Problems in benchmarking and solution of problems?

Answer 1

Performance Measures

One of benchmarking's cardinal questions is that of what to measure. That depends on the nature of the business. The point is that you cannot chase 50 benchmarks at the same time. One macro benchmark is required which then might be broken down into a series of supporting micro measures.

Although it is fine to circulate such a measure, the most worthwhile aspect of the benchmarking process can be the opportunity for people in an organisation to see at first hand how other organisations go about their business. It is the process itself which is valuable; the voyage that is more educational than the reaching of the destination. Nevertheless, measurable performance falls into the three broad areas: • time;

• cost; and

• quality.

Time measures should incorporate the process from start to finish. For example, from when a customer places an order to the time of receipt of goods and payment, thereby accounting for total lead time, product development time and productive time.

Cost measures are the traditional basis of comparison between firms and, because of this, we are often most comfortable with these measures. Two which can be useful in benchmarking are total process cost per unit of output and return on assets.

Quality measures should capture the errors, defects and waste attributable to processes. Some measures which should be used in achieving this include process variability, defects, process yields, customer perceived quality, cost of quality and quality improvement efforts.

Caveats

Benchmarking is not a panacea for all business ills. It is a part of the broader process of continuous improvement; it is a catalyst for major change.

As with any force for change, however positive, there are aspects of benchmarking which should be treated with respect. Such aspects include recognition that: • not all practices identified in a competitor may be worthy of emulation;

• benchmarking can enable you to match a competitor's performance, but might not identify practices for beating it;

• benchmarks must not stagnate but must evolve;

• benchmarks give no indication of future capabilities; and

• benchmarking should not focus solely on direct competitors. Similarly, as always when seeking to improve through change, care is needed to avoid:

• the "Yes, but ..." reaction that suggests the performance gap identified is not valid for this or that imaginary reason;

• the "we are different" syndrome which asserts that a particular international practice is not applicable locally;

• a mindset which sees copying as being of less value than inventing or the quantum leap of pure innovation;

• be careful not to focus on wrong or too many measures; and finally

• remember, it is the process of analysis and action which is of value - not the development of a metric.