Which of the following is the process of measuring your organizational process against the best in the industry?

Benchmarking is a process of measuring the performance of a company’s products, services, or processes against those of another business considered to be the best in the industry, aka “best in class.” The point of benchmarking is to identify internal opportunities for improvement. By studying companies with superior performance, breaking down what makes such superior performance possible, and then comparing those processes to how your business operates, you can implement changes that will yield significant improvements.

That might mean tweaking a product’s features to more closely match a competitor’s offering, or changing the scope of services you offer, or installing a new customer relationship management (CRM) system to enable more personalized communications with customers.

There are two basic kinds of improvement opportunities: continuous and dramatic. Continuous improvement is incremental, involving only small adjustments to reap sizeable advances. Dramatic improvement can only come about through reengineering the whole internal work process.

Step-by-Step Benchmarking

Benchmarking is a simple, but detailed, five-step process:

• Choose a product, service, or internal department to benchmark
• Determine which best-in-class companies you should benchmark against – which organizations you’ll compare your business to
• Gather information on their internal performance, or metrics
• Compare the data from both organizations to identify gaps in your company’s performance
• Adopt the processes and policies in place within the best-in-class performers

Benchmarking will point out what changes will make the most difference, but it’s up to you to actually put them in place.

First Steps

In order to benchmark anything, you need to have quantitative data available to study. That means breaking down internal processes to calculate performance metrics. Quantify everything, because only quantifiable information can be accurately compared.

Key Benefits

In addition to helping companies become more efficient and profitable, benchmarking has other benefits, too, such as:

• Improving employee understanding of cost structures and internal processes
• Encouraging team-building and cooperation in the interests of becoming more competitive
• Enhancing familiarity with key performance metrics and opportunities for improvement company-wide

In essence, benchmarking helps employees understand how one small piece of a company’s processes or products can be the key to major success, just as one employee’s contributions can lead to a big win.

Benchmarking on ASQTV

Quality Glossary Definition: Benchmarking

Benchmarking is defined as the process of measuring products, services, and processes against those of organizations known to be leaders in one or more aspects of their operations. Benchmarking provides necessary insights to help you understand how your organization compares with similar organizations, even if they are in a different business or have a different group of customers.

Benchmarking can also help organizations identify areas, systems, or processes for improvements—either incremental (continuous) improvements or dramatic (business process re-engineering) improvements.

Incremental Quality Improvement vs Benchmarking Breakthroughs

Benchmarking has been classified into two distinct categories: technical and competitive. The House of Quality matrix and Gantt charts are often used to plot the benchmarking evaluation.

Technical Benchmarking

Technical benchmarking is performed by design staff to determine the capabilities of products or services, especially in comparison to the products or services of leading competitors. For example, on a scale of one to four, four being best, how do designers rank the properties of your organization’s products or services? If you cannot obtain hard data, the design efforts may be insufficient, and products or services may be inadequate to be competitive.

Competitive Benchmarking

Competitive benchmarking compares how well (or poorly) an organization is doing with respect to the leading competition, especially with respect to critically important attributes, functions, or values associated with the organization’s products or services. For example, on a scale of one to four, four being best, how do customers rank your organization’s products or services compared to those of the leading competition? If you cannot obtain hard data, marketing efforts may be misdirected and design efforts misguided. 

Benchmarking Procedure

Considerations

• Before an organization can achieve the full benefits of benchmarking, its own processes must be clearly understood and under control.
• Benchmarking studies require significant investments of manpower and time, so management must champion the process all the way through, including being ready and willing to make changes based on what is learned.
• Too broad a scope dooms the project to failure. A subject that is not critical to the organization’s success won’t return enough benefits to make the study worthwhile.
• Inadequate resources can also doom a benchmarking study by underestimating the effort involved or inadequate planning. The better you prepare, the more efficient your study will be.

Plan

1. Define a tightly focused subject of the benchmarking study. Choose an issue critical to the organization’s success.
2. Form a cross-functional team. During Step 1 and 2, management’s goals and support for the study must be firmly established.
3. Study your own process. Know how the work is done and measurements of the output.
4. Identify partner organizations that may have best practices.


5. Collect information directly from partner organizations. Collect both process descriptions and numeric data, using questionnaires, telephone interviews, and/or site visits.


6. Compare the collected data, both numeric and descriptive.
7. Determine gaps between your performance measurements and those of your partners.
8. Determine the differences in practices that cause the gaps.


9. Develop goals for your organization’s process.
10. Develop action plans to achieve those goals.
11. Implement and monitor plans.

Benchmarking Example

Carleton University’s department of housing began a project to improve the process by which students apply for and are assigned housing. This project had three main goals:

1. Reduce residence vacancy rates to below 1%
2. Improve student satisfaction levels
3. Make the best possible use of employee time and effort

The department chose benchmarking as the basis for the improvement project after realizing that other universities already had better processes Carleton could learn from and quickly implement without needing to re-engineer the process from scratch.

The cross-functional team started by mapping the existing residence application process to establish a baseline, focusing attention on the process used by new first-year students (left side, Figure 1).

The project team then conducted focus groups with students living in residence, asking them to describe their expectations of the assignment service process, their perceptions of the services they actually received, and any gaps between the two.

The team also reviewed websites of housing offices at 24 international universities, followed by a telephone survey of 12 of these to find out more about their systems. The team then conducted site visits to four universities seen as leaders in dealing with residence applications to learn about their current processes and discuss the relative advantages and disadvantages of each one.

The team presented its benchmarking report to management, describing the best practices seen at other universities and making specific recommendations for adapting them for Carleton (right side, Figure 1). Carleton implemented many of the recommended changes and is seeing the benefits (Figure 2).

Excerpted from "Benchmarking Goes to School," Quality Progress.

Benchmarking Studies

Benchmarking the Global State of Quality

ASQ is partnering with APQC to collect and study data on the global state of quality. The goal is to provide an initial view and regular updates to help organizations compare quality and continuous improvement advancements to each other, their regions, and their economic sectors. Learn more about the Global State of Quality.

Benchmarking Reports Available for ASQ Members

Through an agreement with APQC, ASQ offers access to a collection of benchmarking reports and metrics documents to members. Log in with your ASQ member ID and password to access benchmarking data from organizations in a variety of industries. Each benchmarking study also includes case studies on individual organizations. 

Quality Strategy Improves Business School Placements (PDF) Using competitive benchmarking and quality tools, Ramaiah Institute of Management Studies improved job placement results for its students, decreasing the number of interviews required to secure a position and increasing the mean salary offer, while also adding a new source of revenue for the organization.

Great Ormond Street Hospital for Children (PDF) Great Ormond Street Hospital for Children (GOSH) benchmarked its handoff from cardiac surgery to the intensive care unit against pit stop techniques of the Ferrari Formula One race car team. Process improvements resulted in increased patient safety and decreased error rates.

Best Practices in Process Improvement (PDF) The internet is revolutionizing process improvement projects by facilitating benchmarking, speeding up data collection and putting people in contact with colleagues.

Benchmarking: A Tool for Sharing and Cooperation (PDF) Find out how NASA and the Kennedy Space Center used benchmarking to progress from incremental to breakthrough improvement.

Benchmarking and Best Practices (PDF) Implementing benchmarking and best practices, from definitions and appropriate uses to tools and methodologies, is discussed.

Multipronged Approach: A Business Excellence Framework on Multiple Quality Methods (Quality Progress) In today’s rapidly changing IT service organizations, one of the main challenges is improving business performance while enhancing value to the customer. Using multiple quality methods, one global organization developed a sustainable business excellence culture to meet these objectives.

The Role of Quality Benchmarking Deployment to World-Class Manufacturing (PDF) The main goal of the article is to study the role of quality benchmarking deployment for achieving world-class manufacturing status.

Case studies

Quality Strategy Improves Business School Placements (PDF) A cross-functional team at Ramaiah Institute of Management Studies used quality tools to improve placement numbers, attract recruiters, enhance salaries, and earn revenue. This project was entered in the 2012 International Team Excellence Award competition and earned finalist honors.

Six Hospitals Combat Regional Emergency Department Congestion with Lean (PDF) Representatives from six urban hospitals in the Canadian province of British Columbia that partner to serve mental health and addiction patients worked together to curb emergency department congestion by deploying a single care model across all sites.

Business School Improves Learning, Research, and Placement Measures with TQM (PDF) A cross-functional team at Ramaiah Institute of Management Studies used TQM principles to improve measures of learning, faculty research, and graduate placement. This team-based project was a finalist in ASQ’s 2010 Education Team Excellence Award process and earned the "Award of Distinction."

Books