BENCHMARKI

NG

TREM PAPER REPORT

Submitted by
IMRAN HUSSAIN

REG.NO:10902893

ROLL NO:A20

In partial fulfillment of the requirement

for the Award of the

MASTER’S DEGREE IN
BUSINESS ADMINISTRATION

Under the Guidance

 Of

LOVELY INSTITUTE OF MANAGEMENT

Lovely Campus, Jalandhar-Delhi G.T. Road (NH-1),
Phagwara (PUNJAB) INDIA

ACKNOWLEDGEMENT

First and foremost, I thank the Almighty God for sustaining the
enthusiasm with which plunged into this endeavor.
I avail this opportunity to express my profound sense of sincere
and deep gratitude to many people who are responsible for the
knowledge and experience I have gained during the termpaper work.

I extend my overwhelming gratitude to , for her valuable guidance and

meticulous supervision during the preparation of this Report.

My hearty and inevitable thanks to all the respondents who is helped me

to bring out the termpaper in a successful manner.

Last but not the least; I extend my gratitude towards my, faculties and
friends who extended their wholehearted support towards the successful
completion of this termpaper Work.

IMRAN
HUSSAIN
MBA(194)
 SECTION-1902

REG.NO.-10902893

TABLE CONTENTS

• INTRODUCTION
• OBJECTIVES
• DEFINATION OF Benchmarking
• Types of Benchmarking
• Process of Benchmarking
• Methodology
• Analysis
• Benchmarking in TATA CONSULTANCY
SERVICES
• Conclusion
• Bibliography
OBJECTIVES
➢ Describe the basic idea behind benchmarking.
➢ How benchmarking can be used to help a firm

execute a successful growth strategy.

➢ Gain insight in to an organization’s capability by
identifying the strengths and weakness of its
current Performance.
➢ Relate these strengths and weakness to the
benchmarked KPI set.
➢ Prioritize improvement plans.
➢ Focus on improvement (correct weakness that

generates risks) that is most beneficial the

organization given in current performance level.
➢ Compare performance against industry values
(average, Best in class)
 BENCHMARKING
Introduction
Benchmarking is a popular method for developing
requirements and setting goals. In more conventional
terms, 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 targets, strategies, and
implementation. Benchmarking involves research into
the best practices 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. For example, Xerox Corporation
studied the retailer LL Bean to help them improve their
parts distribution process.
Benchmarking goes beyond the mere setting of goals.
It focuses on practices that produce superior
performance. Benchmarking involves setting up
partnerships that allow both parties to learn from one
another. Competitors can also engage in benchmarking,
providing they avoid proprietary issues.
Benchmarking projects are like any other major
project. Benchmarking must have a structured
methodology to ensure successful completion of
thorough and accurate investigations. However, it must
be flexible to incorporate new and innovative ways of
assembling difficult-to-obtain information. It is a
discovery process and a learning experience. It forces
the organization to take an external view, to look
beyond itself.

Popularity and Benefits from benchmarking

In 2008, a comprehensive survey on benchmarking was
commissioned by The Global Benchmarking Network,
a network of benchmarking centres representing 22
countries. Over 450 organizations responded from over
40 countries. The results showed that:
1. Mission and Vision Statements and Customer
(Client) Surveys are the most used (by
2. 77% of organisations) of 20 improvement tools,

followed by SWOT analysis (72%), and Informal

Benchmarking (68%).
3. Performance Benchmarking was used by (49%)

and Best Practice Benchmarking by (39%).

4. The tools that are likely to increase in popularity
the most over the next three years are Performance
Benchmarking, Informal Benchmarking, SWOT,
and Best Practice Benchmarking. Over 60% of
organizations that are not currently using these
tools indicated they are likely to use them in the
next three years.
TYPES OF BENCHMARKING
➢ Process Benchmarking - the initiating firm
focuses its observation and investigation of
business processes with a goal of identifying
and observing the best practices from one or
more benchmark firms. Activity analysis will
be required where the objective is to
benchmark cost and efficiency; increasingly
applied to back-office processes where
outsourcing may be a consideration.
➢ Financial Benchmarking - performing a
financial analysis and comparing the results in
an effort to assess your overall competitiveness
and productivity.
➢ Benchmarking from an Investor
Perspective- extending the benchmarking
universe to also compare to peer companies
that can be considered alternative investment
opportunities from the perspective of an
investor.
➢ Performance Benchmarking - allows the
initiator firm to assess their competitive
position by comparing products and services
with those of target firms.
➢ Product Benchmarking - the process of
designing new products or upgrades to current
ones. This process can sometimes involve
reverse engineering which is taking apart
 competitors products to find strengths and
weaknesses.
➢ Strategic Benchmarking - involves observing

how others compete. This type is usually not

industry specific, meaning it is best to look at
other industries.
➢ Functional Benchmarking - a company will

focus its benchmarking on a single function in

order to improve the operation of that
particular function. Complex functions such as
Human Resources, Finance and Accounting
and Information and Communication
Technology are unlikely to be directly
comparable in cost and efficiency terms and
may need to be disaggregated into processes to
make valid comparison.
➢ Best-in-class benchmarking - involves

studying the leading competitor or the

company that best carries out a specific
function.
• Operational benchmarking - embraces
everything from staffing and productivity to office
flow and analysis of procedures performed

METHODOLOGY
➢ The Benchmarking process begins with an
initial period of intensive research and
preparation. This defines what is to be
benchmarked and who the benchmarking
 partners will be. Data is then gathered on
specific processes, practices, and results. After
collecting and analysing the information,
stretch goals are set and an implementation
plan developed to improve performance.
Beyond implementation, ongoing
benchmarking must be instituted to reassess
and re-evaluate best practices to maintain
continuous improvement.
➢ The Benchmarking process is composed of

four phases: Planning, Analysis, Integration

and Action. For the purposes of this survey,
only the Planning and Analysis phases which
are elaborated below will be conducted.
PLANNING
➢ Planning lays the foundation and is critical to

implementing a successful benchmarking project.

Planning involves the complete understanding of
the existing internal processes and
measurements. It provides definitive answers to
the questions: What will be benchmarked? Who
will we benchmark? and, How will the data be
collected? The answers to these questions will
guide the project to successful fruition.
STEP 1 : IDENTIFY WHAT IS TO BE
BENCHMARKED.
➢ Activities that are of greatest value to your
customers;
➢ Activities that are major cost areas or consume a
large portion of your resources;
➢ Activities where known improvement is needed:
➢ Activities that are considered important in
achieving organisation's goals or meeting
organisational priorities.
➢ Analyse the selected process to determine the
specific issues/items to be benchmarked.
➢ Map (e.g. through flow-charting) the existing

process to reach a common understanding of how

the process functions in the organisation. A good
process map will enable you to.
Identify process boundaries;
➢ Turn a clouded, confused situation into a

logical sequence of events (process steps)

that can be addressed, analysed and
prioritised into a planned and systematic
manner.
➢ Identify all actions, decision points,

feedback loops and inspection points.

➢ Understand departments and functions

involved in the process and their role.

➢ Understand the critical interfaces with

customers and suppliers.

➢ Understand the interdependencies of the

process with other processes.

➢ Understand critical factors affecting

performance.
➢ Recognise "disconnects" (things that

should be happening but are not).

Identify illogical work flow.
➢ Identify customers and their needs. How do
customers assess whether the process is
performing well or not? This will give a clear
indication as to what aspects of the process
should receive priority attention.
➢ Examine each step of the process to determine
whether it adds value in the eyes of the
customers. This analysis will help to identify
problem areas in the process (including non-
value-adding or non-essential activities) which
should receive attention during the benchmarking
investigation. Ask
➢ How long (total elapsed time) does the process

take? The total elapsed time includes transports,

waiting, and reworks time.
➢ How long is the total process time that is actually
being worked on?
➢ What are the costs (such as cost of people input
hours, cost of input materials, etc.)?
➢ What are the costs of waste/ rejects/ rework ?
➢ What are the volumes through (people, tonnes,

units, etc.)?
➢ What departments of our organisation are

involved? In what way? Who, how and when?

➢ What do you currently measure/ performance

indicators?
➢ What performance is achieved against each

measure?
➢ Who are the suppliers to this process and how

does their behaviour influence the process

performance?
 ➢Decide on what should be the key indicators
(measures) for the process, based on the priority
needs of customers and major aspects of cost.
The measures can include.
➢ Process measures (cycle time, quality, cost

measures etc.).
➢ 0utput/ Input measures (volume, quantity,

delivery, etc.).
➢ Result measures (customer satisfaction,

productivity, profitability, sales turnover, etc.).

➢ This level of process mapping provides a clear
illustration of how work "currently" gets done,
what it costs to produce a specific output, the
cycle time involved and so on. It may also reveal
a high level of complexity, areas of significant
variation, bottlenecks, waste, duplication and
rework.
➢ Summarise purpose of study--by staling:
➢ Rationale for study:
➢ Subject of study and measurements involved;
➢ Usefulness of study;
➢ Scope of study.
STEP 2: IDENTIFY COMPARATIVE COMPANY
➢ Conduct a thorough search effort to identify
organisations to benchmark. Sources of research
can include industry/trade publications, annual
reports, professional or trade associations,
seminar and conference papers, company
newsletters, government agencies, newspaper
articles, customers, suppliers and distributors.
➢ There are three types of organisations to
benchmark:
1. Internal functions with similar processes:
2. Direct competitors;
3. External functional leaders outside the
industry.
➢ In determining potential organisations to

benchmark, ask the question, "What organisation

must do an outstanding job in our studied area to
be successful as a total organisation?" Some
other considerations induce.
➢ Outstanding organisations - won an international
or national award
➢ The practices of interest must be well-developed

and structured.
➢ The level of importance of the subject area to the

organisation in the internal supplier-customer

chain or in satisfying end users or consumer
needs.
➢ Recommendations by the relevant professional,

industry or certifying bodies.

➢ Draw up a written set of criteria against which

you can evaluate and prioritise your list of

potential best practice partners. The criteria can
induce.
➢ Size of organisation.
➢ Structure of operation.
➢ Technology level.

➢ Products.

➢ Industry.
 ➢Capability in process studied.
➢ Type of customers/employees.
➢ Once a set of best practice organisations have

been identified, obtain all publicly available

information before contacting the organisations
directly. The number of best practice
organisations to focus the study upon is usually
no less than two, and no more than six.
STEP 3: DATA COLLECTION
➢ Develop a list of specific questions for the
benchmarking investigation. Ask focused
information pertaining to the selected work
process as well as each step of the process and
the measurements. The aim is to identify the
benchmark measures and practices which drive
the best practice partners to be better/ best-in-
class. The benchmarking questionnaire serves as
a leading instrument for data gathering with
selected partners.
➢ Document the benchmarking organisation's

answers to the questions (This step will ensure

that the process in the benchmarking
organisation is truly understood. It will also help
you to pre-test the questionnaire. Answers can
also be used as a gesture of reciprocity with the
best practice partners).
➢ Collect all publicly accessible information on the
best practice organisations pertaining to the
questions developed (If sufficient information
has been obtained, proceed to the analysis phase
 without directly contacting the targeted
organisations).
➢ Select the method to gather outstanding

information from the best practice organisations

through original research. The three common
methods are:
➢ Mail Survey - Using mail survey should be
limited to those initiatives requiring easy and
quick responses. Further, mail survey questions
should be mainly close-ended in nature (e.g.
multiple choice, yes/no, etc.), and their number
should be kept to a minimum. The most effective
use of mailed questionnaires is in pre- screening
a large number of potential partners; viral few
questions are specifically asked of a sample
group of companies. The responses will help
determine the best practice partners to pursue in
greater detail via site visit interviews.
➢ Phone Interview The phone interview brings a
personal touch to the sometimes ineffective mail
survey process. A combination of close and
open-ended questions is permissible using this
method.
➢ Site Visit interview the greatest opportunity to

understand the processes and practices of others

is certainly via a structured site visit interview.
This is NOT however an endorsement for
benchmarking teams to conduct site visits in all
cases. A good rule for deciding upon a site visit
is to determine if there is an operation or some
other tangible component worth seeing in person.
 Also, having selected several best practice
partners, site visits should be for the top two or
three who are perceived as having the best of the
practices/ processes from which to learn. Site
visit questions are usually open-ended, and
encourage a productive discussion by all parties.
➢ Make contact and draft a letter (where
appropriate), obtaining agreement of the best
practice partners to the proposed benchmarking
activity.
➢ Prepare a small site visit team (3 persons) from
the benchmarking organisation for the
benchmarking information exchange: define
ownership and responsibilities of each team
member to ensure a professional and productive
session for all involved.
ANALYSIS
➢ The analysis phase involves analysing the
benchmarking data to identify and understand the
practices which contribute to the best practice
partners' strengths

.
STEP 4: DETERMINE CURRENT
PERFORMANCE GAP
➢ Organise the qualitative and quantitative data
that is gathered, and determine the benchmark
performance.
➢ Understand how and why the best practice

organisations have achieved their performance

 by identifying the enablers (performance drivers)
contributing to that performance.
BENCHMARKING SOFTWARE QUALITY
_WITH APPLIED COST OF QUALITY

Cost of Quality has remained theoretical in many

treatments despite its powerful relevance in software
quality. A survey-based approach makes this model an
important quality driver today. Cost of Quality (CoQ)
as a software quality model has remained an attractive
yet difficult proposition. It is attractive, because it
promises to provide excitedly insightful measurements,
thus making cost reduction driver for improving quality.
It is difficult, because it demands granular measurement
and analysis, making assessment tedious. The good
news is that indirect methods employed to leverage the
model have helped increase the adoption of Cost of
Software Quality (Cost). Correlation with Cost
improvement and CMM® maturity has also been
established
Convincingly in some studies. These document
exploresthe facets of Cost and its growing importance
in software quality. It suggests a proven approach in
making it practically implementable in large software
Settings.
Quality for Competitiveness
Cost of Quality – the Cost that Reduces
Cost
Software quality has come a long way. Having said
that, I am probably provoking a section of software
maker’s and recipients who are still sceptical about
whether true software quality exists. With quality
frameworks and methodologies like CMMI® and Six
Sigma being used to the hilt, we somehow think we
need to add another perspective to quality, one that can
provide a sole indicator for benchmarking and fact-
based improvement. Software quality has become more
tangible with time and it is interesting to see new
dimensions being added to it. In every case though, the
quest has been to make it relatable to business
outcomes.
Cost of Quality is becoming increasingly important as a
driver in business quality. It is also finding serious
application in software. This is more so because it
provides a unified indicator as well as a driver of
business health. Despite the challenge of quantifying
the measures involved, it is possible to baseline
software quality and benchmark improvements using
survey based techniques. This paper demystifies Cost of
Software Quality by suggesting practical approach to
base lining Cost, which has been successfully used with
our global clients. Despite quality generally being an
applied discipline, COQ has remained theoretical in
many treatments. Therefore, we call this approach
“applied cost of quality”. Cost of quality started with
the need to reduce cost of meeting client requirements,
thereby increasing competitiveness. Over time, it
progressed as a philosophy for successful business. Phil
Crosby laid the foundation of the current form of COQ
in his book Quality is Free (McGraw Hill 1979). He
suggested that cost of quality was the sum of two
primary costs – cost of conformance and cost of non-
conformance. Cost of conformance intern sums up the
cost of appraisal and cost of prevention. The non-
conformance cost, on the other hand, has two
components – cost of internal failure, that is, the cost of
defects that occur before release to market(for instance
in development and production), and cost of external
failure, that is, the cost of defect that occurs after
release to market. In the case of software, these
components can be illustrated as hereunder:
Cost of Appraisal:
These are costs incurred to determine the degree of
conformance to the requirements. The typical activities
of
Appraisals are:
➢ Review of code and other artefacts

➢ Purchased software testing

➢ First iteration of integration and system testing
➢ User Acceptance testing.
Benchmarking Software Quality – With
Applied Cost of Quality

Cost of Prevention:
These are costs incurred to prevent poor quality by
keeping failure and appraisal costs to a minimum. The
typical prevention occurs through:
➢ Casual Analysis and defect prevention.

➢ Quality planning and software quality assurance

➢ Quality training on tools and techniques
 ➢ Process improvements
➢ Code and component reuse
➢ Training on design review
Cost of Internal Failure
These are costs associated with defects found prior to
delivery of software to the customer. The typical
activities under this head are
➢ Pre-release defect management

➢ Rework
➢ Re-reviews
➢ Retesting.
Cost of External Failure
These are costs associated with defects found after the
software is released to customers. Typical activities are
Cost of pre-enhancement maintenance and support after
release:
➢ Reworks and defect management of field errors.

➢ Warranty redressed.
Cost of Execution
These are costs incurred to build the software right first
time or the cost of construction, also expressed as
percentage of project cost.

Therefore,

Cost of Execution (%) = 100 – Cost of Quality (%)

Cost of quality provides a means to quantify quality

cost in business terms. It therefore helps in identifying
Opportunities for cost reduction. The underlying
philosophy is that by cutting down on the cost of
quality, one is able to stay more competitive in the
market and reduce opportunity cost of losing out to
competition. Therefore, in the highest performance
state, the effective cost of quality to business is
minimal. It emerges as a powerful driver and, at the
same time, carries the simplicity of providing one
unified metric to judge the health of the line of
business. By providing distribution of quality cost
across the four components of it, it helps in
understanding the direction of improvement focus. For
instance, if the cost of appraisal is high compared to
that of prevention, one would focus on finding
improvement opportunities in defect prevention (such
as in design, coding best practices).
The underlying philosophy is that by cutting down
On your cost of quality, you are able to stay more
Competitive in the market and reduce opportunity
Cost of losing out to competition. Therefore, in the
Highest performance state, your effective cost of
Quality to business is minimal. It emerges as a
Powerful driver and, at the same time, carries the
Simplicity of providing one unified metric to judge
The health of the line of business.

Cost Correlates with

SoftwareCapabilityMaturity Levels
The Cost of Software Quality (Cost) has a good
correlation with capability maturity of the organization,
 and can be explained by Knox’s model for Cost
(Modelling the Cost of Software Quality, Stephen T.
Knox). Knox used the CoQ model developed in the
manufacturing environments and extended it across the
SEI CMM® to produce a theoretical Cost model.
CMM® today is a well-accepted framework to assess
maturity of software delivery capability. Thanks to its
wide adoption, we have extensive data available on
overall industry maturity in terms of CMM® levels.
Knox predicted that CMM® Level 1 units have 60%
Cost and he further hypothesized that Cost reduces by
67% at level 5.Knox was able to map the four
components of CoQ with the CMM® maturity levels.
His finding suggested that the ratio between
conformance and non-conformance cost at level 3
would typically be 0.5. In the study, the overall Cost
exhibits a downward trend and an improvement of cost
of execution. Thus, the high maturity organizations get
a return of 85% on marginal cost of quality (return on
penny spent).

KICK-STARTING THE JOURNEY-

BASELINING-COST OF SOTWARE QUALITY

(3Measured and Controlled

INITIAL ORGANIZATION QUESTIONARIES
STUDY Process characterized DESIGN
for the
 Concluding Remarks
Cost of Quality has emergedPOPULATION
ADMINISTER as a tool for looking at
QUESTIONARIES
quality from the perspective SAMLPING
of enhancing
competitiveness. By cutting down the cost of quality,
we are improving the overall health of the line of
business; Cost of Quality has remained theoretical in
many treatments despite its powerful relevance in
softwarequality. A survey-based approach makes this
model an important quality driver today. Cost of
Quality (CoQ) as a software quality model has
remained an attractive yet difficult proposition. It is
attractive, because it promises
SURVEY to provide decidedly
IDENTIFY
RESPONSE
insightful measurements, thus making
PRECENT cost reduction
OPPORTUNITY
GROUPING
a driver for improving quality.
FOR It is difficult, because it
ANALYTICS IMPROVEMENT
demands granular measurement and analysis, making
assessment tedious. The good news is that indirect
methods employed to leverage the model have helped
increase the adoption of Cost of Software Quality
(CoSQ). Correlation with CoSQ improvement and
CMM® maturity has also been established
convincingly in some studies. This document explores
the facets of CoSQ and its growing importance in
software quality. It suggests a proven approach in
making it practically implementable in large software
settings.
 BIBLIOGRAPHY

www.tcs-ca.tcs.co.in/
global.consulting@tcs.co.in
www.isixsigma.com/me/benchmarking
BOOKS
Benchmarking for best practices : auther-christopher
E. Bogan and michaed J. Enlish
The benchmarking : author- Michael J. sphendolini