Effectiveness of Benchmarking as a Performance Improvement Strategy - Research Proposal Example

Effectiveness of Benchmarking as a Performance Improvement Strategy. Introduction. Benchmarking is a management strategy which is aimed at improving performance in an organization by trying to match the industry best practices. Zairi and Leonard say that it involves identifying companies or organizations that are “leaders in specific management functions or practices” (128), and then trying to emulate these best practices. Benchmarking is not limited to business organizations. It can also be used in non profit making organizations who want to improve their service in their specific area of operations. This is because there is an element of management in any organization whether profit oriented or not. Essentially benchmarking involves “carrying out an audit on two fronts” (Evans 138). One needs to identify current processes and practices in a business or organization and then probe their weaknesses. The next step involves identification of companies that have proved to be experts in a given field and then trying to match or even better their performance. The rationale behind benchmarking is that if you do not know what the best practices in the industry are, then chances of being the best are almost zero. It is also a tried and tested method of matching competitor strength and even eclipsing them in the market place. A good example where benchmarking has been used lately is in the field of mobile technology. Apple Inc caused a stir when it introduced the hugely popular touch screen phone the iPhone. Coupled with its top notch marketing strategy, the company easily set the benchmark in trendy mobile technology. Not to be outdone, rivals such as Nokia and Samsung used Apple’s touch technology to produce mobile phones which have gained a foothold in the market and proved to be worthy competitors. This proposal will therefore try to find out the extent to which benchmarking has been used as a strategy and with what success. A literature review will be conducted and appropriate recommendation given. The process of benchmarking. According to Damelio, benchmarking is a “process and not an event” (71). It involves constantly looking outside the organization to learn the tricks of achieving excellence in an organization. In other words it is a learning experience and once the lesson is learnt then the process is applied in the company. The first step in the process of benchmarking involves a thorough understanding of the current norm of business and then analyzing the business practice of others who are considered the pace setters in the industry. The next step involves doing complete analysis of the variance between the company’s practices and the best practice in the industry. When the difference is identified steps are then put in place to try and match the company’s performance with the best that is available in the industry. The last step which involves implementation is critical if benchmarking is to be successful. In trying to close the gap between current company standards and the ideal standards then consistency is important when implementing the strategy. Finally evaluation of results is necessary so as to determine the extent to which the whole process is successful. Rationale of the study. You can only be the best if you match and surpass the best. As Ogilvy noted try and reach for the stars, even if you don’t get one you will not come back with mud either. Various authors on management have showered praise on benchmarking arguing that it is the only sure bet to success especially for new companies that have not gained a foothold in the market. The researcher will therefore try to find out the extent to which the benchmarking strategy is effective in improving performance in an organization. Companies which have used this strategy will also be studied and their level of success highlighted. In the market place, “nothing short of success counts” (Cook 27). Customers want to be associated with the best brands, current fashion trends and best practices. Any company that falls short of these standards is doomed to fail. It will be relegated to the basement and be left to cater for the low end market. Now in any market, there are innovative and established firms which are considered market leaders in the industry. They are regarded highly in the eyes of the consumer and they make huge profits. In the same market, there are start ups which are struggling to make a mark in the market. There are also the small and medium enterprises which are itching to topple the current market leaders and become the dominant force in the market. How can these small and medium enterprises match or better the industry’s best practices? How can these small and medium enterprises be responsive to customer needs? How can they produce products that meet consumer needs? These are some of the questions that small enterprises grapple with on a daily basis. This study will therefore be used by companies who want to be the best in the industry courtesy of the benchmarking strategy. The study will be used as a guide by companies which want to implement the whole process of benchmarking in a competitive industry. Benchmarking is a strategy that has been used successfully by corporate giants with varying levels of success. “It is listed among the five most used management strategies in the fortune magazine” (Bramham 108). Among the companies that are listed as having used this strategy include Telecommunication giant AT&T, Computer manufacturer IBM and also Xerox. Xerox is credited has having pioneered the concept of benchmarking. The firm was lagging behind the competition and measures had to be taken to stop this trend. Company executives studied the technology used by competitors and their management strategies. Xerox tried to match the competition by introducing the same in their company and ended up becoming one of the biggest names in the copier manufacturing business. “The Xerox case is a good example of how benchmarking can be effectively used improve performance in an organization” Zairi and Leonard (91-95) On the other hand there are scholars who point out that benchmarking leads to a slump in creativity. They argue that a company cannot become the best simply by “copying and pasting” the strategy of another because circumstances differ. This can also be interpreted as agreeing to play second fiddle or merely trying to catch up not beat the leader. This study is therefore critical so as to outline the potential pitfalls associated with benchmarking so that companies which use this strategy can avoid them. Objectives of the study. 1. To determine the extent to which benchmarking has been used as a performance improvement strategy and with what success. 2. To identify the potential pitfalls of using benchmarking as a performance improvement strategy. 3. To find out the best methods of implementing the benchmarking strategy. 4. To find out the costs which are associated with implementing this strategy. 5. To make recommendations based on the findings. Literature review. A number of management authors have written widely on the subject of Benchmarking, its successes and potential pitfalls. Rob argues that benchmarking is one of the tools that can be used to ensure that a company attains the “ultimate goal of profitability” (72). He further says that there are some key benchmarking principles which must be followed by any company that wishes to pursue this strategy. Among the principles highlighted by Rod include the importance of conducting in depth research as well as consistency in implementing the strategy. He also says that training and adequate resources are critical if the benchmarking strategy is to be implemented successfully. Bramham brings a “human resource perspective” to the whole process of benchmarking (21). He says that employees of a company are key to the success of any organization. Bramham further says that it is important for companies to take more than a passing glance at the hiring practices of successful companies if they are to get and retain the best employees. He also discusses the various types of benchmarking which include product benchmarking, performance benchmarking, financial benchmarking as well as process benchmarking. According to Bramham product benchmarking includes the creativity that is associated with new products that a company manufactures (101-103) Bramham further observes that “the products that a company is offering determine its level of success in the market place” (145). He therefore concludes that this is a critical area where benchmarking is crucial. It allows a company to match its product offering to the best in the market. Zairi and Leonard see the link between “benchmarking and continuous improvement” (11). The two authors bring a new twist to the whole concept of benchmarking. They point out that getting to know the strategies another company uses to succeed is not a walk in the park affair. This brings into focus the small matter of ethical practices in benchmarking. For instance how does a company gather information about the processes used by a competitor? Sometimes companies result to using employees to gather some crucial information at a fee. Zairi and Leonard also take a look at the different types of benchmarking and point out that they “present different challenges to implement” (81). For instance competitive benchmarking is used when two companies are in direct competition. A good example is Google and Yahoo. In this case Yahoo which is the underdog in the search engine business can try and find out what processed and techniques Google uses to become the world’s biggest search engine. Yahoo can then try and implement these strategies with the aim of matching or even beating Google in the search engine business. And are there any costs that are associated with the whole benchmarking process? Well, Cook has the answers. She says that a company will incur some cost in implementing the benchmarking strategy. And what are some examples of these costs? According to Cook, they include “data analysis and administration cost, traveling and research cost and the labor cost of experts who will be involved in the research” (38).Robert pays close attention to the cost savings that are associated benchmarking. According to Robert research shows that companies that that use this strategy have recorded cost savings of up to 40 percent. He also notes that “benchmarking can be used as a performance improvement tool” (19) by introducing new and innovative ways of doing business. Finally on a different note Camp looks at the not so rosy side of benchmarking. He says that benchmarking actually “kills creativity” (79). Camp argues copying what others have done to get to the top kills innovation in an industry due to duplication. According to this author, to get ahead of competitors companies should do what they are not doing. This cannot be achieved through benchmarking. Matters and Evans do not share the views advanced by Camp. They argue that in any industry there must be “market leaders, challengers and the beginners” (7). However way you look at it the beginners have a lot to learn from the veterans which can only be achieved through benchmarking. Research Methodology. A Descriptive study best fits this type of research since it is aimed at describing and analyzing a given phenomenon. In this case the researcher intends to describe benchmarking and find out the extent to which it has been a successful business strategy and if it can be used by other companies to improve performance and increase profitability. Target Population. The target population for this research will be middle and top level managers. This is the group that is involved in laying business strategies that will be implemented. The group is also well versed with various management strategies and current business trends. The researcher settled on this group because they are more likely to give the right answers and share their personal experiences and shed more light on the whole issue of benchmarking. Sampling design Non probability sampling will be used in this research because it will help in capturing the population of interest to the researcher and it is also cost effective. Using the directory and other business papers, the researcher will identify at least one hundred business organizations using judgmental sampling. Data collection procedure and instruments. The manner in which data is collected is crucial and could affect the overall outcome of the research. Taking this into consideration, the researcher will use both structured and non structured questionnaires. Personal interviews with managers of different companies will then be used to capture the data and fill out any other necessary information. Data analysis and presentation. This research will involve collection of both qualitative and quantitative data. Quantitative data will be analyzed using measures of central tendency while qualitative data will be analyzed using pie charts and appropriate conclusions drawn. Recommendations will then be analyzed and put forward. Timescale and resource requirements. A period of three months will be enough to conduct this research and make the appropriate recommendations. Most of the time will be spent in data collection and analysis. Carrying out any research involves some costs especially when personal interviews are involved. It becomes expensive because the researcher will have to move around while collecting the necessary information. The researcher expects to spend around $300 while conducting the research. This will cover the cost of buying material to be used in the research such as voice recording equipment, data analysis software and travel costs. Reflective statement /conclusion The benchmarking strategy has been used silently by many business organizations with varied measures of success. The strategy has also been discussed at length by various authors and business practitioners. It is hard to quantify the levels of success achieved by different companies where the strategy has been implemented. In this planning process of the research, I have learnt about a new business strategy that has been used by corporate giants in all spheres of business interest. They range from computer technology, manufacturing, communication and also in the service sector. I have noted that most of the companies that are listed in the fortune top 500 have at one time or another employed the strategy of benchmarking in an effort of improving performance and also catching up with a more refined competitor. Different authors have different views on the topic of benchmarking. While some depict it as a tried and tested success formula others argue that it has prone to some pitfalls and it does not fuel innovation and creativity in the market place. To some extent the benchmarking strategy can be equated to total quality management. For any TQM strategy to function properly it must be aided by a benchmarking strategy. Benchmarking has also been linked to cost control and continuous improvement in companies. Some of the other ideas that have come up as a result of benchmarking include outsourcing and customer relationship management. The ideas have spread across businesses because they have proved to be workable in a given company. As a result of benchmarking other companies have followed suit hence making the idea spread across the industry. While planning for this research I have also learnt the tricks multinationals use to compete in the market place that are closely related to benchmarking. They include the importance of strategic planning where by companies lay strategies of up to 10 years to come. This includes the alternatives should a competitor get wind of the plan. Reference: Bramham, John. Benchmarking for People Managers. New York: CIPP Publishing, 1997. Camp, Robert. Benchmarking: The Search for Industry Best Practices that lead to Superior Performance.Birmingham, AL: Quality Press, 1989. Cook, Sarah. Practical Benchmarking: A Managers Guide to Creating a Competitive Advantage. London: Kogan Page, 1997. Damelio, Robert. The Basics of Benchmarking. New York, NY: Productivity Press.1995 Evans, Anne. Benchmarking: Taking Your Organization towards Best Practices. Oxford: Business Library, 1994. Matters, Margaret. Evans, Anne. The Nuts and Bolts of Benchmarking. Columbus, OH: Wiley Blackwell publishing, 1994. Rob, Reider. Benchmarking Strategies: A Tool for Profit Improvement.San Francisco, CA: John Wilky, 2000. Zairi, Mohamed, and Leonard Paul. Practical benchmarking: The Complete Guide. New York: Springer publishing, 1994. Read More