Running head: BENCHMARKING: PROCESS IMPROVEMENT

Benchmarking: Process Improvement Audrey Dodson Liberty University February 2, 2014

BENCHMARKING: PROCESS IMPROVEMENT Benchmarking: Process Improvement The business environment is continuously changing due to advancements in technology, telecommunications, and globalization. To adapt to the changing environment, some organizations are adopting benchmarking (Daft, 2013). Benchmarking is used as a comparative tool to assess processes and performance of other organizations. The main purpose in utilizing this approach is to improve organizational processes. By adopting the benchmarking approach, the organization uses best practices as a standard to identify weaknesses and redundancy in its processes (Moriarty, 2011). Improving Organizational Processes Organizations use various functions and processes to harness information created by business operations. Processes have a profound impact on organizational performance; thus, many organizations have adopted a process oriented view of operations to gain operational benefits. Improving processes and eliminating redundant processes can aid organizations in

overcoming the barriers of change in an uncertain environment (Daft, 2013). Benchmarking can be used to help organizations build processes that are flexible to the changing environment while reducing costs and adding value to the organization. Overall, benchmarking can be used by an organization to help identify its competencies and assess their value relative to sustainability of the organization (Moriarty, 2011). Benchmarking Driving Factors Technological advancement is a main driving factor for process change within organizations. The business environment today requires that organizations continuously update processes to adapt and respond quickly to environmental changes (Shamma & Hassan, 2013). Other driving factors of change are customer service concerns, day-to-day operational costs,

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employee productivity, and global competition. Customer satisfaction, customer needs, products and services, productivity, cost, and information directly impact the competitiveness and efficiency of an organization. The most influential drivers of change are customers and competition (Daft, 2013). Competition Organizations are challenged on a daily basis to watch and understand what their competitors are doing and what the competition is offering (Blocher, Stout, Juras, & Cokins, 2013). In the past, organizations did not automate documents because of the cost of providing technology to meet these needs. Now organizations are automating processes, but the main driver for changing from a paper process to the electronic alternative is the benefit the organization receives for doing so: information and knowledge (Gelinas, Dull, & Wheeler, 2012). Benchmarking has been proven to aid organizations in evaluating their competitive position. With the help of benchmarking, managers are able to identify gaps between actual and desired performance (Shamma & Hassan, 2013). Customers Organizations have come to realize that attaining customer value by delivering quality products and services is an important key to continued growth and sustainability. Retaining and keeping customers satisfied are attributable to increased sales, increased net profits, and a potential higher market share (Helena & Sampaio, 2012). These organizations understand that their success is defined by the customer and use benchmarking to assess and analyze customer value, customer profitability, and customer satisfaction. Benchmarking from a customercentrique focus helps the organization meet customers expectations and requirements and conform to specifications and standards (Shamma & Hassan, 2013).

BENCHMARKING: PROCESS IMPROVEMENT Benchmarking Process The mission of benchmarking is to help an organization become better prepared to face and handle the continuously changing business environment, gain competitive advantage, and

sustain and grow (Hong, Hong, James, & Park, 2012). Benchmarking is an investment and must have full support of senior management. The benchmarking process has five stages: planning, data gathering, analysis, execution, and monitoring. Each stage is essential to the effective implementation of the benchmarked functions (Fibuch & van Way, 2013). Planning Stage The goal of the planning phase is to identify organizational processes that will be benchmarked; identify the best competitors or performers; and decide how information will be collected. The organization identifies processes to be benchmarked by examining critical success factors, products, services, and processes (Williams, Brown, & Springer, 2012). When functions have been identified for benchmarking, the benchmarking team develops measurements to support and enhance the success of the benchmarking project. In the identification of competitors or best performers, the benchmarking team develops a set of criteria to be used as a gauge for selection of benchmarking partners (Daft, 2013). A list of companies considered industry leaders or best practices companies is compiled. The list of potential partners is shortened based on whether the companies are willing to share information and the functions being benchmarked are similar (Williams, Brown, & Springer, 2012). The planning stage is very important and consumes a lot of time. Data Gathering Stage Once all activities of the planning stage has been completed information gathering begins. An initial activity of the benchmarking team is exploring internal and public domains to

BENCHMARKING: PROCESS IMPROVEMENT access information on the benchmarking companies. Some examples of public domain sources are trade publications, annual reports, government documents, newspapers, and trade shows. If the information does not meet the requirements of your study an original study will have to be conducted (Daft, 2013). The benchmarking team must use both legal and ethical considerations when gathering information. Some practices that the team should adhere to are (1) not to misrepresent themselves, the organization or the purpose for the research, (2) not to use illegal means to gather information, and (3) not to obtain proprietary products or processes (Williams, Brown, & Springer, 2012). Analysis Stage The benchmark team analyzes all the gathered information to determine benchmark practices and performance. The information is then used to assess or measure the difference between the best practices and the organizations processes to identify gaps in performance (Hong, Hong, James, & Park, 2012). Execution Stage During this stage, the benchmarking team submits its findings to senior management for acceptance and approval. If management approves, the benchmarking team has to develop an action plan to adopt best practices and work processes or to amend current work processes

(Fibuch & van Way, 2013). It is very important for the action plans to be thoroughly defined and also reviewed with functional employees. Having functional employees understanding and buyin helps to ensure successful implementation (Williams, Brown, & Springer, 2012). Monitoring Stage It is not enough to just implement new processes. Progress should be monitored according to measurements in the action plans. Also, more training and coaching may be

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needed. Benchmarking is a tool for improving processes; therefore, the organization will need to continue to periodically reassess benchmark functions for continuous process improvements (Hong, Hong, James, & Park, 2012). Benchmarking Categories Benchmarking enhances an organizations ability to predict trends in its industry while identifying the organizations strengths and weaknesses (Daft, 2013). Because every organization is different, there is not a standard one for all benchmarking approach. There are four different types of benchmarking: internal, competitive, functional, and strategic; organizations may use one or a combination of the benchmarking types (Fibuch & van Way, 2013). Internal Benchmarking Internal benchmarking compares an organizations performance metrics over time. The organizations information is easy to access and track. Though internal benchmarking is needed, the benchmarks identified may not be the best because the organization does not compare its performance with industry best practices (Fibuch & van Way, 2013). Competitive Benchmarking An organization that endeavors to use competitive benchmarking compares its performance with the performance of its competitors: processes, products, services, or profits. The competitive benchmarking approach provides the organization with information about the marketplace (Fibuch & van Way, 2013). One drawback to adopting this approach is acquiring reliable information on competitors (Daft, 2013).

BENCHMARKING: PROCESS IMPROVEMENT Functional Benchmarking Under the functional benchmarking approach, an organization forms partnerships with organizations within their industry and with organizations outside of their industry. The aim of

this approach is for each organization to share information and ideas on ways to improve (Fibuch & van Way, 2013). Strategic Benchmarking In strategic benchmarking an organization compares its strategic goals and objectives with another organizations strategic goals and objectives. One company is the seeker and the other company has the best practices and or processes. This type of benchmarking endeavor allows the parties to share information and processes confidentially (Fibuch & van Way, 2013). Benchmarking Barriers Though benchmarking has been proven to aid organizations in identifying weaknesses and strengths, and improving processes, there are some managers and organizations that are reluctant to adopt benchmarking. According to Williams, Brown, and Springer (2012) barriers to benchmarking can be divided into four categories (1) the soundness of benchmarking, (2) internal capacity to benchmark, and (3) inertia. The soundness of benchmarking refers to a managers or organizations belief that benchmarking efforts are flawed because attempts are made to measure incompatible functions, products, or services. Still others believe that benchmarking standards are not justified because the approach has not been well recognized and documented in literature reviews (Williams, Brown, & Springer, 2012). An organizations internal capacity to benchmark can be a barrier to adopting benchmarking if the organization does not have the time, expertise, and resources.

BENCHMARKING: PROCESS IMPROVEMENT Benchmarking is an investment in the organization and is very time consuming (Williams, Brown, & Springer, 2012). For the project to be effective it must have senior managements support; not having the support of senior management can also be a barrier to benchmarking (Fibuch & van Way, 2013). Inertia can also be a barrier to benchmarking. Companies and employees have a natural

resistance to change when they have become comfortable with the way the organization operates. This reluctance to benchmarking is due to their fears of the unknown. (Daft, 2013). An organizations rules and regulations or company policies can also be factors that impede change (Williams, Brown, & Springer, 2012). Conclusion Benchmarking is a comparative tool for improving performance of an organization by continuously identifying, understanding and adopting internal and external practices and processes. The effective adoption and implementation of the benchmarking approach can be used to enhance an organizations strategy, improve its processes, and aid in setting goals and objectives. Two main reasons for an organization to adopt benchmarking are to remain competitive in a rapidly changing environment and technological advancements. Because processes become ineffective over time due to economic, environmental and organizational changes, benchmarking processes should be continuously monitored for obsolescence and change. Through benchmarking an organization learns from the experiences and processes of other organizations; examines its internal processes for gaps; and shares the best practices between benchmarking partners. Overall, benchmarking helps to improve processes and enhances creativity, innovation, and flexibility for adaptation to the continuously changing environment and for sustainability and growth.

BENCHMARKING: PROCESS IMPROVEMENT References

Blocher, E., Stout, D., Juras, P., & Cokins, G. (2013). Cost management: A strategic emphasis (6 ed.). New York: McGraw-Hill/Irwin. Daft, R. (2013). Organization theory & design (11 ed.). Mason, OH: South Western, Cengage Learning. Fibuch, E., & van Way, C. I. (2013). Benchmarking's role in driving performance. Physician Executive, 39(1), 28. Retrieved from http://go.galegroup.com.ezproxy.liberty.edu:2048/ps/i.do?id=GALE%7CA317784080&v =2.1&u=vic_liberty&it=r&p=AONE&sw=w Gelinas, U. J., Dull, R. B., & Wheeler, P. R. (2012). Accounting information systems (9 ed.). Mason, OH: South-Western Cengage Learning. Helena, M. G., & Sampaio, P. (2012). The customer satisfaction-customer loyalty relationship. Management Decision, 50(9), 1509-1526. doi:10.1108/00251741211266660 Hong, P., Hong, S. W., James, J. R., & Park, K. (2012). Evolving benchmarking practices: a review for research perspectives. Benchmarking, 19(4), 444-462. doi:http://dx.doi.org/10.1108/14635771211257945 Moriarty, J. P. (2011). A theory of benchmarking. Benchmarking: An International Journal, 18(4), 588-611. doi:10.1108/14635771111147650 Shamma, H., & Hassan, S. (2013). Customer-driven benchmarking: A strategic approach toward a sustainable performance. Benchmarkins: An International Journal, 20(3), 377-395. doi:10.1108/14635771311318144

BENCHMARKING: PROCESS IMPROVEMENT Williams, J., Brown, C., & Springer, A. (2012). Overcoming benchmarking reluctance: a literature review. Benchmarking, 19(2), 255-276. doi:http://dx.doi.org/10.1108/14635771211224563

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