Benchmarking: Xerox, Hewlett Packard and General Motors of Mexico - Assignment Example

? Benchmarking Contents Benchmarking Contents 2 Part 3 Part 2: Case Study 8 Xerox 8 Hewlett- Packard 10 General Motors 11 Conclusion 13 Reference15 Part 1 Discuss whether, if overestimation of performance is common, management attempts to introduce benchmarking procedures are likely to meet with employee resistance? Benchmarking is termed as an improvement process which is mainly used to discover as well as incorporate the best practices in operation. It is the most preferred process which understands and identifies the elements of world class performance in work process (Damelio, 1995, p.1). There are four processes in benchmarking which includes planning, analysis, action and review. There are three different types of benchmarking which includes internal, external and best practice. About 70% of the fortune 500 companies goes for benchmarking companies like Ford Motor Company had benchmarked its function of account payable against Mazda Motor. Studies have shown that top management usually does not support the benchmarking. Mangers should not be discouraged from the process of benchmarking. It provides managers to know their goals through the data (Bernardin, 2008, p.222). According to Betts, there are people who perceive that their individual performance is better than actually it is which is also termed as the Lake Wobegon effect. Betts have conducted a research to seek if these phenomena are also present when the employees are asked to give their views on the performance of the organization. Overestimation of performance is common in organization as well as in individuals. Individuals rate themselves better than they actually are projected with the help of an example. Around 87% of MBA students at Stanford rate their performance to be at top in comparison with their peers, about 90% of the students believed that were above average and only 10% thought they were below average. Similar is with organizations. Thus benchmarking is important in order to escape from the Lake Wobegon effect as the consequences of this performance may not result to be effective for organizations or mangers. According to Alfred North Whitehead, it is not ignorance but ignorance of ignorance which leads to the death of knowledge. The performers who are below the average and are ignorant of the fact that they are poorer performer usually are not motivated to improve (Betts, Croom & Lu, 2011, p.734). Lake Wobegon effect or benchmarking revolves around perverse dynamic. The mangers believe that they are above average performers. But in reality not all mangers are above average neither does all of them deserve to get a performance bonus. Therefore establishing an appropriate peer group and benchmarking is the only option to establish a competitive edge over the competitors (Lipman & Hall, 2008, p.33). Therefore it has been proved that overestimation of performance is common in organizations and individuals. As per a survey conducted by Betts, it has been proved that overestimation of performance is common as 75 % of the employees reported above average performance, 20 of them reported average performance and only about 5% reported to be below average performance. The people are bad at understanding the average performance basically when they are to evaluate the performance of organization in which they work. Therefore the consequence of over estimating is likely to bring about a change and so a greater effort should be put on benchmarking performance and also in spreading awareness in respect to benchmarked to the organization (Betts, Croom & Lu, 2011, p.740). Thus creating a need for change is must in the organization but as seen the management decision of benchmarking usually creates a resistance in the employees. Change is an important aspect and should be done on regular intervals. Manager’s use benchmarking to compare the performance of employees on some given dimension in comparison with other organizations performance so that it can be decided how successful the change has been. For example, when Xerox was performing badly during 1980s it decided to benchmark the efficiency of distribution against L.L. Bean, efficiency of central computer against John Deere and of marketing liabilities against P&G. By studying these three companies Xerox was able to increase its performance (Jones, 2009, p.469). The upper management should endorse the policy to undertake the process of benchmarking in order to bring about a change in the organization. Significant changes are quite necessary and the resistance to change is also quite strong in most of the organization. There is always a resistance of change by the employees and they are in direct proportion to the change required. But resistance can be overcome by motivating the employees to live with uncertainty. If a manager has thought of benchmarking as organizations vehicle than vision is regarded as the fuel which keeps the process of benchmarking going (Coding, 1992, p.41). What are the potential means of remedying such overestimations and successfully implementing a benchmarking proposal? The potential means for remedying over estimation of performance is through benchmarking which the management is focusing mainly on so that the works can be compared with other organizations and changes can be implemented. Benchmarking focuses mainly on the external practices which an organization can use in order to improve its own process and practice. While implementing the process of benchmarking, managers should find organizations with common culture, context, size and operation. An organization with 500 people would have a different strategies then organizations with 5000 employees. Thus the organizations should firstly study and choose appropriate benchmarks which would prove to have an effective impact on the performance of the organization. Benchmarking is also the starting point for improving performance related to HR (Mathis & Jackson, 2010, p.63). There are different types of benchmarking that a company can undergo with according to the needs of the company. The different types includes, competitive benchmarking which is used to inform people as to how badly or else how effectively they are performing against direct competition. One of the examples of competitive benchmarking is Xerox. Xerox benchmarked its printers which were of low volume in order to market against that of Sharp, Minolta and Canon. The next type is functional benchmarking which aims to compare some specific functions such as services, logistics and distribution. Advantage of applying the functional benchmarking is that is easier to gain a way into the non competitive organizations as the process is less threatening. Example of the company who undertaken the functional benchmarking are Ford, IBM, 3M, Volvo and Sainsbury. Next is generic benchmarking which is quite similar to that of functional benchmarking. The next type is internal and external benchmarking which is also a common type used by the organizations. External benchmarking is also referred to as best practice (Zairi & Leonard, 1994, p.47). Organizations are in continuous pressure to improve the performance and become much more efficient along with customer focused. The most effective way to improve business is to adopt the best practice and compare the performance of the organization such as internal and external groups. Internal review provides efficiency but it does not help an organization to indicate that the wrongs things are been done effectively. Thus external comparison is an effective tool then the internal review. Benchmarking is a useful tool used in organizations to measure performance. Benchmarking can be both formal and informal. Thus formal or the best practice benchmarking contains the following steps, firstly the organization should obtain a commitment to bring about a change in the organization, and then determining the process that the company needs to change and decide accordingly, the company needs to identify the best practice. The next step is to develop benchmarking partners or partnership with organizations that displays the best practice. The company should study the product and operation method of the partnership firm so that it can deliver the best practices. The next step is to create a benchmark which would measure the outstanding performance, to compare and contrast the current practices of affirm with that of partners practice is the next step involved in effective benchmarking. There are different types of comparison which benchmarking may put light into such as organizational, performance, process and finally project benchmarks. And the final step is to develop a plan to achieve the benchmark standard. Forming a benchmarking partnership is important as the company would compare its practice with that of the partnership company. An example of companies who have practiced benchmarking and has proved to be a success is Xerox and IBM. To avoid any kind of pitfall it would be advisable to consider these partners because they have pioneered in the area of benchmarking. For an effective benchmarking, it is essential to form teams though an individual can handle benchmarking. It would be much more effective to develop a team and assign the roles and responsibilities. The data collected should be analyzed which would help to known the strength and weakness of the organization as compared with the benchmarked partner and try to establish a gap with regards to current firms practices and those of its leaders. Thus successful implementation largely depends on how a firm exercises its process effectively and overcome resistance to change among the employees and managers. Employees and managers who have done the job in a particular way for a longer period of time always find it difficult to do things in a new way or change the process (Christensen, Betz & Stein, 2007, p.103-107). Therefore continuous benchmarking helps to prevent arrogance and complacency. Benchmarking also provides an opportunity to develop a genuine network of professional contacts which might help an organization in the future. The most effective result of benchmarking is that it creates a culture which is focused and in the same time receptive to change and in addition it allows the organizations to come up with different new and innovative ideas which prove to be healthy for the organization. Part 2: Case Study This section would deal with the case studies in relation to benchmarking. The first case study is about the company which has pioneered in the field of benchmarking which is Xerox, followed by a case study on Hewlett Packard and finally a case study on General Motors of Mexico. All the case study explains the benchmarking process and why did these big companies applied the concept of benchmarking and how did they profit from it. Xerox The case study on Xerox aims to examine the initiatives taken by the company as a part of the company’s program of leadership through quality in the early 1980s. This case provides detail analyses of the concept of benchmarking and implementation of the process of benchmarking in different process at Xerox. The case study also brings out the positive impact that benchmarking had on the world’s leading courier company, Xerox. Xerox was started way back in 1939 and in 1961 was listed in the New York Stock Exchange and Chicago stock Exchange respectively. Xerox grew by acquiring many companies and as a result the company’s revenue also grew incredibly. Xerox revenue grew from 698million dollar in 1966 to 4.4billion dollar in 1976. Its profit also increased from $83milion to $407million. But the problem arose when the decision making slowed down which resulted in delays in the development of the company’s product. The company found out that it could sustain competition from US and the Japanese competitors. As per analysts, the management of Xerox failed to provide the company with strategic decisions. The major mistake that the company did was it ignored the new entrant who was strengthening their position in the niche segment. Xerox’s operating cost was relatively high as compared to its product which was of inferior quality. The company also suffered because of its highly centralized decision making process. Thus its market share fell down relatively from 86% to just 17%. The profit also decreased drastically. Therefore to gain back the market share of the company, the CEO David T. Kearns introduced a program which was referred to as Leadership through Quality. As a part of this program the company implemented benchmarking which played an important role for Xerox to bring back it into the business. This program had encouraged the company and found ways to reduce the manufacturing cost. The company decided to benchmark against Japanese competitors and found out that Xerox took a much longer time as compared to its Japanese competitors to introduce a new product in the market. Thus Xerox decided to benchmark its supplier management system. The company encountered that the Japanese companies had only about 1000 suppliers whereas Xerox itself had 5000 suppliers. The Japanese companies use a strategy in which they standardized the maximum parts so that fewer suppliers can be used. The components of similar machines were identical and the Japanese competitors often worked closely with their suppliers to standardize the parts. The employee’s were trained frequently in the fields of quality control, manufacturing of automation and other areas which are essential for the company. The Japanese companies practiced Just in time production which meant products were delivered in small quantities. Xerox benchmarked the entire process conducted by Japanese companies and thus was able to increase the number of satisfied customers of its product. The customer satisfaction increased by 39% and complaints declined by more than 60%. Satisfaction towards sale process also improved and the percentage increased to 40% and service and administrative process by 18 and 21% respectively (ICMR, 2006). Therefore this case study showed that benchmarking can help a company to establish itself again in the market, the only thing needed is to identify the problems with the concerned organization and work accordingly. Hewlett- Packard Hewlett-Packard is a well known technology company which was founded in 1939. The company operates in more than 170 countries across the world. In the fiscal year 2009 HP revenue amounted to about $114.6billion which made it the one of the largest IT Company. The case aims to give an overview of the company’s social innovation. The challenge that HP was facing was with regards to its social innovation techniques and it was said that the company moved from its vision to implementation. The scale and scope of the company was questioned along with its ability to last in the future scenario. HP had a good potential to become a leader in its social innovation and CSR activities. But with the shift from its vision the company went for benchmarking analysis. The benchmarking process was performed to understand the company’s relative positioning in the current market place. Also the company wanted to assume things beyond dollars and understand how peers had achieved world class social engagement. HP applied the benchmarking process by using three steps. First HP benchmarked social giving which included corporate as well as foundation spend with the help of different set of peers in the market place. Next the relation between the total giving and perceived quality was analyzed, the company mainly focused on those companies which had a high rank in the field of sustainability or CRS activities. The third step was the company with the help of FSG put in light more in-depth case studies of other companies which showed the method and technique used by them to engage themselves in high impact social innovation. The company in order to implement the change the basic concept of Hp was divided into four blocks. The first block tend to answer the question as why does HP wants to engage itself with the society, what is the thing that the company was trying to focus and engage, how did the company chose its mode of operation and what was the success factors and how was it implemented. The company’s result was measured and most importantly progress was communicated. With the help of these blocks HP was able to robust picture as to how the company managed to stack up against its current market place and also did found out opportunities to increase its social impact (FSG, 2012). General Motors The following case study is about General Motors in Mexico (GMM). The case study aims to show the tactics that Gm had acquired in the process of benchmarking along with its logistic supplier, Penske. Penske Logistic is one of the leading suppliers for GM with more than 75 years of experience with GM. The logistic of GM has extend to various different part of the world and as such logistic is a big challenge for GM. General Motors of Mexico is the subsidiary of General Motors and serves as a vital part for North American operation. Penske is the lead logistic provider of GMM. The logistic firm had proved to be beneficial for GMM as it had reduced the transportation cost and also the company was able to receive real time data from its participant of supply chain. This all was possible as the company had benchmarked its transportation operations along with processes, personnel and infrastructure. GMM had a total of 17000 suppliers who manufactured approximately 13000 parts a day. Penske Logistic was the lead logistic for GMM. The challenge that the company encountered was to reduce the cost and also inefficiencies in GMM; to increase the visibility of GMM supply chain and to establish accounting measures as well as procedures for the company’s carriers and suppliers. GMM managed its transportation network internally on three sites which consists of Silao, Ramos and Toluca. As the demand increased, its transportation network started to lack collaboration. As a result each of the operation was making individual decision on logistic which lead the company cost more redundancies and also inefficiencies in supply chain process. Therefore Penske logistic being one of the leading logistic of GMM, decided to implement a three phase within its first year of operation. Firstly the most important task was benchmarking which would take approximately ninety days. The aim was to conduct a study on GMM inbound transportation. Next step was to process design and engineering where the company developed new procedures base on its inefficiencies and benchmarked which were discovered in phase 1. This process was scheduled for ninety days. It was aimed to track the supply chain activity and maximize the trained labor force of GMM by hiring the company’s personnel who helped in implementing the new system and processes. The final step was implementation which delivered GMM a high return on investment within a year of operation. The approach was so effective that the company was able to reduce its transportation cost by 15%. The result did exceed the expectation level of GMM. The benchmarking process reduced the transportation cost of GMM, decreased its freight cost and cost of inventory and eliminated shutdowns. The software that was introduced by Penske was one of the biggest achievements for the company as with the help of the software the company was able to track the exact part and the pickup quantities. The Company had an access to real time updates for the supply chain process which made GMM supply chain much more effective. The three phase plan also allowed GMM to track rate and measure the performance of the parties involved in its supply chain management process. The benchmarking process of its inbound transportation helped the company to identify and handle the transportation in a much more effective way. Therefore the end result was effective as within six months of benchmarking process the company was able to reduce its transportation cost by an incredible percentage of 15%. With the implementation of the logistics management system software General Motors of Mexico was able to track and had an instant access to real times data with regards to its supply chain and issues regarding carriers. The three phase plan had helped the company to reduce its carrier base from 100 to just 20 within the very first year of its implementation. The on time supplier had increased to about 98% and delivery rate to about 99% (Penske, 2012). Conclusion Therefore as a result of benchmarking many different conclusions can be drawn from the exercise. It is necessary for organization to recognize the importance of adopting a more holistic approach towards the organizational change which is done with the help of benchmarking and accept the level of investment in order to effect a change in the organization. Benchmarking is an effective tool which helps the company for continuous improvement and thus relying on the practice of benchmarking indicates the requirement for a better change in the organization. Benchmarking is an important tool for the entrepreneurs, policy makers and also for the consultants. It is one of the critical techniques which make the transformation of the organization quite easy. The above case study also illustrates the use and benefits of using the process of benchmarking. As said change is the only thing constant, thus to implement effective change for the betterment of the organization benchmarking is used. This topic deals with Lake Wobegon Effect which indicates the over estimation of performance by the employees and also employers. They often tend to think they are above average performer where as in reality it might not be the case. Therefore the potential means of remedying such overestimation is through benchmarking. A successful benchmarking depends on the process which needs to be transparent and the result of benchmarking should be made available to the affected sections of the organization. Reference Bernardin, H. J. (2008). Human resource Management 4E. Tata McGraw-Hill Education. Betts, A. Croom, S. & Lu, D. (2011). Benchmark to escape from Lake Wobegon. [Online]. Available at: http://warwick.academia.edu/DaweiLu/Papers/1186749/Benchmark_to_escape_from_Lake_Wobegon. [Accessed on January 23, 2012]. Christensen, E. H. Betz, K. M. & Stein, M. 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Available at: http://www.penskelogistics.com/casestudies/gm2.html. [Accessed on January 24, 2012]. Zairi, M. & Leonard, P. (1994). Practical benchmarking: the complete guide. Springer. Read More