information between organizations, it is often necessary to use ratio measurements whenever applicable.
By using ratios instead of real values, you can exchange information with other organizations without having to disclose production or absolute values.

26. Getting cooperation
In competitive benchmarking, your organization probably will not get the cooperation that is needed from its competitors.
In these cases, you need to collect the data yourself using techniques like reverse engineering, competitive shopping, and competitive performance analysis.
This information is extremely valuable because it is directly compatible with and comparable to your item's data.
Often in competitive benchmarking the organization can make use of third party test laboratories (such as Consumer reports) to obtain performance comparisons between the item under study and the competitor's item.

27. 4b. Providing the "HOW"
Another real advantage of the benchmarking process is that it provides insights into how others have become the best.
This aspect focuses on discovering how world-class organizations developed their processes and products to ensure superior performance.

28. The specifics you might analyze are:
Knowledge
Ways
Processes
Methods
Can apply this knowledge to your benchmark item, adapting and/or improving it to meet the unique requirements of the customers, employees, and products that make up your organization's personality.

29. 5. Camp has defined four distinct types of benchmarking:
Internal
Competitive
Functional
Generic

30. Internal benchmarking
One of the easiest benchmarking investigations is to compare operations among functions within your own organization.
This type of investigation is applicable to multidivisional or international firms.
Data should be readily available and reportable on a consistent basis.

31. Competitive benchmarking
Direct product or service competitors are the most obvious to benchmark.
Although this information may be difficult to obtain, its value is high

32. Functional benchmarking
Functional benchmarking investigates leaders in dissimilar industries.
The relevance of comparison is maintained by defining the performance characteristics that must be similar to your own functions.
It is not necessary to limit comparison to direct competitors.
In fact, a narrow focus may risk missing potential breakthroughs.

33. Generic benchmarking
Generic benchmarking is the purest form of benchmarking, in that it may uncover methods that are not implemented in the investigator’s own industry.
It extends functional benchmarking by removing the constraints imposed by limiting the investigation to practices with similar characteristics.
It holds the potential for revealing the “best of the best”.
It requires broad conceptualization.
Although it is the most difficult type of benchmarking to use, it probably provides the highest potential payoff.

34. Other types of benchmarking
Noncompetitive
To benchmark the process that we want to improve including
a related process with a firm you do not directly compete with
a related process in a different industry
an unrelated process in a different industry
World class
The most ambitious.
It involves looking toward the recognized leader for the process being benchmarked.
An organization that does it better than any one.

35. 6. Approaches to benchmarking
Strategic Approaches Benchmarking
Benchmark to identify weaknesses and strengths within a specific area or functional unit
Organizational Approaches Benchmarking
Benchmark to support and direct the business plan.
If improved, that will impact the organization’s competitive position.

36. What benchmarking can do:
Here are some of the benefits of benchmarking:
Increases the desire to change.
Focuses on meeting end-user expectations.
Improves the benchmark item and key financial indicators.
Focuses on the use of best worldwide practices.

37. 7. The benefits of benchmarking:
Provides-a way to improve customer satisfaction.
Helps eliminate the not-invented-here syndrome.
Includes the use or proven approaches, methods, processes and technologies.
Improves employee morale and pride.
Improve relationships and understanding between benchmarking partners.
Identifies your competitive position, strengths and weaknesses.

38. Increases the effectiveness, efficiency and adaptability of your processes.
Transforms complacency into an urgent desire to improve.
Defines and incorporates best applicable processes and management practices.
Helps set attainable but aggressive targets.
Provides breakthrough types of improvement and prioritizes improvement activities.
Concentrates on the major contributors to the success of the organization.

39. Allows you to project future trends in your industry.
Sets new standards of performance.
Provides a faster, lower-risk approach to meeting aggressive targets.
Provides your organization with a competitive advantage.
Creates culture of continuous improvement.
Reduces the cost of the improvement process.
Develops a professional interface with other organizations.

40. 8. The seven steps to benchmarking

41. 9. Bench marking's critical success factors
The following is a list of critical success factors that must be addressed if an organization is to have a productive benchmarking process:
Top management must actively lead and support the benchmarking process.
Benchmarking must be defined correctly. It is not just comparative analysis.
Resources must be set aside for benchmarking.

42. Projects need to be prioritized and competitive areas addressed first.
The organization must have a comprehensive understanding of how its item functions and performs before it approaches benchmarking partners.
The process must be focused on implementing the future-state solution.
There must be a commitment to a continuous, ongoing benchmarking effort.
All managers and key support personnel need to understand the benchmarking process.

43. Results must be measured in away that evaluates the benchmarking effort's impact on the bottom line.
Benchmarking projects must apply Organizational Change Management concepts to the target areas from the beginning of a project and continually apply them after the future-state solution is implemented.
Benchmarking item teams must develop a specific and realistic action plan
Management must select Benchmarking Item Team (BIT) members who can implement the results of the benchmarking study.

44. Management and BIT members should be measured on how they will use the benchmarking process.
Critical business processes must be identified and improved.
Creativity, innovativeness and new ideas must be required of all employees. All efforts must be encouraged. Even noble failures should be rewarded.
The organization must be willing to share information with internal and external benchmarking partners.

45. 10. Bench marking’s rules of the road
Designing the organization's benchmarking process and implementation strategy to ensure that it will adhere to these rules will save the organization a great deal of time and trouble.
First, get top management's commitment to the benchmarking process.
Design your benchmarking process before you start to benchmark.
Start with a few critical items.
Define a very specific code of ethics and be sure that everyone engaged in the benchmarking process is trained on its content & intent.

46. Train all the employees who will be actively engaged in the benchmarking process about the benchmarking methodology and the appropriate supporting tools.
Characterize your benchmark item first.
Never ask a benchmarking partner for information that you would not share with. Be very careful not to obtain confidential information from your benchmarking partner, even if you would be willing to share that information with the partner.
Tell your benchmarking partner up front how the data will be used.
Combine inputs from all your benchmarking partners to define a number of potential future-state solutions. Then select the best-value solution for implementation.

47. Be satisfied not to be the best
Be satisfied not to be the best. Stop when additional cost does not improve your competitive position.
Start managing the benchmark item's change process the first week that the benchmarking item team is formed.
Do not try to collect all the data that is out there. If you do try, you will never get beyond the data collection stage.
Don't copy; create. Analyze what the benchmarking item team has collected so that the data can be transformed into information. Then be creative with the use of this information to design the future-state solution.
No organization is the best at everything it does. Find the right benchmarking partner for each item that is benchmarked.

48. Keep focused on implementation of the future-state solution
Keep focused on implementation of the future-state solution. Remember, the very best plan is useless if it does not get implemented. Don't analyze the bench- marking process to death.
Make line managers responsible for benchmarking, and measure their performance.
Establish a reward-and-recognition system that supports the desired benchmarking behaviours.

49. 11. What benchmarking is not?
Benchmarking is an important tool in the improvement arsenal, but it is just one of more than 400 different tools that should be part of every organization's improvement toolbox.
It should not be used:
To cure all the organization's ills-many ills cannot be cured by benchmarking
As a short-term process that will be dropped in 1 or 2 years

50. Untruths
Just a Competitor Analysis. Actually looking in detail at specific processes which may or may not be at competitors.
Copying. Usually a case of looking and improving, rarely are the circumstances such that you want to copy anyway.
Just numbers. The way things are done is often the key. Understanding the process is a discipline, as is having the right measures.
Only manufacturing. Applies to all sectors and equally to administration, sales, finance etc.
Competitors won't share. Don't expect them to share everything. That still leaves lots that could be reviewed and help the industry as a whole to grow.

51. Truths
Senior Management Support. Based on commitment, understanding and participation.
Understand own Process. A prerequisite to finding out more from others.
Team process. Involve the people concerned, who really know the current work and gain their enthusiasm in making improvements.
Planning. The approach needs organising, championing and monitoring with goals etc.
Part of strategy. Requires thinking about critical success factors and could have a major impact on achieving business strategy.

52. Benchmarking is.. To know your position / operation
To know the industry leaders / competitors
To incorporate the best
To gain superiority.

53. 12. NPC BENCHMARKING MODEL
There are different models of the benchmarking process, which vary in complexity from four steps to thirty steps.
No matter what terms they use, close scrutiny reveals that they all revolve around four basic stages or phases: Planning, Data Collection, Data Analysis and Action.
A vigorous process ‘model’ which supports successful benchmarking study is one which based on the Deming cycle of Plan-Do-Check-Action.

54. This model was developed by National Productivity Corporation (NPC), Malaysia in 1998.
The NPC Benchmarking Model is a synthesis of various models and consistent with various definitions on benchmarking.
It incorporates many steps, that have been found to characterize successful benchmarking programs in leading organizations.
As such, the model follows the PDCA cycle.
The desired end result of benchmarking is higher productivity and better service quality level.
Benchmarking is a systematic and continuous process of searching, learning, adapting and implementing the best practices from within your organisation or from other organisations towards attaining superior performance.

55. The NPC Benchmarking Model

56. The model comprises 14 steps
The model comprises 14 steps arranged in three phases.
Phase 1 emphasizes on the selection of performance indicators, data processing, benchmark comparison and sharing of strengths.
Phase 2 focuses on the performance analyses, identifying best practices and sharing of knowledge and experiences.
Phase 3 is the adaptation, implementation and standardization of best practices into one's organization for continuous improvement.
The first 2 phases are for planning, data collection & analysis
The 3rd phase is for action or implementing the best practices identified.
In the model, constant monitoring and feedback take place throughout the benchmarking process. The final phase also embraced reviewing the benchmarking project.

57. Phase 1
The plan phase focuses on the various up-front decisions such as the selection of functions/process to benchmark and the type of benchmarking study on which to benchmark.
Participating organisations delve in a self-study to characterise the selected processes using matrices and documenting their business practices.
The share-strength session is also held to enable participating organisations to learn, comparatively speaking, in which particular areas they can improve and also to identify those partners who have already grappled with, and overcome similar problems and are willing to share their ideas.

58. Phase 2
Phase two involves training the benchmarking teams in each of the organizations to equip them with the necessary skills and knowledge of benchmarking.
The benchmarking teams are not only responsible for investigating improvement opportunities but also organize site visits to the best performers in the particular process they have selected.
The teams are required to report their findings pertaining to their investigation whether negative or positive gaps exist between the benchmarking company and benchmarking partner(s).
They then proceed to recommend actions in order to close negative gaps or maintain positive gaps.

59. Phase 3
In this phase, NPC facilitates organizations' adaptation and implementation of the best-practice findings arising from the benchmarking project.
The key skill in this phase is change management.
The improvement teams will be trained to ensure constant monitoring and measurement of results to determine whether the process is improving.
Regular review of contingency plans and deadlines along with documentation of progress and standardization are essential to maintain momentum and provide impetus for upcoming benchmarking study.

60. Basis for Using NPC Model
This model provides an adequate framework for successful planning and execution for any benchmarking exercise.
It enables companies to see where they are going and how they are going to get there.
It also provides a common process in a language understandable to all.
Since the model provides the basic framework of action, all types of variations in approaches are possible within the model framework, enabling benchmarking process to be tailored to fit specific requirements of the industries.

61. Example of NPC Benchmarking Process
1st Meeting
Agree on Benchmarking Topic
2nd Meeting
Agree on Scope; Measures and Definitions
3rd Meeting
Data Collection: Survey
4th Meeting
Share Strengths
5th Meeting
Site Visit Preparation
6th Meeting
Data Collection: Site Visit 1
7th Meeting
Recommend Improvement
5th Meeting®
6th Meeting®
Data Collection: Site Visit 2
7th Meeting®
8th Meeting
Share Findings
® = Repeat

62. About NPC
The National Productivity Corporation (NPC) formerly known as the National Productivity Centre, was established in 1962 as a joint project between the United Nations Special Fund and the Federal Government, with the International Labour Organisation acting as its executing agency.
NPC worked closely with other institutions and the Trade and Service Associations such as Federation of Malaysian Manufacturers (FMM), Malaysian Retailers Association (MRA), Pusat Tenaga Malaysia (PTM), Malaysian Employers Federation (MEF), Asian Productivity Organization (APO), and other relevant agencies as the intermediaries to promote benchmarking to the potential companies.
NPC set up a Benchmarking On-line Networking Database (BOND) to assist organizations in implementing benchmarking and facilitate companies to search for benchmarks and best practices locally and world-wide.

63. BOND is a database of best practices and performance measurements, which will guide you through the benchmarking techniques, step-by-step processes, defining the terms and providing examples and case studies whenever necessary.
NPC's best practices online systems comprises the interactive e-Benchmark system, BP Net and HR Suite.
Your company can register as a member of the community of practices (CoP) and gain access to the e-Benchmark system for data collection to obtain the real-time competitive scores and ranking.
You can interact actively with other members in your CoP using the Best Practices Net (BP Net).
You can participate in NPC benchmarking projects, best practices forums, seminars and workshops.

64. 13. Benchmarking through Community of practices (CoP)
Creating a Community of Practice (CoP) is an essential step before initiating on any benchmarking project.
CoP is a network of individuals / organizations (public or private sector) within similar or dissimilar industries who share some common areas of interest, voluntarily group together to initiate some form of benchmarking activities, where NPC serves as the facilitator.
The main purpose of setting up CoP is that members would be able to share benchmarks and best practices in common areas of interest using the e-Benchmark system.
Common Interest Group acts as a platform in sharing information on performance of business results (financial or non-financial) among its members.

65. List of NPC CoP Private Sector
Electronic Manufacturing Benchmarking Council (EMSBC)
Best Practices in Human Resource (BPHR)
Human Resource Scorecard (HRS)
Hotel Industry
Malaysian Oleo-chemical Manufacturers Group (MOMG)
Energy-use Efficiency
Small and Medium Enterprise (SMEs) APO BPN - Local Companies
World Association For Industrial and Technological Research Organisation (WAITRO)
Private Hospital
Power Producer
Public Sector
Counter Service
Selangor Local Authority
Educational Excellence
Service Delivery

66. The e-benchmark system
The e-Benchmark system provided by NPC is to speed­up the data collection and computation of benchmarks.
The interactive e-benchmark system involves 6 simple steps which allows industries to key-in data, compute indicators, rank performance and benchmark comparisons, all within a submission.
Confidentiality of data is assured using a password and coding of companies.
A web-based tool which facilitates benchmarking communities to be more effective and efficient in handling data and information.
An on-line interactive database that offers members greater convenience and speed - available at all hours; members can just participate through internet access
Members able to enter data, obtain real-time feedback report which enables them to view comparative data of where they stand/rank

67. The e-benchmark System

68. The e-Benchmark system generates two type of reports: Competitive Scores and Ranking Report (graph/table)
The competitive scores report presents in terms of minimum, medium and maximum of the community's performance against the organization's own performance, while the ranking report highlighted the organization's position against CoP members.
NPC won the 2004 United Nations’ Public Service Award for “Innovation in the Public Service,” in developing the e-Benchmark System that had contributed significantly to Benchmarking and other Productivity and Quality enhancement.

69. The CoP Process
A seminar to share the e-Benchmark findings will be organized for more in-depth discussion.
The exemplary performers or best practice organizations will share their strengths on how they have achieved the benchmark performance.
All participating members could exchange experiences and share their strengths and opportunities in this seminar.
To learn more about the best practices, the CoP would visit the benchmark organizations.
The face-to-face interview provides members the chance to get acquainted with the atmosphere, environment and culture in which the organization is operating.

70. The BP Net
The next stage of benchmarking for best practices project is to share the best practices implemented by the "best-in-class" organization.
NPC also issued password to each of the member for them to access into BP Net that allows the capture, dissemination, sharing of knowledge and best practices information that provides a culture of continuous learning, innovation and improvement.
Best Practices Net (BP Net) is a platform that enables CoP members to communicate through "discussion forum".
The members also could use other e-facilities in BP Net such as news publishing mechanism, event calendar, notification mechanisms such as online calendar, web messaging system, online qualitative survey & questionnaire.

71. The HR Suite
HR Suite is an NPC's window that addresses the Best Practices of Human Resource Management and Development as well as NPC's Productivity Thrust on Quality Workforce.
It comprises 8 web channels: HRCP, BP-HR Taskforce, BEST, HR Exchange, HR Dashboard, HRPQ (Human Resource - Productivity and Quality), HR Benchmarking and Productivity-Linked Wage System (PLWS).

72. The CoP Process
Benchmarking process is only complete when members take learning back to their organization.
They need to plan to adapt Best Practices from observations learnt during the site visits and experiences shared during the sharing of best practices findings.
The proposed improvements recommended should be implemented, for continuous improvement ­the very essence of benchmarking.
It is important to establish detailed action plans and accountability for identified improvements.

73. References
Robert C. Camp (1989). Benchmarking- The Search for industry Best Practice That Lead to Superior Performance. Milwaukee: Quality Press.
Harrington H. J. & Harrington J. S. (1995). High Performance Benchmarking: 20 Steps to Success. New York: McGraw-Hill.
NPC Homepage (

74. The End
Thank you