BENECHMARKING -DEFINITION

“The continuous process of measuring products, services, and practices against the company’s toughest competitors or those renowned as industry leaders

“Benchmarking is the practice of being humble enough to admit that someone else is better at something and wise enough to try and learn how to match and even surpass them at it.” - APQC, 1998

BENCHMARKING THOUGHTS

BENCHMARKINGBENCHMARKING In sharp contrast to the

conventional approach of setting the future goals extrapolated from the internal practices and past trends.

Since external environment and market conditions change rapidly; goal setting which is internally focused can’t be true reflection of customer’s expectations.

BENCHMARKINGBENCHMARKING

Customers’ expectations are highly liquid and are driven by standards set by best performer.

Any product or service just below these standards may not catch the eyes of customer.

Why use BenchmarkingWhy use Benchmarking

Survival lies in emulating best and not in lagging behind

Bench marking is time and cost efficient because it involves imitation and adaptation rather than pure invention. Prevents the “Re-inventing the wheel”.

Quantum-leaps in performance

Why use BenchmarkingWhy use Benchmarking

An effective ‘wake-up call’ and helps to make a strong case for change

Practical ways in which step changes in performance can be achieved by learning from others who have already undertaken comparable changes

The impetus for seeking new ways of doing things and promotes a culture that is receptive to fresh approaches and ideas

Opportunities for staff to learn new skills and be involved in the transformation process from the outset.

POTENTIAL OF BENCHMARKING IN PAKISTANPOTENTIAL OF BENCHMARKING IN PAKISTAN

Local industry is not yet well developed and is sprouting its wings.

Cultural growth and professionalism is inchoate.

The leading enterprises are foreign based whether pharmaceuticals, automobiles or other FMCGs.

These transnational companies have nurtured a professional culture.

POTENTIAL OF BENCHMARKING IN PAKISTANPOTENTIAL OF BENCHMARKING IN PAKISTAN

The professional culture has paid TNCs in Pakistan through huge revenues.

MNCS have small market share volume wise and high share price wise.

National companies share is greater volume wise and fewer revenues wise.

POTENTIAL OF BENCHMARKING IN PAKISTANPOTENTIAL OF BENCHMARKING IN PAKISTAN

A list of top ten pharmaceutical companies in Pakistan is filled with the MNCs

Same situation exists in the beverages, automobile, electronics and FMCGs.

POTENTIAL OF BENCHMARKING IN PAKISTANPOTENTIAL OF BENCHMARKING IN PAKISTAN

Since TNCs are leading in the competition, they can be benchmarked by the striving national companies.

Every aspect of the business where TNCs outperform their local competitors can be benchmarked.

POTENTIAL OF BENCHMARKING IN PAKISTANPOTENTIAL OF BENCHMARKING IN PAKISTAN

These aspects include

Organizational cultureMarketing strategiesOperational activitiesFinancial aspectsHuman resource Or any other aspect

Types of BenchmarkingTypes of Benchmarking

Internal benchmarking

External benchmarking

Functional benchmarking:

Internal benchmarkingInternal benchmarking

sharing opinions between departments within the same organisation

ADVANTAGES:

Easier to implement Easier to access data

DISADVANTAGES:

External ideas blocked

External BenchmarkingExternal Benchmarking

– Comparison with external organisations to discover new ideas, methods, products and services.

– The gap between internal and external practices displays the way where to change and if there is any need to change.

Advantages Helps to measure one’s

own performance Helps to search for

best practices

Disadvantages Takes time Requires support Legal/ethical isssues Industrial espionage

Functional Benchmarking:Functional Benchmarking:

Comparative research to seek world-class excellence by comparing business performance not only against competitors but also against the best businesses operating in different industry

Advantages:

Discovering innovative practices

Disadvantage:

Not suitable for every organisation

Other Types of BenchmarkingOther Types of Benchmarking

Product Benchmarking Process Benchmarking Strategic Benchmarking

How companies compete, identify the winning strategies that have enable high-performing companies to be successful in their marketplaces.

Parameter Benchmarking

Gap Analysis (Spider chart)Gap Analysis (Spider chart)

Current performance of the host Current performance of the partner

Current performance of the host for variable ‘K’.

Best of the best (current performance of the partner for variable ‘A’.

Total customer satisfaction

METHODOLOGY OF BENCHMARKINGMETHODOLOGY OF BENCHMARKING

AT&T Vs

XEROX

– Clearly defined purpose– Continual analysis &

reassessment– BM methodology must be

appropriate– Significance of results must be

clear– Conclusions must be justified by

the data– Never compromise integrity for

the sake of findings

BENCHMARKING ESSENTIALS

BENCHMARKING ESSENTIALSBENCHMARKING ESSENTIALS

Investigation must be systematic A high code of ethics is essential Successful benchmarking requires a

planned approach Requires senior management

commitment Must establish & enforce milestones Must report findings to senior

mangment

Internal training for company personnel

Access to a benchmarking database

Professional BM analysts to support studies

The process must be institutionalized!

BENCHMARKING ESSENTIALS

1. Fear of being seen as “copying”2. Fear of losing competitive advantage

by sharing information3. Arrogance – “we are the best, why

benchmark?”4. Benchmarking trap – benchmark that

which is convenient, but may not be important.

Adapted from Watson 1992

BARRIERS TO BENCHMARKING

5. Impatience – “A quintessential trait”6. Excuses are too easy:

– We are too small– We are too busy– We are too different– Nobody else does what we do– We do it better than anyone else

Adapted from Watson 1992

BARRIERS TO BENCHMARKING

1. Key is to “Adapt not adopt” – Deming

2. Benchmarking does not come as a natural process for many – competitiveness does, but not benchmarking, because benchmarking requires a team approach.

BENCHMARKING OBSERVATIONS

Legal & Ethical GuidelinesLegal & Ethical Guidelines

Keep it legal; Be willing to give what you get; Respect confidentiality; Keep information internal; Use benchmarking contacts;

EXAMPLRY SPIDER CHART

FOR BENCHMARKING