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com

Benchmarking is the practice of being humble enough to admit that someone else is better at something and wise enough to try and learn how to match and even surpass t he m a t i t .

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Benchmarking - is the process of determining who is the very best, who sets the standard, and what that standard is. organizations evaluate various aspects of their processes in relation to best practice

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y Benchmarking is a powerful management tool because it

overcomes paradigm blindness y Benchmarking gets people out of their comfort zones and generates closed loop change processes

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Benchmarking the Japanese way

I. People
Employee selection based on potential Importance of the individual Lifetime employment Company loyalty

II. Work style

Top management involved in quality Job rotation Very important to have an inquiring mind Attitude to Excel under challenge

III. Product Quality

Zero defect policy Quality supersedes production Just in Time inventory Company takes interest in development of suppliers

IV. Customers
Global reach Attention to detail Market research

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The Xerox story

y Invented as a formal process by Rank Xerox y Benchmarking initiative taken as a part of its Leadership

Through Quality program. y The program encouraged Xerox to find ways reduce their manufacturing costs.

to

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The key findings by Xerox

y Twice as long as its japanese competitors to bring a

product to market y Five times the number of engineers, y Four times the number of design changes y Three times the design costs...

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y all the Japanese copier companies put together had only

1,000 suppliers, while Xerox alone had 5,000. y Cooperation between the company and the vendor extended to just-in-time production scheduling,

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Outcome
y Highly satisfied customers for its copier/duplicator and

printing systems increased by 38% and 39% respectively y Customer satisfaction with Xerox's sales processes improved by 40%, service processes by 18% and administrative processes by 21%...

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Steps for benchmarking

y y y y y y y y y

Identify your problem areas Identify organizations that are leaders in these areas Scope definition Determine measurement methods, units, indicators and data collection method Data collection Analysis of the discrepancies Present the results and discuss implications / improvement areas and goals Make improvement plans or new procedures Monitor progress and plan ongoing benchmark
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Benchmarking ::Stages of improvement

World Class Recognized as the best. Benchmarked by others even in other sectors Best in Class Exceeds customer expectations,outperforms all competitors and has clear competitive edge

Efficient Meets all internal requirements for cost margins, asset utilization,cycle-time and measures of excellence

Effective Satisfies all customer requirements

Incapable Is ineffective , inefficient and at the risk of failing. Needs major redesign
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24/7
y Staff are benchmarked in five key areas: productivity, cost

and structure, compensation and benefits, hiring, and retention. y It is the first Indian BPO company to get an ISO 9002 certification and in December 2001 was awarded with COPC-2000 certification by COPC (Customer Outsourcing Performance Centre), an authority in contact centre operations.

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LEVELS OF BENCHMARKING
y Strategic Benchmarking - using best practices to develop

corporate, program, product strategies and results. y Operational Benchmarking - assessing and implementing the best practices of industry or public service leaders to improve processes to the extent possible to meet organizational goals.

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Types of Benchmarking
1. Internal benchmarking -benchmark within a corporation, for example between business units 2. Competitive benchmarking - benchmark performance or processes with competitors

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3. Functional benchmarking -benchmark similar processes within an industry 4. Generic benchmarking - comparing operations between unrelated industries

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5. Collaborative benchmarking - carried out collaboratively by groups of companies (e.g. subsidiaries of a multinational in different countries or an industry organization).

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VERIZON
y Energy Star benchmarking - dramatically reduce energy

costs while reducing pollution - top Energy Star company in the telecommunications industry y Compensation y Process benchmarking of software engineering models and the processes followed for CMMI certification

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Energy use benchmarking

y Energy-use benchmarking process for the company's

central office buildings y Identify efficient energy-use administrative buildings y Buildings audited for energy use - receive a score between 0 and 100, based on how efficiently the building uses electricity y Score of 75 or higher - eligible to apply for the energy star label y Saved millions of dollars in energy costs annually
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CO M PEN S A T ION y Benchmarks compensation programs against two peer

groups - companies that Verizon competes with for executive talent y Market peer group - similarly sized, multinational companies regardless of industry. eg., 3M, AT&T, Cisco Systems, Coca Cola, Ford y Industry peer group - companies that provide wireline, wireless and broadband communication services. eg., AT&T , BellSouth, Time Warner

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COMPENSATION
y Annually benchmarks and reviews verizons total

compensation and component pay levels (base salary, short- and long-term incentive opportunities) y Overall compensation market and industry peers y Short & long-term incentive programs and individual compensation industry peers

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Cost of benchmarking
y There are costs to benchmarking, although many

companies find that it pays for itself. The three main types of costs are: y Visit costs. y Time costs y Benchmarking database costs

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Limitations of benchmarking
y Tough process y Time-consuming and expensive. y 'they are different from us' syndrome y Comparing with 'best in class' -ideally be done on a

continuous basis

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COMMON MISTAKES

y Confusing benchmarking with participating in a

survey y Thinking there are pre-existing "benchmarks" to be found y Forgetting about service delivery and customer satisfaction y The process is too large and complex to be manageable y Confusing benchmarking with research

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Contd
y Misalignment y Picking a topic that is too intangible and difficult to

measure y Not establishing the baseline y Not researching benchmarking partners thoroughly y Not having a code of ethics and contract agreed with partners

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How to improve??
y You can keep costs down by doing benchmarking in

degrees and by defining very narrow areas to explore y With careful planning, the benchmarking costs can be kept to a minimum. y To benchmark effectively, one must team up with companies in ones own industry whose processes are analogous

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INFOSYS Financial policy

y Return of capital should be two times the cost of

capital and three times the invested capital, excluding cash earned 3.2 times and 4.8 times respectively y Benchmark of 30% operating cash flows - earned 31.5% y Days of the sales outstanding benchmark was 60 achieved 47

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INFOSYS PERFORMANCE
y Measure response times and throughput for different

workload intensities to use as a standard for comparison and to understand scalability of system components y Benchmark consists of a workload model and associated performance measures - used as a standard to compare the performance of other systems or workloads in a specific domain

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CONCLUSION
Opens organisation to new ideas, tools ans methods to

improve effectiveness
The knowledge you gain is well worth the investment you make.

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