Contents | Quality Encyclopedia | Discussion Blogs

Part One of a three-part series

The following is an excerpt from Chapter 5 of The Handbook for Quality Management by Thomas Pyzdek, © Quality Publishing.
The Handbook for Quality Management may be ordered from the Quality Publishing Order Form.

Benchmarking

Benchmarking is a topic of general interest in quality management. Thus, our discussion here goes beyond the use of benchmarking in project management alone.

Benchmarking is a popular method for developing requirements and setting goals. In more conventional terms, benchmarking can be defined as measuring your performance against that of best-in-class companies, determining how the best-in-class achieve those performance levels, and using the information as the basis for your own company’s targets, strategies, and implementation. Benchmarking involves research into the best practices at the industry, firm, or process level. Benchmarking goes beyond a determination of the "industry standard." It breaks the firm’s activities down to process operations and looks for the best-in-class for a particular operation. For example, Xerox corporation studied the retailer LL Bean to help them improve their parts distribution process.

Benchmarking goes beyond the mere setting of goals. It focuses on practices that produce superior performance. Benchmarking involves setting up partnerships that allow both parties to learn from one another. Competitors can also engage in benchmarking, providing they avoid proprietary issues.

Benchmarking projects are like any other major project. Benchmarking must have a structured methodology to ensure successful completion of thorough and accurate investigations. However, it must be flexible to incorporate new and innovative ways of assembling difficult-to-obtain information. It is a discovery process and a learning experience. It forces the organization to take an external view, to look beyond itself.

The Benchmarking Process

Camp (1989) lists the following steps for the benchmarking process:

1. Planning

   1.1. Identify what is to be benchmarked

   1.2. Identify comparative companies

   1.3. Determine data collection method and collect data

2. Analysis

   2.1. Determine current performance "gap"

   2.2. Project future performance levels

3. Integration

3.1. Communicate benchmark findings and gain acceptance

3.2. Establish functional goals

4. Action

   4.1. Develop action plans

   4.2. Implement specific actions and monitor progress

   4.3. Recalibrate benchmarks

5. Maturity

   5.1. Leadership position attained

   5.2. Practices fully integrated into process

The first step in benchmarking is determining what to benchmark. To focus the benchmarking initiative on critical issues, begin by identifying the process outputs most important to the customers of that process (i. e., the key quality characteristics). This step applies to every organizational function, since each one has outputs and customers. The QFD / customer needs assessment is a natural precursor to benchmarking activities.

The Benefits of Benchmarking

The benefits of competitive benchmarking include:

• Creating a culture that values continuous improvement to achieve excellence
• Enhancing creativity by devaluing the not-invented-here syndrome
• Increasing sensitivity to changes in the external environment
• Shifting the corporate mind-set from relative complacency to a strong sense of urgency for ongoing improvement
• Focusing resources through performance targets set with employee input
• Prioritizing the areas that need improvement
• Sharing the best practices between benchmarking partners

Some Dangers of Benchmarking

Benchmarking is based on learning from others, rather than developing new and improved approaches. Since the process being studied is there for all to see, a firm will find that benchmarking cannot give them a sustained competitive advantage. Although helpful, benchmarking should never be the primary strategy for improvement.

Competitive analysis is an approach to goal setting used by many firms. This approach is essentially benchmarking confined to one’s own industry. Although common, competitive analysis virtually guarantees second-rate quality because the firm will always be following their competition. If the entire industry employs the approach it will lead to stagnation for the entire industry, setting them up for eventual replacement by outside innovators.