Performance Measurement vs Process Benchmarking- Valutrics
The benchmarking starting point is measurement. However, we must distinguish between the act of measuring performance and the process of benchmarking. A benchmarking process uses a common measurement standard to compare across organizations to determine where a best practice exists based on the results it produces. After the performance has been measured, then a further investigation is conducted to characterize the practices that lead to the observed performance and the root causes of the performance advantage are documented as a best practice.
To understand the dynamic characteristics of a benchmarking study, the different terms that identify the choices that can be taken in the design of a study must be identified and defined. The first term that must be defined is process benchmarking.
* Process benchmarking: A method for studying work process performance between two unique or distinct implementations of the same fundamental activity. Process benchmarking includes internal inspection of an organization’s own performance as well as the external study of another organization that is recognized for achieving superior performance as evidenced by an objective standard of comparison (the benchmark). The objective of process benchmarking is not to calculate a quantitative performance gap, but to identify best practices that may be adapted for improvement of organizational performance. There are two categories of process benchmarking studies that may be differentiated according to their application as strategic or operational studies. These two categories are further divisible into performance and perceptual benchmarking studies depending on the type of data that is being compared. The relationship among these distinctions is clarified in the following:
* Strategic Benchmarking: A benchmarking study whose objective is to discover ideas for improvement that will trigger breakthrough changes and may be leveraged across the business to enhance an organization’s competitive advantage.
Strategic benchmarking studies challenge management to move from a current state to a desired state of business performance by identifying potential breakthrough opportunities that can generate significant profitability or productivity improvement. A strategic study focuses on critical business areas that must change to attain or maintain the competitive advantage of a business, including the validity of critical business assumptions, options for improving core competence areas, concepts for development of business processes, alternative ways to approach technology inflection points, or ways to strengthen business fundamentals that define the organization’s operational strategy.
A strategic benchmarking study may change the total framework of an organization by assessing topics such as strategic direction; structure or governance of the business; decisions supporting capital acquisition or investments in research and design (R&D); decisions affecting management choices regarding either business or product line positioning; or change management strategies (e.g., pursuit of a specific strategy such as implementation of an enterprise software product or management’s choice of an improvement methodology—for example, ISO9000, Total Quality Management [TQM], or Six Sigma) as a way to induce change in the organization. These types of benchmarking projects can act as triggers for greater change that may be leveraged across the entire organization.
Thus, strategic benchmarking studies tend to seek out business leverage opportunities and change trigger points that can cause an organization to make a breakthrough change that results in competitive advantage. A leverage opportunity is a business improvement concept that may be applied across the organization in a variety of areas and that will create a big performance difference.
Examples of strategic benchmarking studies include evaluation of options for the design of an organization’s governance structure; assessment of approaches used to implement advanced technology (e.g., enterprise management software or paperless document handling); or strategic business issues that are faced by the organization (e.g., creating a web- based business capability; managing the technology transition across generations of advancement; or managing the routine work of the organization through management methods such as balanced scorecard, performance management, and business excellence assessments).
*Operational Benchmarking: A benchmarking study that is focused on the way that a specific work process is performed with an objective of improving the performance of that specific process (e.g., improving a sales process, printed circuit board production process, or distribution process). Operational benchmarking will provide productivity improvement by concentrating on specific activities that will improve the effectiveness, efficiency, or economy of routine business operations. Operational benchmarking focuses on specific work activities that need to be improved and seeks to identify the work procedures, production equipment, skills or competence training, or analytical methods that result in sustained performance improvement as indicated by objective measures of process productivity (process throughput, cost per unit, defect opportunities, cycle time, etc.).
Both strategic and operational benchmarking studies may focus on either performance or perceptions as the type of data that is being evaluated. Performance data consists of a set of measures about results or outcomes, while perceptual data comes from the feelings or reactions of an individual to the outcomes or results of the process.
A performance benchmarking study seeks to answer the following question: Which organization, product, or service is better based upon rigorous assessment using objective performance criteria? Examples of performance benchmarking studies include consumer product analysis that evaluates products on a head-to-head basis using a fixed set of criteria for performance; the evaluation of product performance using a standard test, such as operating time, to run a specific application; or endurance tests that identify the ability of a product to perform over a fixed period of time under comparable operating conditions. What sets a performance-focused study apart from its opposite is the type of data that is used to make a comparison in the study.