Small to Medium Enterprise - Business Performance Bench Mark
WHAT IS A BENCH MARK?
Benchmarking is a powerful technique that is basically the practice of learning through comparing. Although experts break benchmarking into several types, there exist two main types of benchmarking
Performance/competitive benchmarking; this involves comparing the performance levels of organisations for a specific process. This information can then be used for identifying opportunities for improvement and/or setting performance targets. Performance levels of other organisations are normally called benchmarks and the ideal benchmark is one that originates from an organisation recognised as being a leader in the related area. Benchmarks are also often used in the form of indexes such as the American and European Customer Satisfaction Indexes
Process benchmarking; this is where organisations search for and study organisations that are high performers in particular areas of interest. The processes themselves of these organisations are studied rather than just the associated performance levels, normally through some mutually beneficial agreement that follows the benchmarking code of conduct.
Knowledge gained through the study is taken back to the organisation and where feasible and appropriate, these high performing or best practices are adapted and incorporated into the organisation's own processes. Therefore process benchmarking involves the whole process of identifying, capturing, analysing, and implementing best practices.
Who uses Benchmarking?
In the West it is generally believed that nearly all large and highly successful organisations use process benchmarking as a tool to continually learn and improve. The resources needed to carry out repeated process benchmarking projects properly and in a way that maximises the learning to be gained from the experiences can be considerable, hence the focus upon large organisations in the earlier comment. A key reason for the development of the BPIR was to offer help to organisations who may not have the necessary resources to undertake process benchmarking.
Therefore the BPIR website has been designed to assist in every step of a rigorous benchmarking process (again, you can read more about this in the article mentioned above). On the other hand, comparative or competitor benchmarking is not affected to the same degree by resources, and is used by organisations of all sizes, the most basic form of this practice is simply knowing your main competitors product price, something that is a prerequisite to staying in business
Actual evidence of benchmarking use in the west is provided by many researchers. Among these it is quoted that UK company involvement in benchmarking is 60%, 78% and 85% (Zairi and Ahmed, 1999, Coopers and Lybrand, 1995 and the CBI, 1997 respectively) and a European study in 1994 suggested that 88% of companies were involved in benchmarking activities (Voss et. al., 1997).
In the US a similar level of involvement was recorded by Bain & Company's 1999 Northern American management tools survey with 76% of organisations indicating that they used benchmarking (Bennett, 2000).
Evidence from a recent survey (TBE, 2001) suggests that most users of benchmarking will be involved in comparisons of performance metrics rather than the more rigorous style of process benchmarking. Even when considering this, these figures above provide a clear indication of the popularity of benchmarking in industry today.
What are the common challenges associated with the benchmarking approach?
There are several main issues that both inhibit organisations actively involved in benchmarking and prevent others from attempting active involvement, the BPIR has been developed to provide help in this whole area. In a survey of 559 UK respondent organisations (Hinton et. al., 2000) findings indicated that among some of those involved in benchmarking there were difficulties encountered during the process. These difficulties included
Finding suitable partners,
Difficulties in comparing data (50% of involved organisations found this),
Resource constraints (time, finance and expertise), and staff resistance.
The main reasons given by respondents for not being involved in benchmarking at all, were:
resource constraints 25%
data comparability 29%
too small to gain 15%
not appropriate 26%
How can the BPIR help?
Of these inhibitors the BPIR can assist in the areas of finding suitable partners, data comparability, resource constraints, and to some extent the perception of being too small to gain from the process.
This is accomplished by providing databases of identified successful organisations and case studies that can aid in identifying suitable partners and also by the range of performance measures that can aid in collecting comparable data.
As information on the website represents the views and/or experiences of a diverse range of organisations of all sizes, and from many different industry sectors and geographical locations, it is intended that all users of the website will find relevant information
What is the track record of benchmarking use?
Because benchmarking is so closely linked to Business Excellence, many of the benefits attributed to one can also be attributed to the other. For organisations to reach performance levels judged as "world-class" the various business excellence models indicate clearly, through their scoring systems, the importance of benchmarks and the process of benchmarking. Czarnecki (1998) through considering the Baldrige scoring table concluded that over half the points available were related to benchmarking activities
There are many case studies focusing on the success gained through benchmarking alone in organisations. The best known of these are perhaps the experiences at Xerox and Chrysler.
In the late 70's and early 80's where, faced with ruin due to more efficient Japanese competitors, benchmarking turned the giant Xerox organisation around and put it back at the top of the market. At Chrysler Corporation the benchmarking of Japanese new product development techniques prior to the development of the Viper sports car is credited with saving three billion dollars from development costs and one year of development time (Khade & Metlen, 1996).
Organising and Managing Benchmarking Final Report, a study by APQC's International Benchmarking Clearinghouse (1995) of Fortune 500 companies, found some compelling figures relating to first year payback from benchmarking projects.
Within organisations of 'average' benchmarking experience an average of $76 million payback was reported by more than 30 of these companies for their most successful benchmarking project, and from 'more experienced' organisations this figure was a staggering $189.4 million.
Even among developing organisations this study found average first year payback levels from the most successful benchmarking project at $370,000.
BPIR.com - Other links baldrigeplus.com
Small Enterprise Business Models
WHAT IS A BUSINESS MODEL?
Organizations today operate in an environment of increased competitiveness and change. Successful organizations are those that are effective at change, either through creating new markets or meeting new goals for existing products. Yet many companies are ineffective at change and hampered by poor control of their product development operations.
Many companies are unable to accurately estimate, control and improve specific product or contract profit margins, product ship dates, or product quality. Companies know that they need to improve, but with inadequate data they often find themselves unable to prioritize problems, leading to excessive improvement initiatives performed in an unfocused manner.
Companies are left either spending very little money on improvement because they're unsure how to best allocate the money, or are spending a lot of money very ineffectively on numerous improvement efforts going in 20 different directions.
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