Benchmarking Benchmarking

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					Benchmarking:
Making Best Practices Your Daily Practice


James W. Cornell, President
CBC, CTP, CM&A, CBA, CRA, CPP
January 2005
    Praxiis Business Advisors




  Our mission is to help private and corporate business owners
create strategies for high performance & competitive dominance,
               drive value growth, and when ready
      devise and execute the most profitable exit through a
     predetermined succession plan or sale of the business.
Praxiis Business Advisors

 Corporate Renewal, Growth & Transaction Advisors to Small and Mid-
  Market Businesses and their Stakeholders.

 Established as Strategic Corporate Services in 1988.

 Primary offices are in Western NY and services are delivered
  nationally.

 Affiliated Professionals possess academic credentials including B.S.
  Business Management & Economics, Master of Business
  Administration, Ph.D. in various disciplines, Juris Doctor and numerous
  professional designations.
James W. (Jim) Cornell
 Founder and President of Praxiis Business Advisors
 24 years as advisor to $1M - $4B Clients
   – Strategy, Turnarounds, Performance Improvement, Value Growth,
      Exit Planning, M&A, Government Contracting
 Principal in numerous mid-market turnarounds, including
   – National security services firm
   – Internationally recognized manufacturer of engineered fabric
      structures
   – DOD and Industrial Paint & Coatings manufacturer

 Lead advisor for successful turnaround of $50M DOJ Citizenship
  Benefits Processing program, & $1B+ major government contract wins
  (TVA, SPR)
 BS, Business Management & Economics, and MBA from SUNY Empire
  State College
 Governor, SUNY Empire State Federation Board of Governors
 Faculty, SUNY Empire State College FORUM Program
 Chair- Licensure Task Force Alliance of Merger and Acquisition
  Advisors
Benchmarking Defined

 To measure the best practices of leading businesses, and learn
  and adapt them for use in your business

 A systematic comparison of two or more companies or units of
  companies to gauge their performance relative to a peer
You Cant Improve What You Don‟t
            Measure !

        (and you can‟t prove it to your
              customers either)
Where Did it Start?


 Xerox Corporation 20 years ago
   – Canon was “eating their lunch”
        Higher quality machines, lower price

 Embarked on a systematic campaign
   – Reverse engineered products
   – Studied competitors
   – Studied a wide range of firms in other industries
 A Discipline Emerged

 Malcolm Baldrige National Quality Award incorporated it a a criterion

 Many multi-step recipes emerged, all built around fundamentals..

     –   In “Benchmarking” by Camp, steps are
            Planning
            Analysis
            Integration
            Action
            Maturity

     – American Productivity & Quality Center
         Planning
         Data collection
         Analysis
         Adapting & Improving
Two Types of Benchmarking

 "Metrics" give numerical standards against which a client‟s own
  processes can be compared. Metric benchmarks are of the form:
   – Finished-product first-pass yield of 97%
   – Scrap/rework less than 1% of sales
   – Cycle time less than 25 hours
   – Customer lead times less than 20 days
   – Productivity levels of $150,000 or more per employee
   – Plant-level ROA better than 15%

 These metrics are usually determined via a detailed and carefully
  analyzed survey or interviews
It’ All About the Data!
Well, Maybe Not Always………
Two Types of Benchmarking

 “Process Benchmarking" is generally higher-level and less numbers-
  intensive than metrics.

    – Demonstrate how top performing companies accomplish the
      specific process in question.
    – Takes form of research, surveys/interviews, and site visits.
    – By identifying how others perform the same functional task or
      objective, firms gain insight and ideas they may not otherwise
      achieve.
    – A true value-added feature of benchmarking

 Benefits of process benchmarking are realized when pursuing a
  strategy of changed processes – making marked improvements in
  productivity, costs, and revenues
Best Practices

 Tactics and strategies employed by highly regarded companies

 Process benchmarking is particularly useful to develop BP, and
  our focus today

 Fundamental tool for driving change in contemporary
  organizations
     Why Benchmark?



 When done well, benchmarking prominently reveals gaps
     between the performance of the benchmarker and
            that of a “best practices” leader, and
that leads to developing sustainable competitive advantage
Why Don’t More Businesses Do
Traditional Multi-step Benchmarking?




 Takes too long often six to nine months
 Its costly
 The lessons learned may or may not get translated to practice
  and improvement
    – Reports that get shelf space, not action
    – Cumbersome process to complete
    – Limits Flexibility - procedures oriented
       Put Another Way…..



“Its like the mating of pandas: infrequent, clumsy and often ineffective”

                 Chris Bogan, President and CEO of Benchmarking and Consulting
  How To Get It
How To Evaluate It
  How to Use It
                      Creative Benchmarking*


 Start from the customers point of view
 List each step of the customers buying experience
 Next, determine which factors most influence customers perception of value at
  each step
 Finally, identify companies that excel at each factor – without regard to their
  industry!




* (derived from the work of Dawn Iacobucci and Christie Nordhielm, Kellogg Graduate School of Management)
Entering, Occupying and Exiting a Hotel Room




 Enter Lobby
   – Physical Environment
         Functional, economical
             – Southwest Airlines, the Gap, Target, Sam‟s Club
         Attractive, luxurious
             – Virgin Atlantic, Lexus car dealerships
 Greeting
   – Friendly, casual
         Wal-Mart, Club Med
   – Cordial, professional
         Nordstrom, Ritz-Carlton
   – Discrete
         Alcoholics Anonymous
Entering, Occupying and Exiting a Hotel Room


 Check-In
   – Fast efficient service, no lines
        Express aisles in supermarkets, Hertz
   – Guaranteed maximum wait
        Bennigans Lunch Express
   – Pleasant Queue experience using pagers
        Cheesecake Factory

 Bellboy Carries Luggage
   – Attentive Employees
         Benihana Japanese Restaurants
   – Festive, informal impression
         Carnival Cruise Lines, Southwest
   – Sedate, formal impression
         Management consulting firms, Tiffany
Entering, Occupying and Exiting a Hotel Room


 Use Shower
   – Good shower design
        Professional sports teams
   – Reliable plumbing maintenance
        SeaWorld

 Get Advice on Restaurants
   – Intelligent agents who know restaurants
        Electronic
             – Yahoo!
        Employees
             – Travel agents
        Agents who know their customers
             – Nordstrom
Entering, Occupying and Exiting a Hotel Room



 Breakfast
   – Room service food arrives promptly, at appropriate temperature
         Delivery pizzerias
   – Courteous delivery personnel
         UPS

 Check-out
   – Quick, seamless departure, TV checkout
        Sega children‟s games
        Intuits TurboTax
 Entering, Occupying and Exiting a Hotel Room


 Other areas for hotels to look for best practices….
   – Choose Hotel
   – Make Reservation
   – Travel to Hotel
   – Park Rental Car
   – Walk to Hotel
   – Go to Room
   – Look Around Room
   – Require Assistance of a hotel employee
   – Call Home
   – Use Business Equipment
   – Workout
   – Retrieve Car
   – Head to Airport
   – Follow-up
 Fast-Cycle Benchmarking


 Less elaborate than traditional multi-step

 More tactical
   – What do concrete trucks and pizza have in common?

 Useful to Identify specific operation problems or opportunities

 Rather than simply copy from other firms, use the data to draw useful
  analogies and stimulate generation of creative ideas
   – Mobil and the Penske race team.. gas stations aren‟t race teams,
      but the methods for quick turnaround led to the Speedpass
Figure Out What You Are Looking For


 Replicate and bring it in, or

 Look for practices that can spark ideas, don‟t just replicate what
  you find

 Figure out where benchmarking fits in your toolchest, and make
  an informed decision about the outcome you are really after
Benchmark Companies
Roughly at Your Own Level



 College physics before high school math doesn‟t make any sense…
    –   Forget the world class company (unless you are one!)..find a firm of similar
        size and situation as yours

 Benchmark companies with similar business needs
    –   Common concerns promote a more productive exchange or transportability
        of the information learned
Study the Entire System
Rather Than One Technique



 Avoid cursory, superficial looks

 Mission statements, values and expectations of employees may be
  expressed as a document or pledge, but

 The real value is in how the firm inculcates the meaning in employees,
  and how they put it to work in their daily practices

 High performance systems only work when every single person in the
  organization is fully committed
When Benchmarking a System,
Adapt What You Find, Don’t Just Copy It



 Conditions are never identical

 You can pick up critical variables and apply them …

 Create a system – a comprehensive set of reinforcing practices
  that are responsible for success
Benchmark
Subjective Measures and Qualities



 Running a business today is far more of a creative process than
  in the past

 Quantitative measures are useful, but not all encompassing

 Using a creative process, benchmarking is a directional tool,
  not just a template
Remember Why You Are Doing This


 Don‟t get wrapped around the axle

 Don‟t confuse measures with actually delivering a result from
  the effort

 Focus on the principles most applicable to your business

 It is not an end in itself, it is but a means to an end
Step-by-Step - 1

 You are the Process Owner

 Start by Working Alone
    –   List key ideas and best practices you believe your organization should
        consider
    –   Brainstorm
    –   List and rate your ideas relative to your organizations mission and strategy
    –   Identify timeframes within which each idea and practice could realistically be
        implemented
Step-by-Step - 2


 Share your analysis with other key members of your
  organization
    – Have them create similar lists and incorporate them into a master
      list
    – Discuss individual ratings
    – Develop consensus for importance and timing
Step-by-Step - 3


 Identify extended team members that are motivated
   – Work together to prepare list of top three ideas and best
      practices that should be implemented immediately
   – Identify key benefits expected to be gained from each
   – Develop the approach to be used to implement, problems
      expected, and how you will address them
Step-by-Step - 4


 As Group, list top 3 ideas and best practices that should be
  considered to implement in the next year
   – Identify and assign a key person to take the lead in
     analyzing implementation feasibility
Step-by-Step - 5

 Meet regularly as a team
    – Assess progress and identify new ideas

    – Discuss how to develop a culture of
         Entrepreneurship
         Innovation
         Accountability

    – All to keep the creative energy flowing
  Step-by-Step - 6



                If the task seems too daunting
engage a facilitator from outside the immediate organization
                     to lead the process and
          establish accountabilities for the team
Pitfalls When Not Done Well

 Failure to consider organizational cultures or circumstances
  leads to a wrong direction

 Insufficient preparation usually results in MBWAA
  (management by wandering around aimlessly!)
   – What are you trying to learn about?
   – Why do you want to learn it?
   – What will you do with it to make your processes better once
      you have it?
Recognize You’re Not The Best


 Not invented here

 Humility and Determination is required to think outside the box

 Utilize the best ideas of others to build upon
Processes can often be evaluated
      with numeric metrics
A What Without a
How Can Do More Harm Than Good


 The “hows” underlying the numbers are essential

    – They tell you if you are comparing “apples to apples”

    – They provide clues to how to alter methods to suit your culture or
      circumstance

    – They may reveal that a best-in-class measure isn‟t cost effective,
      or that outsourcing may be in order
Measure What’s Needed, Not What’s Easy



 Broad measures of performance fail to give you actionable
  information

 You don‟t need a 1000 measures, just find the key indicators
  that serve as critical factors
   – eg employee turnover

 Finding balance is important..dont let a non-benchmarked
  metric go bad
   – Call center volume vs. hi-margin cross selling
Find the Happy Medium in Frequency




 One shot benchmarking doesn‟t gain continuing improvement

 Too often (weekly, monthly) makes you reactionary slaves to
  the numbers

 Speed of business is increasing, driving the frequency of
  benchmarking..things change quickly
Involve Implementers from the Start




 Getting Buy-in is critical

 Involvement from planning to implementation of the people who
  need to implement findings conveys ownership
Look for Benchmarking
Opportunities Everywhere



 Internal and External

 In and out of industry

 Utilize Trade and other organizations (Runzheimer)
 Delivering Excellent Service:


Lessons from the Best Firms




Robert C. Ford
Cherrill P. Heaton
Stephen W. Brown
California Management Review Vol 44, NO. 1 Fall 2001
              Ten Essential Lessons


1.    Base decisions on what the customer wants and expects
2.    Think and act in terms of the entire customer experience
3.    Continuously improve all parts of the customer experience
4.    Hire and reward people who can effectively build relationships with
      customers
5.    Train employees in how to cope with their emotional labor costs
6.    Create and sustain a strong service culture
7.    Avoid failing your customers twice
8.    Empower customers to co-produce their own experience
9.    Get managers to lead from the front, not the top
10.   Treat all customers as if they were guests
Resources

 Benchmarking for Best Practices: Winning Through Innovative
  Adaptation, Christopher Bogan and Michael English, McGraw
  Hill

 www.best-in-class.com – Bogan‟s website

 The International Benchmarking Clearinghouse, www.apqc.org

 www.runzheimer.com

 The Business Gateway http://www.bgateway.com/index.asp
        Reference Sources and Readings



 Is Benchmarking Doing the Right Work? David Stauffer, Harvard
  Business School Publishing 2003

 Key Ideas and Best Practices Analysis, Lynda M. Applegate, Harvard
  Business School Publishing, April 2002

 Creative Benchmarking, D. Iacobucci and Christie Nordhielm, Harvard
  Business Review, 2000

 Delivering Excellent Service: Lessons from the best firms, Ford, Heaton
  and Brown, California Management Review, 2001
Thank You!
Additional Areas For Discussion


 Spider Diagram

 Balanced Scorecard
The „Spider‟ Diagram


 The spider diagram is a means of representing visually just how
  well or badly you are doing as a company

 This process benefits from group input

 Identify the 6-8 factors customers use to rate the company
  (and competitors) – Mark each leg of the spider with one of
  these factors.
Spider Chart
Balanced Scorecard
   A new approach to strategic management was developed in the early 1990's by Drs. Robert
    Kaplan (Harvard Business School) and David Norton. They named this system the 'balanced
    scorecard'. Recognizing some of the weaknesses and vagueness of previous management
    approaches, the balanced scorecard approach provides a clear prescription as to what
    companies should measure in order to 'balance' the financial perspective.

   The balanced scorecard is a management system (not only a measurement system) that
    enables organizations to clarify their vision and strategy and translate them into action. It
    provides feedback around both the internal business processes and external outcomes in order
    to continuously improve strategic performance and results. When fully deployed, the balanced
    scorecard transforms strategic planning from an academic exercise into the nerve center of an
    enterprise.

   Kaplan and Norton describe the innovation of the balanced scorecard as follows:

   "The balanced scorecard retains traditional financial measures. But financial measures tell the
    story of past events, an adequate story for industrial age companies for which investments in
    long-term capabilities and customer relationships were not critical for success. These financial
    measures are inadequate, however, for guiding and evaluating the journey that information age
    companies must make to create future value through investment in customers, suppliers,
    employees, processes, technology, and innovation."

   The balanced scorecard suggests that we view the organization from four perspectives, and to
    develop metrics, collect data and analyze it relative to each of these perspectives:
Balanced Scorecard
Begin With the End In Mind!

				
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