value insights

Why Benchmarking Efforts Fail- Valutrics

Benchmarking can be defined as measuring your performance
against that of best-in-class companies, determining how the best-in-class achieve those
performance levels, and using the information as the basis for your own company’s tar-
gets, strategies, and implementation. Benchmarking involves research into the best prac-
tices at the industry, firm, or process level. Benchmarking goes beyond a determination of
the “industry standard,” it breaks the firm’s activities down to process operations and
looks for the best-in-class for a particular operation.


The causes of failed benchmarking projects are the same as those for other failed projects:
* Lack of sponsorship—A team should submit to management a one- to four-page
benchmarking project proposal that describes the project, its objectives, and poten-
tial costs. If the team can’t gain approval for the project or get a sponsor, it makes
little sense to proceed with a project that’s not understood or appreciated or that is
unlikely to lead to corrective action when completed.

* Wrong people on team—Who are the right people for a benchmarking team?
Individuals involved in benchmarking should be the same ones who own or work
in the process. It’s useless for a team to address problems in business areas that are
unfamiliar or where the team has no control or influence.
* Teams don’t understand their work completely—If the benchmarking team didn’t
map, flowchart, or document its work process, and if it didn’t benchmark with
organizations that also documented their processes, there can’t be an effective trans-
fer of techniques. The intent in every benchmarking project is for a team to under-
stand how its process works and compare it to another company’s process at a
detailed level. The exchange of process steps is essential for improved performance.
* Teams take on too much—The task a team undertakes is often so broad that it
becomes unmanageable. This broad area must be broken into smaller, more man-
ageable projects that can be approached logically. A suggested approach is to create
a functional flowchart of an entire area, such as production or marketing, and iden-
tify its processes. Criteria can then be used to select a process to be benchmarked
that would best contribute to the organization’s objectives.
* Lack of long-term management commitment—Since managers aren’t as familiar
with specific work issues as their employees, they tend to under-estimate the time,
cost, and effort required to successfully complete a benchmarking project. Managers
should be informed that while it’s impossible to know the exact time it will take for
a typical benchmarking project, a rule of thumb is that a team of four or five indi-
viduals requires a third of their time for five months to complete a project.
* Focus on metrics rather than processes—Some firms focus their bench-marking
efforts on performance targets (metrics) rather than processes. Knowing that a com-
petitor has a higher return on assets doesn’t mean that its performance alone should
become the new target (unless an understanding exists about how the competitor
differs in the use of its assets and an evaluation of its process reveals that it can be
emulated or surpassed).
* Not positioning benchmarking within a larger strategy— Benchmarking is one of
many total quality management tools—such as problem solving, process improve-
ment, and process reengineering—used to shorten cycle time, reduce costs, and
minimize variation. Benchmarking is compatible with and complementary to these
tools, and they should be used together for maximum value.
* Misunderstanding the organization’s mission, goals, and objectives—All bench-
marking activity should be launched by management as part of an overall strategy
to fulfill the organization’s mission and vision by first attaining the short-term
objectives and then the long-term goals.

* Assuming every project requires a site visit—Sufficient information is often avail-
able from the public domain, making a site visit unnecessary. This speeds the bench-
marking process and lowers the cost considerably.
* Failure to monitor progress—Once benchmarking has been completed for a specif-
ic area or process benchmarks have been established and process changes imple-
mented, managers should review progress in implementation and results.

The best way of dealing with these failure risks is to prevent their occurrence by care-
fully planning and managing the project from the outset. This list can be used as a check-
list to evaluate project plans; if the plans don’t clearly preclude these problems, then the
plans are not complete.

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