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Wednesday, February 17, 2016

8 Benefits of Benchmarking

When organizations want to improve their performance, they often benchmark. Benchmarking is the process of comparing one's business processes and performance metrics to industry bests and/or best practices from other industries. The discussion of whether benchmarking is good or bad is an old one. 

If haven’t bought into benchmarking manufacturing performance, below are 7 reasons why you might want to reconsider that strategy. The process of benchmarking can benefit your organization:

1. Better understand what makes a company successful. Benchmarking can provide a better outlook as to where you are versus where you want to be. The challenge is that successful companies are no doubt working to widen the gap.

2. Opens minds to new opportunities: Comparing key measures to industry targets or even internal targets, can be incentive to drive productivity and innovation needed to exceed those averages. This process usually raises new challenges for businesses.

3. Leads directly to an action plan: Rather than simply highlight problem areas, it undertakes a strong review of processes and metrics.

4. Improving productivity: Businesses following improvement action plans can expect gains in cost, cycle time, productivity, and quality.

5. An holistic approach: It is both qualitative and quantitative, ensuring more accuracy in developing a whole picture of your business.

6. Improve performance. Benchmarking identifies methods of improving operational efficiency and product design.

7. Gain strategic advantage. Benchmarking helps companies focus on capabilities critical to building strategic advantage.

8. Increase the rate of organizational learning. Benchmarking brings new ideas into the company and facilitates experience sharing.

Some feel that benchmarking can limit the true potential of an organization by focusing on how well their competitors are doing. Somewhere I heard the comment that "if you benchmark against your best competitors, your best product will look like your best competitor's crap.” Your competition won’t stand still and you shouldn’t either. Maybe there’s a case then for benchmarking organizations from other industries and not your competition.

The worst mistake is to simply adopt a best practice without first identifying the problem you are trying to solve. Tools and best practices must be applied in response to a specific, defined problem, not just because it seems like a good idea. Instead as we do in Lean you should learn about waste and value. Then analyze your processes to reduce waste and improve value to your customers. Learning from others can be very powerful, but you must learn to apply the right tools and ideas for your particular situation. The problems of your competition or that of other companies you benchmark may not necessarily be the same as yours.

Benchmarking can be an effective means to learn new skills and to develop your organization. However, it should be a process of continual improvement. Once you have implemented changes, you should benchmark your business again to see the results. This will tell you what is working, and where you can still improve.

While benhmarking is not a perfect process if done properly and consistently it can be the start of improving your business and creating a more optimal learning environment. Avoid using it as a means to judge your competition at the expense of creating customer value or solving someone else’s problems.

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