The Benchmarking - Research Paper Example

The Benchmarking For organizations to survive and succeed in the current competitive business environment, they have to carry out various organizational processes optimally. Among those processes, quality management is a crucial one, as only the products as well as the services with optimum quality can reach the intended customers successfully, and bring benefits to the organization. This quality has to be incorporated into every aspect of organizational functioning, and for that the concept or philosophy of Total Quality Management (TQM) can play an effective role. TQM involves an integrated effort by the organization and its employees to incorporate accentuate quality at all level, by following set quality standards. Among the many quality tools being used, benchmarking is the tool or approach “that is accelerating among many firms that have adopted the total quality management (TQM) philosophy.” (“Benchmarking”, n. d.). Benchmarking helps the organizations to find the correct solutions by following the best practices of other organizations. That is, by evaluating the best or even the relevant practices of the other organizations that operate in their organizational sector or in other sectors, and which has faced similar challenges and situations, a particular organization can find their own solutions. This approach is being followed by many real organizations, and many of them are getting sizable benefits, although there some limitations in it. This paper focusing on the quality tool of Benchmarking will discuss about its historical background, working principles, main benefits and limitations, even while elaborating about its application by case studying two organizations, Xerox and Southwest Airlines. Historical background Although, benchmarking, as the term and as an approach, is being used in various organizational sectors from Information technology to various technologically advanced sectors, it seems ironic that it could have been originated from the manual labor centric shoemaking industry. That is, in earlier times, cobblers would place a client’s foot on a “bench” and “mark” it out to make the pattern for the shoes, and also to measure the sizes, and “this pattern became a reference point for the cobbler and helped ensure a better fit.” (Ohab, 2011). From those beginnings, this practice of checking the best practices of others, and replicating it was carried out by various people and organizations throughout the 20th century, irrespective of the sectors. For example, Henry Ford created the assembly line in his car manufacturing units, “after taking tour of a Chicago slaughterhouse and watching carcasses hung on hooks mounted on a monorail move from one workstation to another.” (Evans and Lindsay, 2008, p.368). On the other hand, Toyota came up with their Lean management and Just-in-System inspired by the assembly line strategies followed in Ford and the replenishment strategies followed in the U.S. supermarkets. “The best example is Toyota Motor Corporation’s following the footsteps of Ford Motor Corporation albeit with the adaptation of the Ford’s Just-in-case system into Toyota’s Just-in-time system.” (“Benchmarking”, 2008). Although, various organizations were carrying out this practice, the term “benchmarking” was not coined at that time. It was only after the American company Xerox carried out this practice in a planned way, that the term got originated and gathered prominence. When Xerox faced problems including quality problems in its various processes including order fulfillment process, it decided to learn from the various companies, irrespective of the sector, by studying their practices and also by sending its team of employees there. Based on the inputs given by the team, Xerox replicated certain strategies and that proved to be successful, and the term Benchmarking evolved. Robert Camp, the logistics engineer who first developed the benchmarking practice in Xerox and “who is generally regarded as the guru of the benchmarking movement, defines it as, “Benchmarking is the search for industry best practices that lead to superior performance”.” ((“Benchmarking”, 2008). From those beginnings, the practice of Benchmarking came to be widely used by many organizations in various sectors. Working principles Benchmarking by a particular organization involves evaluating and finding the best practices relating to quality, time and cost of other organization or organizations in their sector or other sectors. When many organizations are evaluated, the resulting assumptions would be considered as the best practices of the whole industry. “Benchmarking is the process of identifying, understanding and adapting outstanding practices from organizations anywhere in the world to help your organization improve its performance.” (Jangla, n. d). This benchmarking process involves certain key principles or steps, which will be carried out by the organization in a logical and in-depth manner. Although, the number of steps may vary according to the organizational needs and the sector, in which they operate, generally the benchmarking process is divided into four steps. A typical four step benchmarking processes involves planning, relevant data collection, analysis of the collected data and finally adaptation. O’Reagain and Keegan (2000) have described the four steps involved in benchmarking as: “1) understanding in detail one’s own processes; 2) analyzing the processes of others; 3) comparing your own performance with that of others analyzed; and 4) implementing the steps needed to close the performance gap” (cited in Inglis, 2005). That is, as part of the first step, the organization will evaluate its problematic issues or shortfalls, which need management and solutions. Then, in the next step, the organization will identify the best performing firms in its sector or even other sectors, where similar type of processes are carried out, and ‘glean’ the relevant data from those organizations. As stated by Gitlow et al. (2005), the best-practice companies are identified, and the information is collected through questionnaires administered to these best practice companies, and importantly by arranging the visit of its personnel on a study tour of these companies. In the third step, the collected crucial data or practices of the high performing companies will be critically evaluated to identify the best practices. The final adaptation stage includes developing an initial action plan to adapt and implement the best practices in the relevant parts of the organization. (Gitlow et al., 2005). Thus, as part of the benchmarking process, all these steps will be followed by the organization to ‘corner’ in on the problems, and come up with optimal solutions, with the aid of those high performing companies. Main application or benefits Benchmarking is very beneficial because it helps the organizations to identify its current position and problems, thereby reorienting its strategies and determining new priorities for improving its performance. The best practices that results out of the benchmarking process could have high success rate for the organization because it has already resulted in success for other organizations. That is, instead of coming up with an all new strategy, whose success rate could not be aptly estimated, adapting an already successful strategy will eliminate the need to spend sizable time to come up with a strategy. These two benefits was pointed out by Lahiry, (1992), who stated benchmarking “uses proven successes as reference standards and hence drastically reduces the incubation period, and the chances of failure, involved in the typical trial-and-error approach of systems improvement.” The other benefit that can be incurred through the benchmarking process is that, it can help the organization to pick the particular best practices that will aid them, and thereby reorient its targets. Instead of trying all the strategies, only the applicable and feasible strategies that can help it to reach those reoriented targets can be picked. Benchmarking “allows organizations to set realistic, rigorous new performance targets, and this process helps convince people of the credibility of these targets.” (“Benchmarking”, 2008) The benchmarking process could also make the organizations implement a training regime to equip the employees to follow those best practices, and that will provide the organizations aptly trained employees. As all the employees may not be well versed with the new best practices, they have to be given training regarding that. When they complete the training, they will become more qualified, and that can provide benefits to the organization in the long run. Total quality will only work expectedly only if every employee is involved and so it is important to train and thereby empower employees to manage quality themselves. Thus, with a successful strategy in-hand, the organization can 'leap-frog' over its competitors, instead of coming up with counter strategies and just playing the ‘catch-up’ game. In a way, this benchmarking process and the gleaned best practices can aid the organizations to come up with products and services, which fulfills customers’ heightened quality expectations. Limitations One of the major limitations of benchmarking is that, organizations could try to completely ape the best practices of the high performing companies, without analyzing and finding the circumstances under which those companies followed those practices. “Benchmarking reveals the standards attained by competitors but does not consider the circumstances under which the competitors attained such standards.” (Nayab, 2010). Although, organizations may operate in the same sector, each organization would have different organizational goals, vision, mission, etc., and so if it adapts the best practices without focusing on these crucial organizational aspects, it could lead to failures. The other limitation or even dangerous disadvantage of benchmarking is that, organizations could become complacent. That is, organizations adapting the already successful best practices could view these practices as the ‘panacea’ of all their problems, and adapt it completely, without making minor changes according to the organizational needs and more importantly without actualizing the apt structure to complement the adaptation. “Many organizations make the mistake of undertaking benchmarking as a stand-alone activity…it is only a means to an end, and it is worthless if not accompanied by a plan to change.” (Nayab, 2010). Although, those best practices are successful strategies, the organizations have to study carefully whether it will fit with every aspect of organizational functioning, otherwise it could cause more problems. Importantly, the organization and its management have to come up with adequate structural or operational modifications including tuning or training of the employees, before as well as during the adaptation. If they do not do it, there will not be improvements as expected. Benchmarking in Xerox Corp When one focuses on the application of benchmarking in real organizations, there is no better example than Xerox, because as mentioned above, it all started there. Xerox, the American document management company, which manufactures and sells photocopiers and other digital equipments, is considered as the pioneer in the field of benchmarking. From 1959, when Xerox invented and introduced the photocopier, till 1970s it had a virtual monopoly in the photocopier sector. Its monopoly and success is so huge that “Xerox” “became a generic name for all photocopiers.” (“Benchmarking”, 2008). However, in 1970s, the Japanese companies entered United States and world markets with high quality copiers, at competitive prices. In addition, American companies also brought out high-end copiers. All of them started ‘eating’ into the market of Xerox, and so by early 1980s, Xerox’s monopoly had gone, with its market share reduced sizably. “By 1981, however, the companies market shrunk to 35% as IBM and Kodak developed high-end machines and Canon, Richo and Savin dominated the low-end segment of market.” (“Benchmarking”, 2008). Xerox understood that it was facing such a diminished scenario due to certain operational inefficiencies inside the organization like impaired assembly line, inefficient supply chain, problematic order fulfillment processes, etc. That is, when Xerox decided to adopt emergency maneuvers to avert its downward fall, thus leading to the origination of the benchmarking approach. “The Xerox manoeuvre was very simple: find out and replicate the world's best business practices. And it went around –looking for the best practices in all kinds of organisations.” (Lahiry, 1992). All kinds of organization in the sense, Xerox understood that its problems in various processes are not specific to its sector, and could be prevalent in organizations in other sectors as well. In that direction, Xerox studied various successful organizations and their best practices, including Ford Motors, American Express, LL Bean, Florida Power and Light, etc. From Ford, it learned how to improve its plant layout, so that the products are manufactured as well as assembled smoothly and quickly. From American Express and LL Bean it learnt how to optimize its supply chain management, warehousing operations and how to do efficient billing, without delay and mistakes. Xerox decided to study the successfully working order fulfillment process of the mail-order catalogue company LL Bean. “Xerox sent a group to visit the company’s warehouse to study its processes, as it felt that it could learn and adapt the best of the company’s practices.” (“Benchmarking in the Health Sector”). Xerox also adapted the best practices of quality improvement from Florida Power & Light. It adapted all these best practices in its functioning, thereby carrying out TQM in an effective manner. As part of TQM, Xerox incorporated quality on all the key processes, without simply focusing on the finished products. Due to this benchmarking process, “Quality problems cut by two-thirds, manufacturing costs cut in half, development task cut by two-thirds, direct labor cut by 50% and corporate staff cut by 35% while increase in volume.” (“Benchmarking”, 2008). These successful results led the Xerox management to name this new management strategy as Benchmarking, with Xerox continuing to use it even now at appropriate places. Benchmarking in Southwest Airlines Southwest Airlines, one of America’s successful airlines, had used benchmarking to improve the quality in its organizational process particularly in relation to its turnaround times during refueling. Interestingly, although it is an airline company, Southwest benchmarked by adapting best practices from a road based industry sector, Formula 1. That is, most of the aircrafts of Southwest Airlines stayed on the ground in-between their flights for an average of 40 minutes for refueling purposes. Although, when compared or benchmarked with fellow airlines, this turnaround time for its refueling was lower, Southwest Airlines’ management wanted to improve further, so they can reach their destinations quickly and aptly. To fulfill that objective, Southwest initiated its benchmarking process by looking at similar processes outside its industrial sector. As the refuellers fueling the cars during the pit stops in the Formula One Racing, were the quickest and efficient ones in the world, Southwest studied their refueling process and adapted it for their operations. The result was immediate and effective. “Adopting the turnaround processes used during pit stops, Southwest Airlines can now refuel an aeroplane in 12 minutes.” (Murdoch 1997). This cross-sector benchmarking or lateral benchmarking can enable organizations to understand the problems from a different perspective, leading to better solutions. Conclusion From the above analysis of the quality tool of benchmarking, it is clear that benchmarking other companies and adapting their best practices could prove to be one of the feasible and effective success routes for any organization. It can optimize the organizational functioning in all organizational ‘spheres’ bringing in various benefits. However, certain structural and operational modifications have to be done to complement the best practices, because benchmarking is not a one-off event, but has to be treated as part of a continuous process. In the current competitive business world, all organizations have to exhibit their optimum best, particularly regarding quality aspects, and for that benchmarking is an effective tool. References “Benchmarking.” (2008, Sept 12). Total Quality Management. Retrieved from: http://totalqualitymanagement.wordpress.com/2008/09/12/benchmarking/ “Benchmarking in the Health Sector.” (n. d). Australian Institute of Health and Welfare. Retrieved from: http://www.aihw.gov.au/WorkArea/DownloadAsset.aspx?id=6442454198. Evans, J. M and Lindsay, W. M. (2008). Managing for quality and performance excellence. New York: Cengage Learning. Gitlow, H. S., Oppenheim, A. J., Oppenheim, R and Levine, D. M.(2005). Quality Management. Delhi: Tata McGraw-Hill Education. Inglis, A. (2005). Quality Improvement, Quality Assurance, and Benchmarking: Comparing two frameworks for managing quality processes in open and distance learning. Retrieved from: http://www.irrodl.org/index.php/irrodl/article/view/221/304 Jangla, B. (n. d). HR Benchmarking. Retrieved from: http://www.hrfolks.com/knowledgebank/benchmarking/hr%20benchmarking.pdf Lahiry, S. (1992, Nov 3). Management by Emulation. Retrieved from: http://www.peopleprofit.in/images/Management%20by%20Emulation%20(BW%20N ov-92).pdf. Murdoch, A. (1997, Nov). USA: Lateral benchmarking or ... what Formula One taught an airline. Retrieved from: http://www.managementtoday.co.uk/news/410740/USA- Lateral-benchmarking-Formula-One-taught-airline/?DCMP=ILC-SEARCH Nayab, N. (2010, Aug 14). Pros and Cons of Benchmarking. Retrieved from: http://www.brighthub.com/office/entrepreneurs/articles/82292.aspx Ohab, J. (2011, April 13). From Shoes to Software, Benchmarking Helps Organizations Find the “Right Fit”. Retrieved from: http://science.dodlive.mil/2011/04/13/from-shoes-to- software-benchmarking-helps-organizations-find-the-%E2%80%9Cright- fit%E2%80%9D/ Read More