3.0 TYPES OF BENCHMARKING

Generally, there are four types of benchmarking studies that are conducted – internal, competitive, functional and process. Each produces a different output that results in different comparisons.

While internal benchmarking involves benchmarking businesses or operations from within the same organisation, competitive benchmarking applies to companies that produce similar products or services. It involves considering high level aspects such as core competencies, developing new products and services and improving capabilities for dealing with changes in the external environment. Changes resulting from this type of benchmarking may be difficult to implement and take a long time to materialise

Meanwhile, process benchmarking focuses on improving specific critical processes and operations. Benchmarking partners are sought from best practice organisations that perform similar work or deliver similar services. Process benchmarking invariably involves producing process maps to facilitate comparison and analysis. This type of benchmarking often results in short term benefits

Functional or generic benchmarking on the other hand is used when organisations look to benchmark with partners drawn from different business sectors or areas of activity to find ways of improving similar functions or work processes.It can lead to breakthroughs that will result in major improvements.

4.0 BENCHMARKING & PERFORMANCE IMPROVEMENT

Benchmarking is an organisational practice of learning through comparing, in a structured way that can cut through and across cultural, industry, size, and functional boundaries to identify usable high-performing practices and benchmarks. Benchmarking is the first step for identifying performance gaps between a business and its peers. Next, the gaps need to be analyzed to determine their underlying causes and to develop strategies and plans that address them. Subsequently, with continuous process improvement, your organization will achieve superior performance and attempt to overtake the “benchmark”.

5.0 BENEFITS OF BENCHMARKING

Benchmarking is a tool that provides goals for realistic improvement and helps you understand the changes required for improving performance. You may use benchmarking to identify and rectify problems, implement strategic change initiatives, or for continuous improvement.

Many organizations are finding that benchmarking is helping them to improve or change in the following ways:

• Improve strategic planning;
• Provide assessments of the strengths and weaknesses of the current core business processes and related critical work processes;
• Foster organizational methods and practices;
• Lead to significant cost savings, and improvements to products, services and business processes by comparing and adapting current methods and practices to those identified as “best practices”; and
• Foster and sustain an improved organizational capacity to successfully implement quality and process improvement initiatives.

6.0 CONDITIONS NECESSARY FOR BENCHMARKING

Benchmarking is more than just comparing, it is about the awareness, ambition and willingness to change, and actions should be undertaken only when an administration is open and prepared to embrace change. For benchmarking to be successful it is helpful to have the right conditions present in your administration. ‘The right conditions’ means the attitudes of people at all levels - not just at top management level but at all relevant working levels. If the attitudes are right, the benefits this process has to offer will be maximized. You need to be prepared to:

• Commit - at the highest level in your organization to improvement;
• Search for better practices - never be sure that you are the best and be prepared to look for organizations that may be better than you in carrying out certain processes or procedures;
• Compare - target precisely the process you want to benchmark and fully
• understand how your organization carries it out, identify agreed measures of performance, then share findings with your partner(s);
• Change - if someone is better than you by accepting new ideas and insights into achieving tasks; and
• Implement - close performance gaps by adopting an implementation programme for the improvements identified by the benchmarking exercise.

7.0 CRTICAL SUCCESS FACTORS (CSF) FOR BENCHMARKING

To ensure success of benchmarking activities in any organisation, certain requirements need to be fulfilled. Among the factors that will contribute to benchmarking success are:

• Senior managers support benchmarking and are committed to continuous improvements;
• The objectives are clearly defined at the outset;
• The scope of the work is appropriate in the light of the objectives, resources, time available and the experience level of those involved;
• Sufficient resources are available to complete projects within the required time scale;
• Benchmarking teams have a clear picture of their organisation’s performance before approaching others for comparisons;
• Benchmarking teams have the right skills and competencies and have access to training, advice and guidance over the course of projects;
• Stakeholders, particularly staff and their representatives, are kept informed of the reasons for benchmarking and the progress made throughout the course of projects. Where practicable, staff should be involved in undertaking benchmarking to make the most of the opportunities for learning from others; and
• The development of recommendations is an inclusive process and that proposed improvements are realistic in the context of local circumstances and other initiatives.

8.0 BARRIERS TO SUCCESSFUL BENCHMARKING

The barriers to successful benchmarking can include:

· Failure to analyse findings clearly. Benchmarking consists of different elements and procedural steps. It has to be supported by research that establishes quantitative indicators and qualitative analysis of best practice;

· Being overambitious in the scope of the benchmarking exercise;

· Refusal to dedicate the required staff and resources. It is important to ensure that the required human resources are available to complete the task;

· Inadequate information about how to adopt the agreed best practice and make it work; and

· Lack of skilled resources to make and manage recommended changes resulting in the failure to implement best practice.

9.0 BEST PRACTICES NETWORK (BPN)

In the fast changing world today, it is not the larger outbidding the smaller companies anymore, but it is the faster overtaking the slower ones. This “business war” is more on ideas, constant reinvention and innovation, rather than the spending cuts or commoditization. Innovation is viewed as a multi-dimensional strategic driver of growth, which goes beyond technological innovation, to encompass new means of doing business, distribution, marketing or design. The key is to be able to collaborate across the global innovation networks to make an idea a reality.

External collaboration is indispensable and the huge gap between the need for collaboration and the ability to do so is clearly a significant roadblock to innovation that companies need to address. And since so many ideas come from outside, companies need to focus on strengthening their collaborative capabilities at the perimeters of their organizations. Benchmarking partnering through Best Practices Network (BPN) is one of the ways they can leverage on to innovate added value and to avoid the reinventing of the wheels.

BPN is a group of people who are working in the same or similar topic areas, and who have made a commitment to the community to improve performance by adopting the Best Practices of others and to help by sharing their own Best Practices and experiences vis a vis:-

• Identify, collect, document, disseminate and replicate best practices as determined by the network;
• Sharing innovation and applying best practices; and
• Captures, shares and develops best practices across the participating companies’ sites, both within the industries in which they operate andacross similar industries, driving a culture of continuous improvement.

9.1 Objectives of Best Practices Network

BPN provides an opportunity/platform for professionals who perform similar functions for their respective organizations to come together to share "best practices," network, and address issues of common interest.

Among others, the objectives of BPN are as follows:-

• To conduct benchmarking studies of important business processes;
• To create a cooperative environment where full understanding of the performance and enablers of "best in class" business processes can be obtained and shared at reasonable cost;
• To use the efficiency of the consortium to obtain process performance data and related best practices; and
• To support the use of benchmarking to facilitate process improvement and the achievement of total quality.

9.2 Benefits of Best Practices Network

With the establishment and implementation of BPN, companies will enjoy the following benefits:

BPN will bring the industry’s best minds & experience together to provide guidance that could not be achieved by companies on their own

9.3 Proposed BPN Forums

The participating companies in the BPN share and access best practice information through the following forums:

• Focus Groups - Formed to identify, develop and implement Best Practices in specific functional areas of the businesses.
• Annual Conferences - Held for network participants to meet in an annual forum to share and discuss Best Practices, to review progress oninitiatives and to identify new areas for benchmarking and development of Best Practices.
• Newsletters - Produced on a regular basis to inform participants of recent activities and progress in Best Practice initiatives
• A website - Accessed by participating companies via the internet, providing information on the BPN.

The website provides an easy way to communicate what is happening across the BPN and within participating companies. It may includes, among others:-A library of identified and developed Best Practices;

• A submissions database for participants to register identified Best Practices;
• Announcements, events and good news stories;
• Contacts lists that make it easy to access relevant expertise across the group

and in specific disciplines or specialist areas;

• Creative Solutions Discussion groups enabling teams of specialists to share
• news, ask questions and build on each other’s experience and ideas;
• Restricted areas for focus group members to share working documents and ideas globally; and
• Copies of all forum presentations, newsletters and other Best Practices publications.

10.0 BENCHMARKING STEPS

Before embarking on a benchmarking activities, it is a vital element to have an appropriate benchmarking model. The benchmarking model can be used as a guide and framework before implementation.

There are many versions of the benchmarking model. In its simplest form, what constitutes a benchmarking activity? It can be said to comprise measurement, comparison, gap analysis, and identification of best practice, implementation of best practice, review, and continuous improvement.

10.1 NPC Benchmarking Model

The benchmarking projects of NPC’s CoPs members were carried out using the NPC Benchmarking Model described below:

This model provides an adequate framework for successful planning an d execution of any benchmarking activities. Variations in approaches are possible within the framework, enabling it to be fit specific requirements of the industries.

Phase 1 of the Model emphasises on the selection of performance indicators, data processing, benchmark comparison and sharing of strengths. Phase 2 focuses on the performance analyses, identifying best practices and sharing of knowledge and nexperiences. Phase 3 is the adaption, implementation and standardisation of best practices into one’s organisation for continuous improvement. The desired and result of benchmarking is higher productivity, lower operational costs and better service quality level.

10.2 The Vision-Driven Benchmarking Process benchmarking to be driven by the same corporate drivers that drive the organization, ensuring consistency throughout. The vision – driven benchmarking process can be applied as follows:

• Identify what is to be benchmarked, in relation to vision, mission, key performance indicators and critical success factors;
• Decide on potential benchmarking partners and gain their commitment;
• Decide who should be part of the benchmarking team;
• Benchmarking initiatives;
• Identify available internal information, generate internal/external information;
• Assess or identify best practice;
• Implement/manage changes; and
• Review, feedback, continuous improvement and monitoring.

11.0 LINKING BENCHMARKING TO STRATEGIC AND QUALITY IMPROVEMENT PLANNING

Benchmarking is not a substitute or replacement for total quality or continuous quality improvement, but it is the most powerful tool available to deliver the necessary level and flow of improvements. Equally, benchmarking cannot stand on its own. It must be linked to overall plan or strategy.

Figure 3 links strategic and total quality planning. As can be seen from the model, the whole process of strategic planning begins with a number of inputs: business strategies and plans; technology forecast; workforce analysis; external environmental scan; and known business/quality issues.

• The business strategies and plansmay be created by the organization carrying out the planning process or may have been developed as a result of strstegies and plans passed down from higher levels of management, head office, a government department and so on.
• The technology forecast is an in-depth data gathering exercise which identifies significant technological changes that may have an impact on the organization during the life of the plans being developed – usually one to three years.
• The workforce analysis identifies the key human resource issues that may have an impact on an organization’s ability to fulfill its palns. For example, will the organization be able to attract, train , develop and retain the staff who must be in place to perform the critical roles? If not, what impact will that have on the plans being develops?
• The external environmental scanattempts to identify the key environmantal, economic, political and social pressures that may have a significant bearing on the organization during the timeframe of the plans being developed.
• The known business/quality issuesare usually gleaned from the review process involving those who developed the previous plans and/or those who are conducting the current planning process.

When major issues are being identified, the vast majority of organizations, in both public and private sectors, identify key issues pertaining to improving customer satisfaction; improving productivity; lowering costs; improving internal processes, procedures or systems, and so on. Therefore, it is not suprising that more and more organizations are seeking to identify best practice through benchmarking and using total quality to change the organization’s culture.

12.0 BENCHMARKING AS LINKED TO GOALS AND OBJECTIVES

Benchmarking is built on a foundation of performance measurement. Benchmarks are established for key performance measures as a way of evaluating whether performance is up to “par,” i.e. whether it is reaching a desired standard or target. Ideally, the performance measures and benchmarks are based on the organization’s key goals and objectives so that what is being measured and benchmarked is central to what the organization is trying to accomplish

13.0 THE BENCHMARKING CODE OF CONDUCT

To contribute to efficient, effective and ethical benchmarking, individuals agree for themselves and their organization to abide by the following principles for benchmarking with other organizations. It concerns:

Principle of Legality:- Conduct yourself within legal bounds.

Principle of Exchange:- Participate by exchanging information.

Principle of Confidentiality:- :-Respect confidentiality of information.

Principle of Use:- Use of information only for intended purpose.

Principle of Contact:- Initiate contacts with designated individuals & obtain permission before providing contacts.

Principle of Preparation:- Be prepared for each benchmarking event.

Principle of Completion:- Follow through with commitments to partners.

Principle of Understanding and Action:-Treat information from others as they desire.

In benchmarking with competitors, establish specific ground rules up front, eg. “We don’t want to talk about things that will give either of us a competitive edge.”

14.1 Benchmarking Online Networking Database (BOND)

BOND is a database of best practices and performance measurements set up by NPC to help organisations in undertaking benchmarking activities. BOND also provides external on-line benchmarking resources to facilitate the search for best practices and benchmarks worldwide. BOND could be accessed through the NPC Homepage:

http://www.npc.org.my.

14.2 Community of Practices (Cos)

CoPs is a network of organizations within similar or dissimilar industries who share some common areas of interest. CoPs members are grouped together on a voluntary basis to:-

• Carry out benchmarking projects;
• Undertake continuous data collection and analysis;
• Establish performance measurements and benchmarks; and
• Conduct regular sharing of best practices for performance improvement.

CoPs members will enjoy the following benefits:

• Convenience and speed in viewing benchmarks scores anytime through the internet (upon being issued the password by NPC Malaysia);
• Able to generate real-time competitive scores, indicating the performance on critical factors that drive business success;
• Able to know competitive scores and ranking which allow CoPs members to identify gaps; and

• Able to create network, share and learn best practices

To date, there are 17 CoPs with more than 300 organizations have participated and shared their benchmarks and best practices.

14.3 e-Benchmark System

The aim of setting up CoPs is to generate knowledge on best practices within the community and to help members achieve best practice performance standard. An interactive e-Benchmark system has been developed by NPC on Malaysia in order to facilitate CoPs members to measure their Key Performance Indicators (KPIs) on-line.

E-Benchmark system is a web-based tool which enables benchmarking Community of Practices (CoPs) to have a win-win situation in communicating their scores and identifying benchmarks and best practices for improvement. The interactive e-Benchmark system is very convenience to use because:

• As a web-based tool, it facilitates CoPs members to be more effective and efficient in handling data and information;
• As an on-line database, it offers members greater convenience and speed i.e. available at all hours and members can just participate through an internet access; and
• CoPs members are able to enter data, and obtain real-time feedback report on competitive scores and ranking.

15.0 CONCLUSION

Benchmarking, if properly implemented can help resolve problems by forcing an organisation to compare itself with best-in-class organisations, quantifying the differences in performance, documenting why the differences exist and identifying what to do to become as good as and eventually better than these organisations.

To achieve its strategic vision with the help of benchmarking, an organization needs to consider key areas in the planning and execution of a benchmarking action.Among others, the key areas include the following :

• Identification of priority areas for action;
• Careful and considered selection of a limited number of partners;
• Agreement of mutually agreed realistic and attainable objectives, capable of being measured on a like-for-like basis;
• Agreement on whether – or to what degree - the benchmarking exercise will focus on the comparison of results (outcomes, e.g. efficiency, effectiveness, economy, quality) or on the comparison of processes (how things are done);
• Agreeing a project timetable and work agenda and respecting the timetable;
• Careful selection of benchmarking team members;
• Agreement on which external stakeholders (if any) need to be involved and how to avoid any confidentiality problems; and
• Commitment to implement recommendations where appropriate

The globalization and liberalization of the world economy poses new challenges. Thus, organizations must be equipped to compete and win. Benchmarking will help to create a sense of urgency by telling us where we are, how good we have to be, and what we have to do to be what we want to be or have to be. The ultimate objective is to improve productivity and quality and enhance organizatinal excellence and competitiveness.

Burhanuddin Saidin - Director

Best Practices Management (BPM) Division

National Productivity Corporation Malaysia