Benchmarking: BITS Pilani

Benchmarking
BITS Pilani
Pilani Campus
Introduction
• Benchmarking is a systematic method by which
organizations can measure themselves against the
best industry practice.
• Derived from the word ‘bench + mark’ ,a mark cut
into a stone by land surveyors to secure a "bench" to
mount measuring equipment.
• It does not mean copying or stealing someone’s
superiority, but more likely adapting the best
practices into one’s own circumstances in the way
most valuable for the company and its customers.
BITS Pilani, Pilani Campus

Introduction
• When the lessons learnt from a benchmarking
exercise are applied appropriately, they facilitate
improved performance in critical functions within an
organization or in key areas of the business
environment.
• In recent years, organizations such as government
agencies, hospitals and universities have also
discovered the value of benchmarking and are
applying it to improve their processes and systems
apart from traditional usage in manufacturing sector.

Introduction
• When the lessons learnt from a benchmarking
exercise are applied appropriately, they facilitate
improved performance in critical functions within an
organization or in key areas of the business
environment.
• In recent years, organizations such as government
agencies, hospitals and universities have also
discovered the value of benchmarking and are
applying it to improve their processes and systems
apart from traditional usage in manufacturing sector.

Introduction
What is Benchmarking and What is Not?
• It is not a mechanism for determining resource
reductions, but redeployment of resources to the most
effective way of supporting customer requirements.
• It is not a program but rather an continuous
management process.

Definition
• “Benchmarking can be defined as a management tool
that may be employed for attaining or exceeding the
performance goals by learning from the best practices
globally.” (Anand and Kodali, 2008)
• “Benchmarking is measuring performance against

that of best-in-class organizations, determining how
the best in class achieve those performance levels,
and using the information as the basis for goals,
strategies, and implementation.” (Lawrence S, 1989)

Definition
• “The search for industry best practices that lead to
superior performance.” (Camp, 1989)
• “Benchmarking is a continuous process of measuring

your current business operations and comparing them
to best-in-class operations. Application of the
knowledge gained from benchmarking study
provides a foundation for building operational plan to
meet and surpass industry-best practices.”
(Bemowski, 1991)

Definition
There are two key elements in definition:

• First, measuring performance requires some sort
of units of performance measures.
• These are called metrics, often expressed numerically.
• Second, the reason as to why performance differs
needs to be understood to benefit from the process.

Reasons to benchmark
• As a tool to achieve business and competitive objectives.
• An example of this would be achieving target market

share.
• Provides an external outlook in a competitive
environment.
• Exposes people to new ideas that are outside of the
organization.

Reasons to benchmark
• Tests internal operating performances and gives an idea

where the organization stands.
• Goal setting based on objectively obtained external
information rather than forecasting. Achieving standards
that are possible.
• Significantly reduces time and cost required. ( Why
reinvent the wheel?)

Types of Benchmarking
Based on organization chosen for benchmarking.
Internal benchmarking
• In large organizations, similar activities are performed
in different levels.
• The objective is to identify the internal performance
standards of an organization.
• Data is easy to obtain problems of confidentiality does
not arise.
Internal benchmarking
• For example, an organization may have several
departments scheduling appointments.
• The best practices for scheduling appointment can be
used as a benchmark.
• Thus all scheduling operations would be improved to
the best internal levels of operation.
Competitive or external benchmarking
• Products and processes of competitors are directly
comparable.
• Information can be difficult to obtain.
• Buying a competitors product and taking it apart is a
common practice.

• An example of external benchmarking is Xerox vs.
Canon.
• Both the companies are from the same industry.
• Another example of external benchmarking is the
practices of Exxon Chemicals.
• Its practices shows how confidential data is obtained.
• Exxon Chemicals is a subsidiary of Exxon Mobil, an
American MNC in oil and gas.
• It partners with its customers to obtain information
about its competitors.
• It observes its competitor's products in use at the
customer’s location and collects comparative data.
Industry or Functional Benchmarking
• Benchmarking against external functional best
operations of industry leaders.
• It can be done with others in the same industry,
which may have the same products or service but
are not competitors in the same market.

Industry or Functional Benchmarking
• It tends to involve comparisons between firms that
share some common technological and market
characteristics.
• For example, BSNL might benchmark its billing
process against the billing process of British
Telecom.
Generic or Process Benchmarking
• Benchmarking a process in one or several unlike
organizations.
• It focuses on excellent work processes that is not
limited to a specific industry.
• Information is easier to obtain as compared to
competitive benchmarking.
Generic or Process Benchmarking
• Motorola benchmarking delivery processes of
Dominos Pizza and Federal Express.
• In mid 1980’s, Motorola faced complaints of
delayed delivery.
• After benchmarking Motorola’s cycle time for
manufacturing reduced by 60-70%.
Relationship Benchmarking
• A comparison is made with another company with
which the company already has relationship.
• For example customer-supplier relations, joint
venture arrangements etc.
• This is a special type of benchmarking first cited
by Nandi (2000).
Based on goal chosen for benchmarking.
Performance Benchmarking
• It is a comparison of indicators related to processes
that is critical for business.
• It is also called as “Result Benchmarking”.
• FMCG’s compare with each other for metrics like
market share, retention rates, profits, costs.

Product or Customer Satisfaction
Benchmarking
• Refers to engineering or qualitative comparison of
competing products and services.
• Common in manufacturing industries through
applying reverse engineering.
• It identifies factors where improvement can be made.

Product or Customer Satisfaction
Benchmarking
• Ford Motor Company did this during the
development of their “Taurus” model of automobile.
• Compared through engineering analysis or customer
perception.
• It is an process integrating multiple departments.

Strategic Benchmarking
• A study of corporate level strategies perused by some
reputed companies.
• Incorporates long term changes that take place slowly.
• Involves benchmarking against organizations that
have won awards or recognition.
• For example, Apple for its high end quality products.
Global Benchmarking
• Involves applying and learning globally.
• It must bridge international trade issues.
• It acts as a means to cross cultural barriers and do
away with business process distinctions.
• For example General Motors implementing the
practices of Toyota.
Benchmarking Steps
Phase 1 : Planning
Phase 2 : Identifying factors for benchmarking.

Phase 3 : Benchmarking partners.
Phase 4: Gap analysis.

Phase 5: Implementation.
Phase 6 : Continuous improvement.

Phase 1 : Planning
Step 1 : Form a benchmarking team

• The team will plan, implement and monitor the benchmarking
process.
• The role and responsibility of each member should be clearly defined.
• The necessary training should be provided to team members if
required.
• The objectives and strategic goals of benchmarking should be

established.

Phase 1 : Planning
Step 2:Understand the need of benchmarking

• Organizations have a strategy to define its objectives in the
market place.
• Strategy is expressed in vision and mission statements can act
as a guide in this step.
• At the end of Phase 1, the team for benchmarking as well as the
areas to be benchmarked are decided.

Phase 2 : Identifying factors for
benchmarking
Step 3:Identify the critical success factors (CSFs)
• Identify the critical success factors (CSFs) for the areas that
are to be benchmarked.
• These are measured by key performance indicators (KPIs).
• Search can be made in the published information sources like

technical and business journals, internal database, external
database etc.

Phase 2 : Identifying factors for
benchmarking
Step 4 : Specify measurement unit and data sources for
each KPI
• The units of KPI should be identified along with its intervals.
Step 5 : Identify the data collection method
• It can be qualitative or quantitative depending upon the environment.
• At the end of Phase 2, the parameters to be identified and method of
data collection are decided.

Examples of Critical Success
Factors
An insurance firm seeking to be ‘ the easiest in the
industry to deal with’.
• CSFs – 24 hour customer service, fast payment of claims,
reduced cycle time.
Another insurance firm seeking to ‘reduce cost
through excellent investment performance’.
• CSFs – recruiting capable financial managers, expert
forecasting , track global market in real time.

Phase 3 : Benchmarking partners
Step 6 : The benchmarking partners, the best in class

organizations need to be identified
• This can be from the various types of benchmarking as discussed earlier.
Step 7 : The data collection method from the

benchmarking partner should be decided
• This should be guided by the area that are being benchmarked.
• At the end of Phase 3, the benchmarking partners are identified and also the
data collection method.

Phase 3 : Benchmarking partners-
Research while benchmarking
In-house Research :
• Examining a wide variety of internal documents and publicly
available information.
• This usually occurs when the organization is only seeking
information about performance results.
Third-party Research :
• Third-party research is usually needed for obtaining hard-
to-get information about direct competitors.

Direct Exchange :
• Information exchanged through written questionnaires, phone
surveys, teleconference or videoconferences.
• This is a very important step prior to a direct site visit.
Direct Site Visits :
• One or more face-to-face sessions between benchmarking teams
to provide interactive discussion on benchmarking information.
• Direct site visits are most effective to conduct benchmarking.

Questionnaires :
• Useful to ensure respondent anonymity and confidentiality when
data is desired from external organizations
• Can be used as a preparation for a site visit.

Focus groups :
• Panels of benchmarking partners brought together to discuss
areas of mutual interest .
• American Society of Quality Control is one such focus group.

Research sources
Library Database Internal Reviews
Internal Publications Professional Associations
Industry Publications Special Industry Reports
Functional Trade Seminars Publications
Industry Data Firms Industry Experts
University Sources Company Watches
Newspapers Advertisements
Newsletters Original Research
Customer Feedback Supplier Feedback
Telephone Surveys Inquiry Service
Networks World Wide Web

Phase 4: Gap analysis
Step 8 : Gap analysis of the selected areas
• The gap between the data collected from the benchmarking partners should be
compared with the data collected from the organization.
• Understanding the gap and its causes are critical in this step.
Step 9 : Bridging the gap
• Steps should be defined for optimum gap reduction by considering the internal and
external constraints.
• At the end of Phase 3, the gap was analyzed and steps to reduce it are recommended.

Phase 4: Gap analysis -
Determining superiority while analyzing data
• Performance should be measured quantitatively.
• Parameters like return on assets, defect rates or

customer satisfaction levels can be used.
• Another way to measure superiority is through
market analysis.
• Level of detail must be sufficient to allow
qualification gaps as inputs, processes and outputs.
Phase 4: Gap analysis -
Possible misinterpretations while analyzing data
• Measurements are synthetic or derived rather than

directly measured from external processes.
• Firstly, when a process is broken down, all of it may not
be the best in class.
• Secondly even if a single-best-in class benchmark exists,
there will be enough differences requiring for
adjustments.

Phase 5: Implementation
Step 9 : Implementation of changes :
• The changes proposed in the previous stage must be implemented. The
proposal must be sent to the management regarding the same.
Step 10 : Identify barriers and develop roadmaps :
• Barriers to implementing changes must be identified.
• A timeline should be made for implementing different functions.
• At the end of Phase 5, the implementations are applied.

Phase 5: Implementation
Implementing changes - Long term vs. short
term
• Decision regarding implementation of benchmarking

objectives are made either as short term or long term.
• Organizational and operational changes are long term
changes that will affect other processes as well.
• Usually passed by the management.
• Process practices are short term and easiest to change.
• Usually changed by the process owners.

Phase 6: Continuous improvement
Step 11 : Monitor processes:

•Process should be monitored at regular intervals for the implementation of the
changes.
Step 9 : Recognition of efforts:
•Efforts of the members who successfully implemented changes must be appreciated.
Step 9 : Extend to other areas:
•After successful implementation, benchmarking can be extended to other areas.
•At the end of Phase 6, efforts are recognized and steps are taken for continuous
improvements.

Benchmarking :Flow Diagram
Planning
Continuous Planning Identifying

improvement benchmarking
Identifying benchmarking factors factors
Finalizing benchmarking partners

Gap analysis Finalizing
Implementation benchmarking
Implementation partners
Continuous improvement
Gap analysis

The Xerox Benchmarking Process
Xerox twelve step step benchmarking process.

Phase 1 : Planning:
• Step 1 : Identify what to benchmark.
• Step 2 : Identify benchmarking partners.
• Step 3 : Determine data collection method and
collect data.
Phase 2 : Analysis:
• Step 4 : Determine current performance gap.
• Step 5 :Project future performance levels.
Phase 3 : Integration:
• Step 6 :Compute findings and gain acceptance.
• Step 7 : Establish functional goals.
Phase 4 : Action:
• Step 8 : Develop action plans.
• Step 9 :Implement specific actions and monitor
progress.
• Step 10 : Recalibrate benchmarks.

Phase 5 : Maturity:
• Step 11: Attain leadership position.

• Step 12: Fully integrate practice into process.
Xerox pioneered the concept of benchmarking.

This model of benchmarking is the most worked
upon over time.
Benchmark compliance
Policy regarding benchmarking should be communicated to

employees prior to benchmarking. Guidelines to be followed in
the following:
• Misrepresentation of identity while gathering information.
• Information should be gathered through request.
• Sensitive information should be avoided while benchmarking.
• Information should be treated as confidential.

Pitfalls and criticism of
benchmarking
• The most persistent criticism of benchmarking

comes from the idea of copying others.
• Benchmarking is not a substitute for innovation,
but a source of external information.
• It is a continuous improvement process.

Hurdles, Causes and Solutions
Hurdles / Causes Solution

Pitfalls
Dissolving the team or job rotation, resignation, Team should be selected such that they
change of members in transfers etc. will not be affected by organizational
the team. change during the period of
benchmarking.
Change of management Merger between two Benchmarking should be launched by

and hence lack of organizations, joint management itself as part of its strategy
commitment. ventures etc. to fulfil its mission, vision and
objectives .
Time taken for Time spent by team Team members should be fully devoted
benchmarking is high. members is less due to or else, a complete day in a week should
normal workload. be set aside.

Other Hurdles and solutions
Unwanted time wastage in data collection:

• Solved by Using of consultants or Experts.
Choosing a scope, that becomes unmanageable:

• Classify the scope in two categories – broad and shallow or
narrow and deep.
• Some criteria can then be used to select a process to be
benchmarked.
• The broad area must be broken into smaller segments.
Choosing the best-in-class benchmarking partner :

• The partner should be selected based on certain
criteria.
• Attributes like customer base, global presence,
focus, quality maturity etc. can be used for this
purpose.

Difficulty in Implementing the recommendations:
• Eliminated by informing them prior about the benchmarking activity
and if possible should be made to involve in the benchmarking study
itself.
• Use of benchmarking facilitators, who are trained in organizational
change management techniques.
Focusing on Metrics rather than processes:

• It is necessary to identify the practice that affects the performance
measures and also should conduct a feasibility study for its adaptation.

Thank You

Benchmarking: BITS Pilani

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Benchmarking

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

• “Benchmarking is measuring performance against

BITS Pilani, Pilani Campus

• “Benchmarking is a continuous process of measuring

BITS Pilani, Pilani Campus

There are two key elements in definition:

BITS Pilani, Pilani Campus

• As a tool to achieve business and competitive objectives.

• An example of this would be achieving target market

BITS Pilani, Pilani Campus

• Tests internal operating performances and gives an idea

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

Phase 2 : Identifying factors for benchmarking.

Phase 4: Gap analysis.

Phase 6 : Continuous improvement.

Step 1 : Form a benchmarking team

• The objectives and strategic goals of benchmarking should be

BITS Pilani, Pilani Campus

Step 2:Understand the need of benchmarking

• Strategy is expressed in vision and mission statements can act

as a guide in this step.

• At the end of Phase 1, the team for benchmarking as well as the

areas to be benchmarked are decided.

BITS Pilani, Pilani Campus

• These are measured by key performance indicators (KPIs).

• Search can be made in the published information sources like

BITS Pilani, Pilani Campus

• The units of KPI should be identified along with its intervals.

Step 5 : Identify the data collection method

• It can be qualitative or quantitative depending upon the environment.

• At the end of Phase 2, the parameters to be identified and method of

data collection are decided.

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

Step 6 : The benchmarking partners, the best in class

• This can be from the various types of benchmarking as discussed earlier.

Step 7 : The data collection method from the

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

• Direct site visits are most effective to conduct benchmarking.

BITS Pilani, Pilani Campus

• Can be used as a preparation for a site visit.

• American Society of Quality Control is one such focus group.

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

compared with the data collected from the organization.

Step 9 : Bridging the gap

BITS Pilani, Pilani Campus

• Performance should be measured quantitatively.

• Parameters like return on assets, defect rates or

• Measurements are synthetic or derived rather than

BITS Pilani, Pilani Campus

Step 9 : Implementation of changes :

• The changes proposed in the previous stage must be implemented. The