Establishing the Need for Improvement: Benchmarking
One of the key requirements of implementing a continuous improvement program is to first establish a need for improvement. You may think this is quite easy, since you already “know” what needs improving. But establishing a need for improving services or products may be harder than you think. If you can’t show the need for improvement in a clear and meaningful way, it will be extremely difficult to get support for making change.
One of the best ways to establish a need for improvement is to benchmark; that is, compare one entity to another for the purpose of improving internal processes. There are four types of benchmarking:
Process benchmarking is about reviewing and comparing process best practices of other companies. For example, the process of issuing building permits – how are other organizations managing this process in comparison to your organization? Are they faster? What is their cost of operations? Are their customers satisfied with the process?
Performance benchmarking relates to reviewing companies that you know are doing a better job than you are overall. When performance benchmarking is undertaken, it is generally undertaken on competitor companies.
Project benchmarking is about evaluating best practices on projects that are similar in scope to your project(s). This can be done with projects both internal and external to your organization. Do your projects generally run over schedule? Over budget? If so, why? What do others do to enable them to stay within schedule and budget? If the Empire State Building was able to be built in 1930 under budget and ahead of schedule, what’s preventing your projects from being equally successful?
Strategic benchmarking relates to observing how other organizations compete. This type of benchmarking is not industry specific and therefore, non-competing organizations are more willing to share their best practices for similar business processes, products or services. In addition, organizations can learn from all operating units within their own organization.
Once you know what type of benchmarking you need to undertake, there are five steps to follow. They are:
Determine your organization’s current practices in your selected problem area and identify your organization’s key performance indicators. This will give you your staring point.
Identify the organization(s) from whom you will be obtaining benchmark data.
Analyze the data that you’ve gathered, comparing your organization’s current practices to the best practices you have observed in other organizations. What are their best practices in this area? In what ways are they better than your organization? Are they faster? What is the cost of the operation? Do they produce a higher quality product/service? How is their customer satisfaction rating in this area?
Model the best practices to fit your organization and present a business case to management for why modeling these best practices is necessary in your own organization. And when approved, implement the change.
Repeat the process. This step is very important, since continuous improvement is not a one-off implementation project. It is a plan-do-check-act cycle that never ceases.
As a management tool, benchmarking cannot be underestimated. It helps you know “how well” your competition or internal units are doing and enables prioritization of change. If your organization does not include benchmarking as part of its continuous improvement mandate, it is likely that your organization is frequently fighting fires and focusing on the present. Instead, use benchmarking to help your organization become and remain profitable by having more time to think about improvements and focus on the future. Leave the firefighting to the fire department..
