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TO WHAT EXTENT BENCHMARKING DELIVER IMPROVED

ORGANIZATION PERFORMANCE WHEN IT IS COUPLED TO THE


CREATIVE THINKING OF EMPLOYEES

ZOYA MALIK
University Institute of management sciences, PMAS Arid Agriculture university
Rawalpindi
(zoyamalik1237@gmail.com)

TABLE OF CONTENT
1. Acknowledgement3
2. Abstract.4
3. Introduction...5
4. Literature review...7
5. Methodology...14
6. Results.17
7. Discussion and analysis...21
8. Conclusion...22
9. Limitations...23
10.Implications.23
11.references.............24

ACKNOLEGEMENT
I would like to thanks all employees who participate in the research and also like to thanks
Mam Rabia without her, I am not able to study the deep root of the research, and also thanks
to the administration of the university who gives me a platform for this research.

Abstract
Benchmarking is concerned with enhancing organizational performance by establishing
standards against which processes, products and performance can be compared and
consequently improved. The importance of creative thinking of employees for organization is
widely accepted. Creative thinking of employees refers to the processes by which organizations
develop new knowledge and core competences in order to improve the organization
performance.
Purpose: This paper examines the effect of benchmarking on organization performance when
it is coupled to creative thinking of employees. By examining the creative thinking of
employees, evidence is presented that supports the argument that benchmarking brings the
greatest benefit to organization performance when combined with creative thinking of
employees.
Sample: The sample is the 200 employees of the banking sector in Rawalpindi/Islamabad and
we use questionnaires as the sampling technique in order to find the impact of benchmarking
on organization performance when it is coupled to effective thinking of employees.
Results: The results show that there is the positive relationship between benchmarking and
organization performance and creative thinking of employees within a company is an essential
ingredient in strengthening the relationship between benchmarking and organization
performance.

INTRODUCTION
Globalization has changed the business scenario generally and competition, in particular. The
modern business environment is characterized by radical changes due to technological
developments, increase competition, and the developments of customers desires and needs.
Many innovative approaches to management, often emanating from Japan, have emerged
during the last thirty years, and have been embraced by Western businesses in the quest for
improved performance. During this period, the theory and practice of benchmarking has also
developed. While many denitions and variations exist, benchmarking is essentially a set of
tools and approaches designed to assist in achieving continuous improvement. By using
objective external standards an organization can assess its performance in relation to
competitors but, more importantly, by creative thinking of employees can lead to the improved
organization performance (Schumpetes, 1994).
The mechanics of benchmarking, and varying approaches to it, are examined later in this paper,
but the identication and management of organizational expertise built around customers,
products, processes, technology and competitors are integral elements of the organization
process. Here the notion of creative thinking of employees arises which has emerged as an area
of increasing importance over the last few years (Shalley, 1995). It is primarily concerned with
the development and management of an organizations information and knowledge assets and
thy improved the organization performance (Nonaka, 1991 and wing, 1997).
According to Jusoh (2006), the pressure from domestic and global competitors and customers,
demands for quality and reliable products, a high expectation from the stakeholders and usage
of new and advanced manufacturing technology. As well as, the increased competition has
forced organizations to continually monitor their products and services as well as that of the
competitors. Therefore, studies have advocated that benchmarking are a key for survival (Mia
& Clarke, 1999).
This paper explores the relationship between benchmarking and organization performance and
the impact of creative thinking of employees on the realationship.. First, this paper proceeds
with a brief explanation on the the benchmarking and creative thinking of employess and
literature review; Second, it discusses the methodology adopted, the objectives of the study
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and the test conducted to obtain the reliable measures of variables. Third, it determines the
correlations between the variables. Fourth, it highlights the results of correlations, regression
and descriptive analyses. Finally, the results are then discussed and implications for academics
and practitioners highlighted.

LITERATURE REVIEW
Benchmarking
Continuous change and improvement are now integral features of global business activity.
Outstanding customer service, eradication of flawed products, elimination of waste and the
creation of a quality culture are major aspects of the philosophy of continuous improvement,
and are central to the total quality management (TQM) paradigm (Dale and Bunney, 1999).
Many different approaches to management have emerged during last 30 years and adopted by
western businesses in order to achieve improved performance. During the period the practice
of benchmarking has also developed. Benchmarking is a set of tools in order to achieve
continuous improved performance (Pemberton and Stonehouse, 2001). By using external
standards an organization can assess its performance in relation to competitors.
A benchmark can be defined as a physiological or biological reference value against which
performance is compared (Zairi, 1992). In its narrowest sense, therefore, benchmarking in a
business context is concerned with comparing a companys performance with that of
competing organizations in an attempt to improve how it performs the same, or similar,
functions (Watson, 1992). As a starting point, it represents an attempt to identify and
subsequently implement best practice (Camp, 1995).
There is no single, agreed approach to benchmarking and its benefits are largely governed by
the nature of the process adopted. Camp, for example, identifies four distinct methods of
benchmarking, whereas Bhutta and Huq argue that there are seven different approaches to
benchmarking (Camp, 1989; Bhutta and Huq, 1999). In this paper, attention is focused on
metric, process and diagnostic benchmarking, three broad categories encompassing many of
the features of methods discussed by other authors (Appleby, 1999).

Metric Benchmarking:
Metric benchmarking is based upon comparisons of certain performance data which are
perceived to be both important and relevant. For example, manufacturing companies use such
data to compare their delivery reliability, scrap rates and absenteeism levels, among several
other measures, with those of other competitors and award-winning companies (DTI et al.,
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1995). This form of benchmarking requires a group of organizations to submit performance


data relating to different aspects of their activities, against which individual organizations can
then evaluate their performance in relation to that of leading performers or industry averages.
While such benchmarking may highlight the strengths and weaknesses of an organizations
performance, there are obvious and inherent dangers in using raw data on aspects of
performance as the basis for comparison. Metric benchmarking is concerned with what
constitutes good performance rather than how it is achieved (Pemberton and stone house,
2001).

Process Benchmarking:
Process benchmarking involves in-depth comparisons of specific areas of activity between two
or more organizations in an attempt to learn how improved performance might be achieved
(Zairi, 1992; Camp, 1995). However, while offering potentially greater benefits in this respect,
the approach is both difficult and expensive. As a consequence, few organizations embarking
upon process benchmarking have fully capitalized upon its potential to significantly enhance
performance, with research indicating that as few as 5% of benchmarking projects actually
result in the transfer of best practice (CCI, 1993). It is worth stressing, however, that process
benchmarking can and does produce impressive results. For example, Camp presents six case
studies outlining the success of companies such as AT&T, Ritz-Carlton and Westinghouse, for
example (Camp, 1995). Zairi and Codling cite further examples of companies that have
experienced success in this arena (Zairi, 1998; Codling, 1998). However, Friedewald describes
such examples as a few leading lights, arguing that the amassed survey evidence is limited and
of dubious reliability, fraught with problems of definition and methodology, with all but the
most quality mature organizations tending to focus on metrics, as opposed to best practices
(Friedewald, 2000, unpublished dissertation). The observed difficulties center predominantly on
the inability of all but the most sophisticated and innovative companies to recognize the
importance of benchmarking (Pemberton and Stonehouse, 2001).

Diagnostic Benchmarking:
It is clear that a necessary precursor to process benchmarking is a detailed understanding of the
organizations own processes. Naturally, in most organizations, the first step in a process
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benchmarking exercise concerns a study and mapping of the processes in question, an often
informative procedure in itself. Ultimately, valuable lessons are subsequently learned by
comparing the businesss own processes with those of other organizations, although the
preparatory step of pooling of knowledge about the processes from various internal sources is
often the most informative and beneficial consequence of the process. Codling, for example,
notes that the first benefits from benchmarking usually occur at this stage, with waste, error
and duplication being identified and, subsequently, eradicated (Codling, 1998).
Diagnostic benchmarking has features of metric and process benchmarking, seeking to explore
both practices and performance, as well as identifying areas of relatively weak company
performance and organizational practices showing room for improvement (Appleby, 1999). The
technique builds upon the idea of performance comparisons, but recognizes the limitations of
using such a benchmark in isolation by inviting an organization to compare its practices or
processes to those of other organizations, simultaneously assessing the results arising from
their practices (Pemberton and Stonehouse, 2001).

Factors affecting Benchmarking


Benchmarking improved the organization performance when it is combined with organizational
learning (Pemberton and Stonehouse, 2001). Manufacturing companies use benchmarking to
compare their delivery, reliability, scrap rates and absenteeism level with those of competitors
(DTI et all, 1995). Lewis also arrives that from personal experience, 95% of best practice
sharing is of no value (Lewis, 2000). Szulanskis exclusive study of intra-firm best practice
transfers offer some insights into the reasons for the difficulties in implementing best practice
(Szulanski, 1993). The benefit from benchmarking with waste, error, duplication being
identified and eradicated (Codling, 1998). Benchmarking highlighting the problems and also
demonstrating the alternative approaches (Yarrow, 1999).

Creative Thinking
The importance of innovative thinking of employees for organization is widely accepted (Van de
Van, 1986). In particular employee innovative behavior e.g developing, adopting and

implementing new ideas is an important asset in order to achieve superior performance (West
and Farr, 1990).
Creative thinking as an employees intention, introduction and application of new ideas,
products, process and procedures to his/her work role, work unit and organization (Pemberton
and Stonehouse, 2001). Examples of such behavior include searching out new technologies,
new ways to achieve objectives, apply new work methods and investigating resources to
implement new ideas. One major reason people innovate in workplace is to bring performance
gains. Expected positive performance outcomes are positively related to creative thinking of
employees (Pemberton et all, 2001).

Entrepreneurial Creativity:
Entrepreneurial activity involves carrying out of new combinations of an existing equilibrium
within an industry (Schumpeter, 1994). The implementation of novel, useful ideas to establish
a new business or new program to deliver product or service.

Recognizing Creativity:
Many managers assume that although they can assess productivity, product, revenue, quality
and other features of work done in firms. They cant asses or even recognize creativity.
However years of research suggest that creativity can be recognized and assessed as long as
people making assessment have a good degree of familiarity with work done in particular
domain (Ambaile, 1982).

Creativity from Social Perspective:


Creativity in generation of novel ideas, product, process or solution (Shalley, 1995). This can be
encompass creative solutions to business problems, relative changes to job, process and
technologies.

Factors that affect creative thinking


A variety of factors have been studied as important to employees creative thinking such as
organization culture and climate (Scott and Bruce, 1994), relationship with supervisor (Janssen
et all, 2004), job chractertics (Oldman et all, 1996) and individual differences (Bruce and West,

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1995). Psychological process that would explain how and why individual thinking affects
innovative thinking (Shalley, 2004).

Organization performance
The concept of performance is related to the survival and success of an organization. Majority
of studies have used both financial and non-financial indicators to measure performance
(Johannessen et all, 1999). The financial and non-financial can be used to operational
performance but use of financial measure in more common even to some extent in certain
organization (Pemberton et all, 2001).
Organization performance comprises the actual output of an organization as measured against
its intended objectives and goal. Organization performance focuses on four areas financial
performance, product performance, process performance and shareholder return (Stonehouse
et all, 2001).

Financial Performance:
It is a subjective measure of how well a firm can use assets from its primary mode of businesses
and generate revenue. This indicates the financial health of an organization can be used to
compare similar firms across the same industry.

Customer Service:
Customer service is a provision of service to customer before, during and after a purchase.
Customer service is directly related to customer satisfaction that brings superior performance
(Turban, 2002). A customer service experience can change the entire perception a customer
has of the organization. Many organizations have employed a variety of methods to improve
customer service that enhance the performance.

Social responsibility:
Social responsibility is an ethical entity has an obligation to act to benefit the society but
actually it improves the performance of the organization. Any welfare act is directly related to
enhancement of performance of organization. (Stonehouse et all, 2001)

Employee stewardship:

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It is an ethic that embodies the responsible planning and management of resources. When
employees are responsible in their work it automatically enhances the organization
performance.

Factors that affect organization performance


Reward and PMS affect organization performance (scopus, 2004). Variety of factors affect the
organization performance; quality measurement enhance organization performance (Agus,
2005), employee focus enhance productivity (Hassan, 2005), TQM has a potential to increase
organization effectiveness (Ahire, 1996), benchmarking (Murray, 1997), absenteeism and
supplier realtions (Leonard, 1982), motivation (Shores, 1992) and employee commitment
(Daniel, 1991).

Rationale for Research


Irrespective of benchmarking technique employed by an organization, creative thinking of
employees strengthen the relationship between benchmarking and organization performance.
However, there is a danger that some approaches to benchmarking can result purely in
attempts to emulate the practice of successful organizations. While performance improvement
may ensue, this could correspond merely to adaptive Creative thinking and under such
circumstances is unlikely to result in an organization overtaking its competitors. Instead,
benchmarking should be used as a catalyst for reflection on, and review of, current
organizational processes and practices, as a basis for creating new approaches based on new
organizational knowledge.
Creative thinking is an increasingly important management function to ensure firms growth
(Imm and workman, 2004). However firms need creative employees to initiate organization
innovation. Employee creativity is recognized as a key for generating a competitive advantage
(Shalley and oldhman, 2004). The role of employees in organization performance is of particular
importance in service sector. Employees hold an important creative thinking that could be
incentivized (wang and Netemeyer, 2004).as employees are frequently responsible for service
delivery. They are key in ensuring customer satisfaction (Bitter and Booms, 1990). Employees

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creativity can be of greater for organization. Creative employees have substantial effect of
organization performance.
In reality an organizational culture promotes shared vision and clear goal and encourages
creative thinking. The use of benchmarking techniques in such a cultural setting improved the
organization performance (Yarrow, 2001).

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METHODOLGY
Problem Statement:
To what extent benchmarking deliver improved organization performance when it is coupled to
creative thinking of employees.

Theoretical Framework:

ORGANIZATION
PERFORMANCE

BENCHMARKING

CREATIVE
THINKING

H1: Benchmarking has positive effect on organization performance.


H2: Creative thinking of employees moderates the relationship between benchmarking and
organization performance.

Type of investigation:
This is a causal study because it shows the cause and effect relationship between the variables.

Study setting:
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In our research we do a field study because this study is conducted to establish cause an effect
relationship using the same natural environment in which employee normally functions.

Unit of analysis:
In our study the unit of analysis is individual; we want to know the effect of benchmarking on
organization performance when it is coupled to the creative thinking of employees then for this
we are interested in individual employees in the organization in order to find out the result.

Time horizon:
The present study used a cross-sectional study as it provides the user with a snapshot of
business elements at a given point in time (Hair et al., 2003). This type of study seemed
appropriate as it can be used within a short space of time and data can be summarized
statistically.

Population:
The population for the present study consisted of employees of banking sector in Rawalpindi
and Islamabad. The table below illustrates the detail of our total population:
Banks

No of employees

HBL

1200

MCB

900

UBL

700

BOP

890

BankIsamic

650

Faysal Bank

1100

Silk Bank

750

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Sample size:
In our study we take sample size as 50 i.e. we take the sample of 50 employees to find out the
results. The below table explains about that how we select our sample.

Banks

Sample Size

HBL

60

MCB

50

UBL

50

BOP

40

Sampling design:
The sampling design that was considered appropriate for the present study was simple random
sampling. In probability sampling, we use simple random sampling in which every person has an
equal chance of selection.

Instrument:
We used questionnaire as an instrument in order to find out the result.

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RESULTS
Table- 1
Frequency%
Gender
Age

Education

Organization
Income

Experience

Organization Size

Management Level

Training Received

Male
Female
Under 20
20 to 30
30 to 40
Above 40
Bachelor
Master
M-Phill
Public
Private
Less than 20000
20000 to 30000
30000 to 40000
Above 40000
1 to 3 years
3 to 7 years
More than 7 years
Large
Medium
Small
Low
Middle
Top
Yes
No

78.9
21.1
86.8
13.2
34.2
47.4
18.4
44.7
55.3
21.1
44.7
34.2
57.9
26.3
15.8
71.1
18.4
10.5
13.2
57.9
28.9
81.6
18.4

Table-1 shows the demographic analysis: The demographics results indicates that
the participants who filled our questionnaire are 78.9% male and 21.1% female, 86.8%
participants are the age of 20 to 30 and 13.2% participants are the age of 30 to 40. The results
show 57.9% participants have experience of 1 to 3 years, 26.3% participants have experience of
4 to 7 years and the employees who have experience of 7 and above years are 15.8% . 44.7%
participants belong to the public sector and remaining 55.3% participants belong to the private
sector. The participants who filled our questionnaire out of them 34.2% are bachelors, 47.4%
are Masters holder and remaining 18.4% are M-Phil holder. 21.1% participants have income of
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less than 20000, 44.7% have 20000 t0 30000 and 34.2% have 30000 to 40000 income. 13.2%
are low level managers, 57.9% are middle level and 28.9% are top level managers. Training
received by 81.6% of employees.

Table - 2
Descriptive statistics of Study Variable
Variables

Min

Max

Mean

S.D

Benchmarking

1.89

5.00

3.5409

.70043

Creative

2.00

5.00

3.5585

.73180

2.29

4.59

3.5108

.58282

Thinking
Organization
Performance

Table -2 shows the descriptive analysis show the maximum and minimum values
and mean and standard deviation of the variables.
The minimum and maximum value of benchmarking is 5.00 and 1.89 respectively with mean of
3.54 and standard deviation of 0.70. The minimum and maximum value of creative thinking is 2
and 5 respectively with mean and standard deviation of 3.55 and 0.73. The minimum and
maximum value of organization performance is 2.29 and 4.59 respectively with mean and
standard deviation of 3.51 and 0.58.

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Table - 3
Correlation Matrix of Study Variable
Variable

II

III

Benchmarking

0.755*

0.632*

II

Creative

0.755*

0.749*

0.632*

0.749*

Thinking
III

Organization
Performance

*P <0.01

Table 3 shows Correlation

which is the statistical tool which tells that if there is

any relationship between the variables or not. The strong relationship between benchmarking
and creative thinking is 0.755, strong relationship between creative thinking and organization
performance is 0.749 and moderate relationship between benchmarking and organization
performance is 0.632.

Table - 4
Reliability of Scale
Variable

No of Items

Alpha

Benchmarking

0.808

Creative Thinking

0.841

Organization Performance

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0.807

Table 4 shows the reliability analysis which is very important. According to Nelney (1978) the
Cronbachs alpha is the most common measure of internal consistency (reliability). According to

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Nelney the reliability value should be greater than 0.7.The reliability value of benchmarking,
creative thinking and organization performance is greater than 0.7 it means it is accepted.

Table 5
Regression Analysis of Independent and Moderator
Variable

S/E

Beta

Constant

1.649

0.388

Benchmarking

0.526

0.107

Constant

1.263

0.348

Benchmarking

0.129

0.140

0.155

0.364

Creative

0.503

0.134

0.632

0.001

Model 1
4.252
0.632

4.892

Model 2
0.001

Thinking
R=0.756, R2=0.571, adjusted R2=0.547, F=23.321
R=0.979, R2=0.959, adjusted R2=0.956, .F=267.487

Table- 5 shows regression analysis:

The coefficient of determination (R2) was

found to be 0.571 indicating that 57% change in organization performance due to


benchmarking. The coefficient of determination R2 is 0.979 indicating that 97% of the change in
employee performance is due to creative thinking. From the first regression model, it can be
observed that job stress (beta = 0.155), had a significant and positive moderate relationship
with organization performance. The 2nd model states that creative thinking (beta=0.632) had
the significant moderate relationship with organization performance.

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DISCUSSION AND ANALYSIS


The results above lend weight to the notion that the creative thinking of employees is strongly
associated with companies engaged in benchmarking. Training figure prominently and is highly
significant in the banking sector. In the case of the banking sector, teamwork, recognition and
reward and active management are important factors for those organizations involved in
benchmarking. It is clear, as many other authors have reported that the factors investigated in
this research appear to be key elements of creative thinking of employees. However, adoption
of benchmarking would appear to be strongly associated with many of these features.
Furthermore, the cultural environment, represents an essential element distinguishing
benchmarking organizations with their non-benchmarking. As outlined earlier in this paper,
culture is one of elements present in creative thinking of employees.
However, the culture truly enhances creative thinking and influences competitive performance
(Stonehouse and Pemberton, 1999). The issue of employee morale and satisfaction fall into this
category in both the banking sector. At first sight, this is surprising, but is consistent with the
work of Herzberg examining human motivation and behavior (Herzberg, 1966). Just as Herzberg
found that hygiene factors had little impact on work performance, it appears that such hygiene
or environmental factors have little impact on creative thinking of employees.
In essence, these results add weight to the notion that benchmarking is merely one element of
a range of features and characteristics that permit a company to improve organizational
performance. World-class and potential winners do not view benchmarking as a cure for
guaranteed success, but it complements existing approaches and is underpinned by a creative
culture. Benchmarking is perhaps the best means for servicing the human asset by continuously
supplying new ideas to sustain superior performance levels (Zairi, 1998).

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Conclusion
Benchmarking represents an attempt by an organization to assess, compare and advance its
performance using acknowledged benchmarks of good and best practice. However, as the
research presented here demonstrates, benchmarking is most likely to deliver significantly
improved organizational performance when it is coupled to creative thinking of employees.
Indeed, the term benchThinking is perhaps a more instructive term when examining
competitive performance in a benchmarking context.
While more detailed research is clearly required to assess potential causality, the evidence
presented in this paper further advances the argument that when assessing performance and
practice in a benchmarking context, the presence of creative thinking appears a key
determinant of success.
Ultimately, organizational performance improves when a company does things differently to its
competitors and behaves in a distinctive way through, for example product innovation etc. The
challenge for businesses embracing benchmarking revolves around their ability to develop a
creative culture that goes beyond imitation of existing best practice by developing new ideas
and processes to improve efficiency and enhance quality, as well as striving to improve upon
the practices of competitors. In effect, creative thinking of employees would appear to be an
essential ingredient if companies are to optimize the outputs of the benchmarking process in
the pursuit of superior performance.

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LIMITATIONS
There are several limitations of this study. First, the work units studied here were embedded
within a four organization of Rawalpindi and Islamabad only; therefore it may have only offered
the cultural identity of that organization. Performing a larger study encompassing more
organizations would alleviate this limitation and assist in making the results more generalize.
Since the data population for this study was city employees it has added to the variety of
organizations that have been surveyed.
One aspect that cannot be overlooked is that the employees involved in this study reported
their own perception. Lying on the questionnaire could have played a role in the study. One
never knows if it did or not without access to names and their records at the organization.
Confidentiality is always an issue with any study that uses self-report.
Additionally, creative thinking is very complex concepts because definitions of creativity cannot
be narrowed to certain variables listed by the researcher. Attempting to define these would be
difficult because each individual has their own construct as to what creativity is to them.
Therefore, finding what creative employees can be considered to be a little subjective.

IMPLICATIONS
This study intends to present understanding of those variables that are likely to determine the
impact in banking sector and hopes that company managers will find these findings valuable to
both service and manufacturing sectors.

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