Practical Benchmarking: The Complete Guide

Practical Benchmarking: The Complete Guide

Practical Benchmarking: The Complete Guide Mohamed Zairi Unilever Lecturer in TQM Bradford University and Paul Leonard Senior Consultant Xerox Quality Solutions Rank Xerox Ltd SPRINGER-SCIENCE+BUSINESS MEDIA, B.V.

1996 Springer Science+Business Media Dordrecht Originally published by Chapman & Hali in 1996 Softcover reprint of the hardcover 1 st edition 1996 Comrnissioned and produced by Technical Comrnunications (Publishing) Ltd. ISBN 978-94-010-4560-5 ISBN 978-94-011-1284-0 (ebook) DOI 10.1007/978-94-011-1284-0 Apar! from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the UK Copyright Designs and Patents Act, 1988, this publication may not be reproduced, stored, or transmitted, in any form or by any means, without the prior permission in writing of the publishers, or in the case of reprographic reproduction on1y in accordance with the terms of the licences issued by the Copyright Licensing Agency in the UK, or in accordance with the terms of licences issued by the appropriate Reproduction Rights Organization outside the UK. Enquiries conceming reproduction outside the terms stated here should be sent to the publishers at the London address printed on this page. The publisher makes no representation, express or implied, with regard to the accuracy of the information contained in this book and cannot accept any legal responsibility or liability for any errors or omissions that may be made. A Catalogue record for this book is available from the British Library

Contents Foreword by Bob Camp Preface Part One: VII ix 1 1 Competing in a modern business environment: what does it mean? 3 1.1 Introduction 3 1.2 Market-driven strategies - a first requirement 4 1.3 Time-based competition 5 1.4 Being a global competitor - what does it mean? 7 1.5 Competing through learning - the role of core competences 8 1.6 Competing through benchmarking - a proposed model 9 2 The total quality movement: where did it start, what does it mean, and how does it affect business organizations? 12 2.1 Background 12 2.2 The evolution oftqm 14 3 Origins of benchmarking and its meaning 22 3.1 Introduction 22 3.2 Why is benchmarking so important? 23 3.3 The evolution of benchmarking 25 3.4 Benchmarking today 26 4 Benchmarking - an all encompassing tool 28 4.1 Introduction 28 4.2 The importance of benchmarking 29 4.3 The links between process and people 32 5 Benchmarking - the strategic tool 34 5.1 Customer - key determinant of strategic planning 34 5.2 The link between competitive analysis and benchmarking 34 5.3 Benchmarking strategic quality planning 35 5.4 The development of an effective benchmarking strategy 43 5.5 Strategic supremacy through benchmarking 44

IV 6 Types of benchmarking 47 6.1 Competitive benchmarking 47 6.2 Functional benchmarking 6.3 Internal benchmarking 6.4 Generic benchmarking 48 49 50 7 Benchmarking, benchmarking processes 7.1 Introduction 7.2 Criteria used for benchmarking 7.3 Methodology of benchmarking 7.4 The benchmarking methodologies considered 7.5 Outcome of benchmarking exercise 8 Data collection approaches 8.1 Prerequisites to data collection 8.2 Data collection methods 8.3 Which methodes) to use? 9 The translation of benchmarking to business results 51 51 51 52 52 63 68 68 71 73 75 10 The link between benchmarking and performance measurement 81 10.1 Introduction 81 10.2 Understanding performance measurement 82 10.3 Best practice in financial measurement - what happens in Japan? 84 loa Integrating performance measurement with benchmarking 86 10.5 Deploying measurement throughout the organization 88 10.6 An integral approach to measurement 90 10.7 An integral approach to benchmarking 92 11 Choosing partners for ettective benchmarking 95 11.1 Beginning the search for benchmarking partners 96 11.2 List reduction 96 11.3 Basic pitfalls 97 11.4 Making initial contact 97 11.5 The next step 98 Part Two: 101 12 Benchmarking applications 103 12.1 Benchmarking in the utilities sector 104 12.2 Benchmarking in financial services 110 12.3 Benchmarking in innovation 119 12.4 Benchmarking in human resources 128

12.5 Benchmarking customer-consumer satisfaction 145 12.6 Benchmarking in marketing 148 12.7 Benchmarking in education 158 12.8 Benchmarking in healthcare 162 12.9 Benchmarking in R&D 167 12.10 Benchmarking in the environment 173 12.11 Benchmarking quality systems 177 12.12 Benchmarking in the public sector 179 12.13 Benchmarking in a multinationavmonopoly situation 181 13 Critical factors in benchmarking 189 13.1 Organizational factors 189 13.2 Benchmarking and TQM: a positive link 190 13.3 Partner issues 191 13.4 Resource issues 192 13.5 Communication/planning issues 193 13.6 Customer issues 194 13.7 Implementation issues 195 13.8 Futuristic issues 196 14 How to avoid pitfalls 199 15 Benchmarking in the future 206 15.1 Benchmarking future competitivness: is time the most critical factor? 206 15.2 Establishing a market-driven approach through benchmarking 208 15.3 Global benchmarking for global supremacy 209 15.4 Competing for superiority - how to beat the Japanese 211 15.5 Benchmarking and strategic alliances 212 Part Three: Who is who in benchmarking? 223 16 Profile of the organizations who have promoted benchmarking 225 16.1 Department of Trade and Industry (DT!) 225 16.2 The European Centre for Total Quality Management 226 16.3 Xerox Quality Solutions (XQS) 227 16.4 Price Waterhouse 228 16.5 Coopers and Lybrand 228 16.6 Oak Business Developers 229 16.7 British Quality Foundation (BQF) 229 16.8 The Benchmarking Centre Ltd 230 16.9 European Foundation for Quality Management (EFQM) 230 16.10 International Benchmarking Clearing House 230 v

vi 16.11 Profit impact of market strategy (PIMS) 231 16.12 Personnel Euro-club (PEC) 232 16.13 The Benchmark Partners Inc. 233 16.14 The Inter-company Productivity Group 233 16.15 IMD Lausanne 233 16.16 IBM Consultants 233 16.17 IFS International 234 17 A review of key publications on benchmarking 235 17.1 Introduction 235 17.2 Benchmarking- the search for industry best practices that lead to superior performance 235 17.3 Benchmarking: a tool for continuous improvement 237 17.4 Best practice benchmarking: the management guide to successful implementation 239 17.5 Strategic benchmarking: how to rate your company's performance against the world's best 241 17.6 Benchmarking: a practitioner's guide for becoming and staying America's best of best 242 17.7 Competitive benchmarking: an executive guide 243 17.8 Articles 244 References 253 Index 258

Foreword by Bob Camp The business improvement topic and quality tool called benchmarking is becoming widely understood and broadly applied. There are now applications in almost all segments of the economy including industrial firms that either produce a product or a service, non-profit organizations such as healthcare, government and education. The approach is starting to spread around the globe with initiatives in Europe, Asia Pacific and South America. This is commendable and reassuring and must show that there is significant interest in the approach and that it works. What is missing, however, are books and reference material that are not solely prepared in the US where benchmarking started. Theses would include examples of applications relevant to the local area and industries. They would include references to articles written about benchmarking appearing in local publications. In this fashion those interested would have near hand case histories of the use of benchmarking and therefore become encouraged to use the technique. Zairi and Leonard have done the benchmarking community a real service by documenting the European view and application of benchmarking to a wide range of examples. But they have not stopped there. Their text includes treatment of a number of related facets of benchmarking that makes this a fairly thorough text. The text does cover the basics. These include the origins of benchmarking, the strategy for its use, the types of benchmarking that are the basic comparisons that can be made and the appropriate approach to choosing partners and data collection. However, they also cover some of the more difficult obstacles to understanding; namely how benchmarking relates to performance measurements and how it is integrated into the other continuous improvement initiatives that organizations invariably find they are pursuing. The text also covers a wide range of examples. These include applications in several different sectors of the economy: utilities, financial services, education, healthcare and several organization functional areas such as: human resources, marketing and R&D. In addition, the experiences of many European firms are covered, not the least of which are those of: Siemens, Rank Xerox, Diahatsu and Philips. The text gives

viii the authors' view of how to avoid pitfalls and the future of benchmarking; this includes the focus on competitiveness and the need for global market driven superiority. A unique feature of the work is a 'Who is who in Benchmarking' section. This does not exist in one comprehensively organized publication. The reader has a ready reference to organizations who have prominence in benchmarking, offer assistance in the pursuit of this improvement approach and who promote benchmarking. This offers invaluable reference for those organizations that are starting their benchmarking journey. New and different perspectives are needed to expand the art and practice of benchmarking and I welcome them and commend this book to your reading. Robert C. Camp Rochester, NY, USA

Preface The authors met for the first time some two and a half years ago at a seminar on benchmarking organized by the UK Chapter of the European Foundation for Quality Management. Our presentations were approached from different standpoints, yet we were both pleasantly surprised to see how similar were the core messages. One presentation was from the standpoint of the academic, the other from the standpoint of an experienced practitioner. Over the ensuing months, we began to share more and more platforms at benchmarking conferences both in the UK and abroad and would spend many hours before, during and after conferences talking and developing our overall understanding of benchmarking from many different viewpoints. Early in 1993 someone, we're not quite sure who, said that the combination of academic and practitioner was a very powerful one and that we should write a book on the subject of benchmarking. At first we rejected the idea because there are so many books, articles, conferences, seminars and workshops on the subject that we felt there wasn't any room for more. However, one day we sat down and looked at the proposition more carefully. Was there really no room for any more literature? Was there really nothing we could contribute? Had it really all been said? After a couple of hours of debate we decided to give it a try! We (and our wives!) were later to regret this decision as writing the book began to consume more and more time and effort. However, the die was now cast, so the process of writing began. Imagine the scene - one author based in Bradford and travelling extensively, the other in the Midlands and also travelling extensively. One using one word processing technology, the other using a different, incompatible system. The sheer size of the logistics problem began to dawn and we began to wonder if we had bitten off more than we could chew and whether the book would ever be completed. In order to minimize the problem we allocated a 'lead' writer to each chapter with the intent of regular progress reviews and aimed at adding value to the lead writer's work. The definition of 'regular' took on a whole new meaning. Half an hour here, an hour there, in Bradford, in London hotels, in Paris, over the telephone, by exchanges of faxes etc. Time began to hurtle by and progress seemed to be moving at a snails's pace. In spite of all the pressures of other

x priorities the book gradually took shape. As each chapter took the form of a first draft it was forwarded to the publisher and eventually all the initial work was completed. The rest, as they say, is history. Our intent was to produce a complete guide to benchmarking from a practical standpoint which would help any company, whether large or small, expert practitioner or beginner to improve their results by a much better use of this most powerful of quality tools. We believe we have succeeded in this task but ultimately it is up to you, the reader, to decide. We have to thank Bob Camp of Xerox Corporation, whose book Benchmarking - the search for industry best practices that lead to superior performance, is a world best seller, for writing such an encouraging foreword. Above all though, we have to thank our respective wives Alweena Zairi and Edna Leonard, without whose unstinting support, as more and more midnight oil was burnt, this book would never have seen the light of day.