Table of contents
- What is Benchmarking?
- Types of Benchmarking
- Benchmarking Process & Analysis
- Performance gaps documentation
- Prepare for the benchmarking case
- Getting executive approval
- Finding project team members
- Determining the goals and scope
- Current state Documentation
- Accept the metrics
- Write the metrics
- Measurement of the current state
- Locating a benchmarking partner
- Planning the benchmarking strategy
- Site visits and interviews
- Learn from mistakes and measure performance
- Communicate with executives
- Choosing the best methods for improvement
- Obtaining executive approval for the implementation
- Controlling and implementing the improvements
- Reporting the results after a steady-state has been achieved
- Benchmarking Code of Conduct
- In conclusion
- Related Articles
What is Benchmarking?
Benchmarking is a way to identify the best performers in an industry, company, or other sector. This information can help identify and fix weaknesses in processes within an organization, which will allow them to gain a competitive edge.
Six Sigma Benchmarking allows companies to evaluate their performance rather than compare it with industry standards or other world-class companies. This usually focuses on one aspect or process of the company’s operations.
Benchmarking is not a comparison of an operation with another, but refers to comparing one aspect of an operation with a best-in-class operation.
For example, a medical clinic may use key metrics to assess its customer service performance and then compare it with a retailer that is known for providing outstanding customer service. They can then see where they are failing and make improvements.
Let’s find out more about how benchmarking can help your company achieve its goals! When discussing benchmarking, it’s important to understand the following points. This will help you work towards it.
- Benchmarking should be limited to the same or related industries. A comparison of an apple and an orange is not an innovative idea.
- Benchmarking should only be done for metrics that are vital to an organization’s or product’s performance. You can benchmark Quality and Cost as well as Productivity (Time- Takt/ Cycle/ Lead Time), etc.
- Identify the GAPS during the process. This will help you to identify the current situation and create plans to compare stage-wise performance to achieve the desired goal.
- It’s important to follow all the Best Practices established by the Benchmark. This is because it allows organizations to compare and strategize how they can improve their performance against Benchmark targets. Best Practice Benchmarking is another name for Process Benchmarking.
- Always apply SMART (Specific, Measurable, Achievable, Relevant & Time Bound) rules when setting goals and work out the financials or in other words do Cost Benefit Analysis to identify if the benefits reaped are higher than the cost that would be incurred in trying to implement a new set-up. It’s crucial to act quickly. You may be losing out to your competitors if you wait.
- Look for potential partners who can work together to achieve the Benchmark Standards.
Competitive benchmarking: This is the study of the competition in the company’s sector with the aim of setting industry standards. An organization can use competitive benchmarking to evaluate their position in its trade. To achieve trade management efficiency goals, aggressive benchmarking may also be useful.
Strategic benchmarking: Look beyond the industry to find top-notch companies that achieve a higher standard. It’s a method of assessing and measuring efficiency at the highest level. This is especially useful for organizations that need to do more than their own business. Six Sigma employs Hoshin (the management of and control over objectives) to make sure that all employees understand the corporate’s strategic direction. Hoshin plans are built on benchmarks established by high-quality organizations. These benchmarks are often obtained from the outside.
Internal benchmarking: High-performing areas of an organization often share their best practices with other parts of the business. It all depends on the corporation’s size. This could be sufficient to demonstrate a wide range of efficiency. If similar industries are not readily available, then you might want to do some internal benchmarking.
Types of Benchmarking
Product Benchmarking can be used for upgraded or new products. For example, a customer might be impressed by the battery life of a smartphone. All Smartphones have the same features. Any company that taps on a sensitive feature will be able to improve its business performance. A Benchmark goal or achievement for the feature will make a stark difference.
Process Benchmarking is an application that allows you to identify a Process as a Center of Excellence. This helps companies to expand their business by purchasing similar processes or outsourcing their benchmarked processes in order to save operating costs.
Functional benchmarking is used for determining and improving efficiency across contrasting functions. This involves breaking down the project into their functions (e.g., IT, HR, Administration, etc.). Next, you will need to work on each function individually to improve them. This will allow you to apply improvement strategies across similar functions within your organization.
Performance Benchmarking is essential for all industries. It’s the main criteria for Product Benchmarking. High performance directly affects an organization’s business performance and helps maintain a competitive edge. Customers will choose companies with higher performance.
Financial Benchmarking is a process to improve an organization’s finances. This includes all other types and strategies that are part of benchmarking. Each strategy aims to reduce costs, improve efficiency, increase sales, or raise revenue.
Benchmarking Process & Analysis
The first crucial step is to find out if the benchmarking standard is set up by the right company. Benchmarking involves site visits, interviews, and documentation, therefore it’s important to know the type of benchmark you want to determine the best one for your business.
It’s essential to clearly define and document your desired outcome and scope to make sure there are no competition issues. Trust is vital for information exchange. Transparency at the beginning of benchmarking will ensure that you have the best experience possible and provide benchmarking examples.
Numerous resources provide information on the benchmarking process. The following guidelines are a suitable place for you to start:
Performance gaps documentation
Performance gaps are those that show how the current state compares to the ideal future state. This state might be fully understood, and benchmarking may not be necessary. Lack of parameters should not be considered a reason to benchmark.
Prepare for the benchmarking case
Plan. You should be able to support benchmarking. Talk to other business units, such as finance and sales. They might be able to provide insight.
Talk to the functional managers about how their team is doing. Consider what appeals to executives. Prepare to present the business case.
Getting executive approval
Approval will allow for internal collaboration and maximize the company’s benefit. Engage with the executive team at every step.
Finding project team members
Determining the goals and scope
The project team determines the benchmarking range. This ensures that everyone gets what they want. Here are some examples of objectives:
- Compare performance with an industry-standard
- Product performance can be improved
- Increase product quality
- Market share to increase
- Lower manufacturing costs
- Create a measurement system
- Determine proper metrics
- Making a project plan for benchmarking and getting executive approval
Make sure that all parties are represented within the company. You will get approval if the key decision-makers are included. Use a template for your project plan if you have one.
Ask executives to tell you what they require to approve the decision.
Current state Documentation
Without any improvements, the current state is the benchmark to which the standard should be compared. Don’t waste your time collecting data. Don’t include optimization ideas.
All stakeholders and functions should be included. This is an exciting time to start Kaizen.
Accept the metrics
These metrics should be within the scope of the objective. This is the time to start mapping the future state.
Write the metrics
The following should be included in elements:
- What should be measured
- What shouldn’t be measured?
- Accuracy in measurements
- Method of measurement
- Standard for Repeatability and Reproducibility (Estimate R&R).
- Calculation methods
- Examples of measurement
Measurement of the current state
Depending on the chosen metrics, the current state might already be known. It is important to document the measurements used to compare to the future state.
Locating a benchmarking partner
The benchmarking partner is the industry leader. This process can take a lot of research and footwork. Reexamining the metrics might be necessary. It is fluid because the future state of things is still unknown.
Planning the benchmarking strategy
A benchmarking plan is a detailed project plan that has been developed in close collaboration with key contacts and an industry leader. It is important to clearly define the scope of interviews. Identify and document your questions.
Get to know the person you will interview. Work with the industry leader. This will make a significant difference in your relationship with the industry leader.
Site visits and interviews
You should not stray from the benchmarking plan. Consensual collaboration may provide additional information. However, all partnerships should be agreed upon in writing and in advance.
Learn from mistakes and measure performance
All elements of metrics should be the same as those measured before benchmarking. Any new parameters must be discussed separately from the “current state” established prior to benchmarking.
Communicate with executives
This is a fantastic way to make your project champion a resource. After analyzing the results, communication should be made immediately. Both negative and positive findings can be found.
Include potential studies and implementation plans. Engage the executives. You should be ready to make changes and take more measures before you move forward.
Choosing the best methods for improvement
In the project charter, all members of the project team are defined. To speed up executive approval, the project champion should be included.
Obtaining executive approval for the implementation
Continue to build on the original project plan. Now show the “future state” and “current state”. Keep a project plan with milestones and expectations in place. Identify all process owners and stakeholders that are needed to implement the improvements.
Controlling and implementing the improvements
During the control and improvement phases, it’s important to work closely with process owners. To ensure that Six Sigma DMAIC projects achieve lasting and efficient results, this is crucial. The process owner is the person who is responsible for the product, process, or service that was benchmarked or modified by the benchmarking project. The new process must be documented in sufficient detail. Training programs might be necessary.
Reporting the results after a steady-state has been achieved
This step is crucial to determine the true benefit. This can be done in a steady state, or after you have enough data. Good reports will improve your chances of getting future approvals for projects.
It took a lot more time and challenging work from many people. Let them know how much you appreciate them. You should give them credit to make sure they are excited about the opportunity to work on your next project.
Benchmarking Code of Conduct
Benchmarking with an industry leader is a collaboration. Hence, the organization must safeguard the trade secrets of the standard and intellectual property.
- Handle confidential information with the utmost care.
- Use the information only as agreed.
- Do not get into any conversations that seem illegal, such as pricing methods.
- Personnel should be contacted only after getting permission from key collaborators.
- Have a plan and be well prepared.
- Treat interactions as an exchange of ideas, not as an investigation.
- Seek clarifications rather than filling in the blanks.
- Be respectful.
It’s obvious why an organization would want to benchmark or reach industry benchmarks. Many organizations have access to databases and tools that allow them to create standards, conduct surveys and polls, and publish books about the performance of different businesses.
It’s crucial to analyze and study the strengths and weaknesses of your competitors before the race starts.
The benchmarking process can be a real help for Six Sigma practitioners, especially in the analysis given the fact that it helps them:
- Choose what they need to measure.
- Shape the strategy to make sure it is relevant and ensures improvements.
- Fix realistic goals aligned to the industry standards.
This will result in a well-set strategy that will prove more than useful when it comes to taking on projects at work.