Total Quality Management: Benchmarking - Essay Example

TOTAL QUALITY MANAGEMENT: BENCHMARKING Benchmarking in itself does not result in improvement. Instead, it identifies inefficiencies in theproduct, process, system, or organization. The real challenge and opportunity is to leverage the knowledge obtained from the benchmark into competitive advantage. Benchmarking compares similar activities so that superior practices can not only be identified but also adopted in order to increase productivity. This can only be effective when the appropriate benchmarking measures are used to gauge comparative performance (Ackerberg et al 2006, p. 161). Benchmarking is an externally focused quality improvement technique that looks at the best practices of departments within the organisation, competitors and organisations with activities that are deemed to be functionally similar. As long as superior performance is identified the next step is to gain an understanding of the enablers or drivers of such performance and then apply them to the organisation (Swanson 2005, p. 243). Benchmarking is one of the strategies used in order to compete effectively in the market. It is a process that is used by organisations in order to target the key areas in their operations that can be used to improve competitiveness, productivity and quality. Organizations use benchmarking when they compare their performance against other companies doing similar business (Gitlow 2005, p.195). Quality needs to have a basis for comparison and so organisations use this strategy to determine how they are performing in comparison with their competitors. This allows them to remain competitive. Comparison is normally done with the best performing organisations. Every organisation can benefit from benchmarking as it is highly unlikely that an organisation does everything well or has nothing to learn from the successes of other organisations (Swanson 2005, p. 203). Benchmark is done as a structured process so as to improve performance and achieve improvements. Benchmarking simply put, is the practice of being humble enough to admit that someone else is better at doing something, and being wise enough to learn how to match and even surpass them at it (Williams 2004, p.226). Types of Benchmarking Benchmarking as mentioned is done so as to set performance standards and so as to achieve superior performance that will result to having a competitive advantage in the industry (Peters 2007, p.89). The 2 basic types of benchmarking are internal and external. The internal aspect of it involves self analysis of a company’s own activities so as to determine its strength and weaknesses. The external part of it is gathering information about the benchmark partner so as to find out why that particular company is perceived as the best in the industry. Comparison of both the internal and the external provide an objective basis for making improvements (Wireman 2004, p.47). The benchmarking types identified and explained below are associated with performance benchmarking. Internal Benchmarking This is simply the comparison between departments, units, subsidiaries within the same company or organization (Creech 2004, p.77). Internal benchmarking is often used within corporations of a large magnitude that compare and evaluate themselves to each other. Practices are transferred internally from the units or departments performing exemplary well to those that are not. The benefit of using internal benchmarking is that it’s very easy and simple to define comparable processes and data and other information needed to benchmark is easily accessible and often on a standard format (Andersen 2006, p.67). For instance, the car manufacturing firm Toyota performs internal benchmarking at two levels; firstly, within each plant, similar processes are compared to one another to identify the most efficient solution, which is then implemented across the plant. Similarly, across plants, all types of processes, not just manufacturing, are continually performance measured against one another (Zairi 2006, p.22). The companies that do not perform well are invited to visit best performing plants so as to benchmark against their processes and implement the results in their own plants. Similarly to Xerox, Internal benchmarking is always performed by the people who own the process because Toyota believe that this not only motivates and empowers employees, but that they also have greater knowledge of the process than anybody else (Besterfield 2005, p.49) Another example is Dell, which has implemented internal benchmarking mechanisms and measures so as to help it identify its strengths and weaknesses and provide a strategy for moving forward and improving performances (Watson 2005, p.30). The company prefers to look in the mirror instead of out the window, and the process has benefited it in a number of ways which the following: data is more accurate and accessible in comparison to most competitive information; goals are more realistic, improvement is more consistent and employees are benefitting by reaping the rewards of outstanding performances. Competitive Benchmarking This involves the direct comparison of the company’s own performance or results against the best and realest competitors in the market place that manufacture the same product or deliver the same product or service (Mackay 2007, p.28). Comparative benchmarking is identified as an extension of a form of competitor analysis that the focus is on the best competitors instead of the industry average. This type of benchmarking is however often seen as superficial and too focussed on key figures due to the problems and limitations that are involved in sharing sensitive information between the competitors. The limitations are usually of a legal or ethical nature. An example of a company which has implemented this type of benchmarking is IBM. Competitive benchmarking has allowed the company to compare itself with its closest rivals on such parameters as geographical coverage, business strategies, product offerings, financial performance, business segments, unique selling points (USPs), M&A developments and product offerings. This report compares the company with its closest competitors on various parameters such as business segments, product offerings & their USPs (unique selling points), geographical coverage, financial performance, M&A developments and business strategies (Goetsch 2010, p.72). IBM’s benchmarking is based on two vital USPs; these are comparative SWOT evaluation on the organization and its competitors and the industry analysis segment. Through competitive benchmarking, IBM has been able to develop mechanisms for strategic planning and decision making with KSFs (key success factors); it has also been able to develop long-term market and quality initiatives in order to improve its overall competitive ability and position (Kurtz 2009, p.34). Functional Benchmarking This involves the comparison of functions or processes against non competitor companies or businesses within the same industry. This type of benchmarking in layman’s terms is simply learning from your own closet. In this type of benchmarking the benchmarking partners are either customers, suppliers or other similar companies within the same industry and it is therefore easier to get in touch with fellow companies and identify the problems that face these companies. Generic Benchmarking This type of benchmarking involves the comparison of own processes against the processes that are the best around regardless of the industry. It is also known as exercising creativity in benchmarking. Generic benchmarking is therefore the process of finding companies and businesses that are totally unrelated and in different industries but perform whatever process well though they may sometimes require a portion of creativity (Spendolini 2002, p.45). Transfer of knowledge from one industry to another is thus generic benchmarking since it involves identifying new practices and technologies that lead to breakthroughs. One such example of benchmarking is the spread of bar coding of commodities and products from industry to industry. Coca Cola is an example of a company that has successfully carried out generic benchmarking. The company has looked for the finest combination of best business practices for an important area like outsourcing by recruiting experienced leaders who have conducted research on a variety of companies and then get them to compile an entire set of practices by examining a number of organizations. Generic benchmarking has allowed Coca Cola to improve productivity; it has also enabled the company to come up with best practices for transformational leadership or change management. BENCHMARKING PROCESS The process of benchmarking can be defined as “an ongoing process of measuring and improving business practices that can be identified as the best worldwide” (Zairi 2006, p.152). Benchmarking is a business technique or tool that businesses use in the comparison of performances. It actually gives businesses a sort of frame of reference as they compare their organization with other similar organizations and businesses that are their competition (Wireman, 2004 p.28). The process of benchmarking does involve the constant need and desire to improve a business’s functions by gathering diverse information in the market that will allow companies to improve their competitive positions. By striving to constantly improve their practices and performance companies achieve a global perspective that gives them a competitive edge over their competitors. The desire to benchmark ensures that companies and businesses alike remain relevant in their fields and that they are not ousted from doing what they do best. Benchmarking as a process simply involves companies thinking outside the box so as to examine their business from an external/ international perspective. It also entails the gathering and discovery of innovative ideas that will be converted into potential rewards following the implementation of these ideas (Camp 2009, p.38). For benchmarking to be totally and completely useful to a business the company must understand the processes and procedures involved in making a company the best. Benchmarking is therefore the process of continuously comparing and measuring an organization with business leaders anywhere in the world to gain information that will help the company to become more and more competitive. It involves the examination and analysis of the management skills and attitudes that when combined allow a company to achieve its best business practices and as an end result, companies are able to move from a parity business position to a superiority position and this is generated by using observation of a company’s best practices (Wireman 2004, p.29). The main steps used in the process of benchmarking are outlined as follows. a) Identification of the measures that will help in product and productivity improvement. b) Selection of organizations that have created a benchmark for themselves within the same industry as your business. c) Gathering of information and collection of data using trade and professional associations and at the same time comparing with what your company does different. d) Performance measurement and setting benchmarking figures in order to achieve desired results such as sale returns. e) Performance assessment and reviewing areas that perform poorly so as to achieve leverage. f) Sharing results with other competitors/ the benchmarking partners so as to improve the overall performance of the industry. QUALITY AWARDS The European Foundation for Quality Management (EFQM) was founded on 15th September 1988 in Brussels by 14 presidents of 14 major countries with the endorsement of the European commission so as to provide an excellent model for those wishing to achieve business excellence. The EFQM is the primary source for organizations throughout Europe that strive to excel in their business operations. The EFQM is the creator of the European Quality Award that recognises the every top company in different industries every year and is used as a way to benchmark with different organizations (Bramham 2007, p.143). The EFQM Excellence Award is the most prestigious award for organizational excellence in Europe, and is given to Europe’s best performing companies and organizations that are not-for-profit. It’s regarded to be the highest form of recognition that a company or organization can receive as it comes from its own peers. The EFQM’s excellence award heralds exceptional performance. STRATEGIC AND OPERATIONAL CONSIDERATIONS This section of the paper deals with critical performance factors whereby they wish to excel and identification of the key areas in which to benchmark. For the planning aspect of benchmarking, it must be supported by senior management and must be integrated with corporate strategy and consideration of the legal and ethical issues should be considered. Personnel/ staff should be identified and a benchmarking team should be selected and it should have a team leader (Oakland 2003, p.54). A team is needed due to the range of skills and knowledge possessed by different individuals. The processes to be benchmarked also need to be identified and data required to make comparisons should also be collected by the benchmarking team. Benchmarking partners should be considered and identified and also contacted. Data and findings should be shared within the team and also analyzed appropriately. The comparison exercise should be done via an action plan so as to avoid the underestimation of the time needed for data collection. The benchmarking lifecycle is constantly ingrained with several ideas of continuous improvement (Oakland 2003, p.58). This is a very important aspect of benchmarking, because it has already been established that without good strategic planning and decision making, the benchmarking process has a huge chance of failing. Companies should therefore be on the lookout for small mistakes that are likely to be made during the process of developing benchmarks; if this is not done they might end up losing direction and achieving negative results. The companies that are selected for study as examples of successful benchmarking should be worthy of such a decision, and it should be made after much deliberation (Parker 2005, p.68). It is recommended that organisations analyse things like risk factors, success factors and basic frameworks in order to establish whether they can match them or keep up with them QUALITY AWARDS AND COMPETITIVENESS The most profitable and best performing organizations are usually measured by their ability and capacity to obtain, sustain and maintain excellent results for stakeholders. However, achieving excellent results is one thing; sustaining them in markets and segments where competition is ever increasing, technology and working processes are ever rapidly changing and movement in the social, customer and economic environments is becoming more frequent is another thing altogether (Parker 2005, p.237). Taking note of this challenge, companies are adopting measures that enable them to promote approaches that lead to excellence in sustainability (George 2004, p.19). Quality awards therefore play an important role in enhancing organizational excellence and hence improve competitiveness. Quality awards play an important role in boosting the effectiveness and efficiency of the general management systems in any organization, thereby giving them a vital edge in the race to secure and protect market share, customer bases and long-term sustainability. In short, with regards to competitiveness, quality awards do the following: • Provide feedback to companies so as to help them enhance performance (Dale 2007, p.51). • Encourage companies to adopt, implement and benefit from outstanding and quality business practices • Recognize and highlight the best performing/excellent organizations and project them as templates and blueprints for others. This helps to improve competitiveness not just for those outstanding companies but also for its competitors (Getty 2009, p.16). CONCLUSION Benchmarking is an ongoing process of measuring your organization against leaders in the industry (Cheney 2008, p.82). Benchmarking helps to stimulate innovation, increase the impact in the marketplace, decrease costs, raise money, inspire staff, impress funders, engage the board members and sharpen the company’s mission. An organization should strategically prepare itself to measure its performance and implement its best practices. Benchmarking related processes are guided using exercises and worksheets. Benchmarking does differ from evaluation and assessment as it is more structured. Benchmarking ensures that the organization always operates at its peak performance (Saul, 2004). Arie de Geus stated that “The ability to learn faster than your competition may be the only sustainable competitive advantage”. This means that for a company to grow and develop and gain a competitive edge it needs to take a systematic approach to identify why the main competitors of a given business in a particular field are the best. To conclude benchmarking is increasingly becoming a necessity for organisations to be competitive in a tough, global business environment where the pace of corporate, political, economical and consumer changes is continually accelerating (Jarrar, 2002). Benchmarking provides organisations with a useful tool to stay equal to or better than competitors and for the most successful global organisations. References Ackerberg, D. 2006, Benchmarking for Productivity Improvement: A Health-Care Application. International Economic Review: 47(1) p. 161 – 201 Andersen, B. 2006, The benchmarking handbook: step by step instructions, Springer, London. Besterfield, D. 2005, Total quality management, Prentice Hall, Englewood Cliffs, N.J. Bramham, J 2007, Benchmarking for people managers. 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Kurtz, D. 2009, Contemporary Marketing, Cengage Learning, Canada. MacKay, A. 2007, Total Quality Management, Taylor & Francis, London. Oakland, J. 2003, Total quality management: text with cases (3rd ed.), Butterworth- Heinemann, Oxford. Parker, N. 2005, Benchmarking, Institute of Management, Corby. Peters, T 2007, Thriving on chaos: handbook for a management revolution, Harper Perennial, New York. Saul, J. 2004, Benchmarking for nonprofits: how to measure, manage and improve performance, Fieldstone Alliance, Indiana. Spendolini, M. 2002, The benchmarking book, Amacom, New York. Swanson, R.C.2005, The Quality Improvement Handbook: Team Guide to Tools and Techniques, St. Lucie Press, Florida. Watson, G. 2005, Managing for results, CIPD Publishing, Paris. Williams, R. 2004, Essentials of total quality management, Amacom, New York. Wireman, T. 2004, Benchmarking best practices in maintenance management, Industrial Press Inc, New York. Zairi, M. 2006, Effective benchmarking: learning from the best. MacMillan, London. Top of Form Bottom of Form Read More