benchmarking: making best practices your daily practice james w. cornell, president cbc, ctp,...

Benchmarking:Making Best Practices Your Daily Practice

James W. Cornell, PresidentCBC, CTP, CM&A, CBA, CRA, CPPJanuary 2005

Praxiis Business Advisors Praxiis Business Advisors

Our mission is to help private and corporate business owners

create strategies for high performance & competitive dominance,

drive value growth, and when ready

devise and execute the most profitable exit through a

predetermined succession plan or sale of the business.

Praxiis Business AdvisorsPraxiis Business Advisors

Corporate Renewal, Growth & Transaction Advisors to Small and Mid-Market Businesses and their Stakeholders.

Established as Strategic Corporate Services in 1988.

Primary offices are in Western NY and services are delivered nationally.

Affiliated Professionals possess academic credentials including B.S. Business Management & Economics, Master of Business Administration, Ph.D. in various disciplines, Juris Doctor and numerous professional designations.

James W. (Jim) CornellJames W. (Jim) Cornell

Founder and President of Praxiis Business Advisors 24 years as advisor to $1M - $4B Clients

– Strategy, Turnarounds, Performance Improvement, Value Growth, Exit Planning, M&A, Government Contracting

Principal in numerous mid-market turnarounds, including– National security services firm– Internationally recognized manufacturer of engineered fabric

structures– DOD and Industrial Paint & Coatings manufacturer

Lead advisor for successful turnaround of $50M DOJ Citizenship Benefits Processing program, & $1B+ major government contract wins (TVA, SPR)

BS, Business Management & Economics, and MBA from SUNY Empire State College

Governor, SUNY Empire State Federation Board of Governors Faculty, SUNY Empire State College FORUM Program Chair- Licensure Task Force Alliance of Merger and Acquisition

Advisors

Benchmarking DefinedBenchmarking Defined

To measure the best practices of leading businesses, and learn and adapt them for use in your business

A systematic comparison of two or more companies or units of companies to gauge their performance relative to a peer

You Cant Improve What You Don’t Measure !

(and you can’t prove it to your

customers either)

Where Did it Start?Where Did it Start?

Xerox Corporation 20 years ago

– Canon was “eating their lunch” Higher quality machines, lower price

Embarked on a systematic campaign

– Reverse engineered products

– Studied competitors

– Studied a wide range of firms in other industries

A Discipline EmergedA Discipline Emerged

Malcolm Baldrige National Quality Award incorporated it a a criterion

Many multi-step recipes emerged, all built around fundamentals..

– In “Benchmarking” by Camp, steps are Planning Analysis Integration Action Maturity

– American Productivity & Quality Center Planning Data collection Analysis Adapting & Improving

Two Types of BenchmarkingTwo Types of Benchmarking

"Metrics" give numerical standards against which a client’s own processes can be compared. Metric benchmarks are of the form:

– Finished-product first-pass yield of 97% – Scrap/rework less than 1% of sales – Cycle time less than 25 hours – Customer lead times less than 20 days – Productivity levels of $150,000 or more per employee – Plant-level ROA better than 15%

These metrics are usually determined via a detailed and carefully analyzed survey or interviews

It’ All About the Data!It’ All About the Data!

Well, Maybe Not Always………

Two Types of BenchmarkingTwo Types of Benchmarking

“Process Benchmarking" is generally higher-level and less numbers-intensive than metrics.

– Demonstrate how top performing companies accomplish the

specific process in question. – Takes form of research, surveys/interviews, and site visits. – By identifying how others perform the same functional task or

objective, firms gain insight and ideas they may not otherwise achieve.

– A true value-added feature of benchmarking

Benefits of process benchmarking are realized when pursuing a strategy of changed processes – making marked improvements in productivity, costs, and revenues

Best PracticesBest Practices

Tactics and strategies employed by highly regarded companies

Process benchmarking is particularly useful to develop BP, and our focus today

Fundamental tool for driving change in contemporary organizations

Why Benchmark?Why Benchmark?

When done well, benchmarking prominently reveals gaps

between the performance of the benchmarker and

that of a “best practices” leader, and

that leads to developing sustainable competitive advantage

Why Don’t More Businesses Do Traditional Multi-step Benchmarking?Why Don’t More Businesses Do Traditional Multi-step Benchmarking?

Takes too long often six to nine months Its costly The lessons learned may or may not get translated to practice

and improvement – Reports that get shelf space, not action– Cumbersome process to complete– Limits Flexibility - procedures oriented

Put Another Way…..Put Another Way…..

“Its like the mating of pandas: infrequent, clumsy and often ineffective”

Chris Bogan, President and CEO of Benchmarking and Consulting

How To Get It

How To Evaluate It

How to Use It

Creative Benchmarking*Creative Benchmarking*

Start from the customers point of view List each step of the customers buying experience Next, determine which factors most influence customers perception of value at

each step Finally, identify companies that excel at each factor – without regard to their

industry!

* (derived from the work of Dawn Iacobucci and Christie Nordhielm, Kellogg Graduate School of Management)

Entering, Occupying and Exiting a Hotel RoomEntering, Occupying and Exiting a Hotel Room

Enter Lobby– Physical Environment

Functional, economical– Southwest Airlines, the Gap, Target, Sam’s Club

Attractive, luxurious– Virgin Atlantic, Lexus car dealerships

Greeting– Friendly, casual

Wal-Mart, Club Med– Cordial, professional

Nordstrom, Ritz-Carlton– Discrete

Alcoholics Anonymous


Check-In– Fast efficient service, no lines

Express aisles in supermarkets, Hertz– Guaranteed maximum wait

Bennigans Lunch Express– Pleasant Queue experience using pagers

Cheesecake Factory

Bellboy Carries Luggage– Attentive Employees

Benihana Japanese Restaurants– Festive, informal impression

Carnival Cruise Lines, Southwest– Sedate, formal impression

Management consulting firms, Tiffany


Use Shower– Good shower design

Professional sports teams– Reliable plumbing maintenance

SeaWorld

Get Advice on Restaurants– Intelligent agents who know restaurants

Electronic– Yahoo!

Employees– Travel agents

Agents who know their customers– Nordstrom


Breakfast– Room service food arrives promptly, at appropriate temperature

Delivery pizzerias– Courteous delivery personnel

UPS

Check-out– Quick, seamless departure, TV checkout

Sega children’s games Intuits TurboTax


Other areas for hotels to look for best practices….– Choose Hotel– Make Reservation– Travel to Hotel– Park Rental Car– Walk to Hotel– Go to Room– Look Around Room– Require Assistance of a hotel employee– Call Home– Use Business Equipment– Workout– Retrieve Car– Head to Airport– Follow-up

Fast-Cycle BenchmarkingFast-Cycle Benchmarking

Less elaborate than traditional multi-step

More tactical – What do concrete trucks and pizza have in common?

Useful to Identify specific operation problems or opportunities

Rather than simply copy from other firms, use the data to draw useful analogies and stimulate generation of creative ideas

– Mobil and the Penske race team.. gas stations aren’t race teams, but the methods for quick turnaround led to the Speedpass

Figure Out What You Are Looking ForFigure Out What You Are Looking For

Replicate and bring it in, or

Look for practices that can spark ideas, don’t just replicate what you find

Figure out where benchmarking fits in your toolchest, and make an informed decision about the outcome you are really after

Benchmark Companies Roughly at Your Own LevelBenchmark Companies Roughly at Your Own Level

College physics before high school math doesn’t make any sense…– Forget the world class company (unless you are one!)..find a firm of similar

size and situation as yours

Benchmark companies with similar business needs– Common concerns promote a more productive exchange or transportability

of the information learned

Study the Entire System Rather Than One TechniqueStudy the Entire System Rather Than One Technique

Avoid cursory, superficial looks

Mission statements, values and expectations of employees may be expressed as a document or pledge, but

The real value is in how the firm inculcates the meaning in employees, and how they put it to work in their daily practices

High performance systems only work when every single person in the organization is fully committed

When Benchmarking a System, Adapt What You Find, Don’t Just Copy ItWhen Benchmarking a System, Adapt What You Find, Don’t Just Copy It

Conditions are never identical

You can pick up critical variables and apply them …

Create a system – a comprehensive set of reinforcing practices that are responsible for success

Benchmark Subjective Measures and QualitiesBenchmark Subjective Measures and Qualities

Running a business today is far more of a creative process than in the past

Quantitative measures are useful, but not all encompassing

Using a creative process, benchmarking is a directional tool, not just a template

Remember Why You Are Doing ThisRemember Why You Are Doing This

Don’t get wrapped around the axle

Don’t confuse measures with actually delivering a result from the effort

Focus on the principles most applicable to your business

It is not an end in itself, it is but a means to an end

Step-by-Step - 1Step-by-Step - 1

You are the Process Owner

Start by Working Alone– List key ideas and best practices you believe your organization should

consider

– Brainstorm

– List and rate your ideas relative to your organizations mission and strategy

– Identify timeframes within which each idea and practice could realistically be implemented


Share your analysis with other key members of your organization

– Have them create similar lists and incorporate them into a master list

– Discuss individual ratings– Develop consensus for importance and timing


Identify extended team members that are motivated

– Work together to prepare list of top three ideas and best practices that should be implemented immediately

– Identify key benefits expected to be gained from each

– Develop the approach to be used to implement, problems expected, and how you will address them


As Group, list top 3 ideas and best practices that should be considered to implement in the next year

– Identify and assign a key person to take the lead in analyzing implementation feasibility


Meet regularly as a team– Assess progress and identify new ideas

– Discuss how to develop a culture of Entrepreneurship Innovation Accountability

– All to keep the creative energy flowing


If the task seems too daunting

engage a facilitator from outside the immediate organization

to lead the process and

establish accountabilities for the team

Pitfalls When Not Done WellPitfalls When Not Done Well

Failure to consider organizational cultures or circumstances leads to a wrong direction

Insufficient preparation usually results in MBWAA (management by wandering around aimlessly!)

– What are you trying to learn about?

– Why do you want to learn it?

– What will you do with it to make your processes better once you have it?

Recognize You’re Not The BestRecognize You’re Not The Best

Not invented here

Humility and Determination is required to think outside the box

Utilize the best ideas of others to build upon

Processes can often be evaluated

with numeric metrics

A What Without a How Can Do More Harm Than GoodA What Without a How Can Do More Harm Than Good

The “hows” underlying the numbers are essential

– They tell you if you are comparing “apples to apples”

– They provide clues to how to alter methods to suit your culture or circumstance

– They may reveal that a best-in-class measure isn’t cost effective, or that outsourcing may be in order

Measure What’s Needed, Not What’s EasyMeasure What’s Needed, Not What’s Easy

Broad measures of performance fail to give you actionable information

You don’t need a 1000 measures, just find the key indicators that serve as critical factors

– eg employee turnover

Finding balance is important..dont let a non-benchmarked metric go bad

– Call center volume vs. hi-margin cross selling

Find the Happy Medium in FrequencyFind the Happy Medium in Frequency

One shot benchmarking doesn’t gain continuing improvement

Too often (weekly, monthly) makes you reactionary slaves to the numbers

Speed of business is increasing, driving the frequency of benchmarking..things change quickly

Involve Implementers from the StartInvolve Implementers from the Start

Getting Buy-in is critical

Involvement from planning to implementation of the people who need to implement findings conveys ownership

Look for Benchmarking Opportunities EverywhereLook for Benchmarking Opportunities Everywhere

Internal and External

In and out of industry

Utilize Trade and other organizations (Runzheimer)

Delivering Excellent Service:Delivering Excellent Service:

Lessons from the Best Firms

Robert C. Ford

Cherrill P. Heaton

Stephen W. Brown

California Management Review Vol 44, NO. 1 Fall 2001

Ten Essential LessonsTen Essential Lessons

1. Base decisions on what the customer wants and expects2. Think and act in terms of the entire customer experience3. Continuously improve all parts of the customer experience4. Hire and reward people who can effectively build relationships with

customers5. Train employees in how to cope with their emotional labor costs6. Create and sustain a strong service culture7. Avoid failing your customers twice8. Empower customers to co-produce their own experience9. Get managers to lead from the front, not the top10. Treat all customers as if they were guests

ResourcesResources

Benchmarking for Best Practices: Winning Through Innovative Adaptation, Christopher Bogan and Michael English, McGraw Hill

www.best-in-class.com – Bogan’s website

The International Benchmarking Clearinghouse, www.apqc.org

www.runzheimer.com

The Business Gateway http://www.bgateway.com/index.asp

Reference Sources and ReadingsReference Sources and Readings

Is Benchmarking Doing the Right Work? David Stauffer, Harvard Business School Publishing 2003

Key Ideas and Best Practices Analysis, Lynda M. Applegate, Harvard Business School Publishing, April 2002

Creative Benchmarking, D. Iacobucci and Christie Nordhielm, Harvard Business Review, 2000

Delivering Excellent Service: Lessons from the best firms, Ford, Heaton and Brown, California Management Review, 2001

Thank You!

Additional Areas For DiscussionAdditional Areas For Discussion

Spider Diagram

Balanced Scorecard

The ‘Spider’ DiagramThe ‘Spider’ Diagram

The spider diagram is a means of representing visually just how well or badly you are doing as a company

This process benefits from group input

Identify the 6-8 factors customers use to rate the company (and competitors) – Mark each leg of the spider with one of these factors.

Spider ChartSpider Chart

Balanced ScorecardBalanced Scorecard

A new approach to strategic management was developed in the early 1990's by Drs. Robert Kaplan (Harvard Business School) and David Norton. They named this system the 'balanced scorecard'. Recognizing some of the weaknesses and vagueness of previous management approaches, the balanced scorecard approach provides a clear prescription as to what companies should measure in order to 'balance' the financial perspective.

The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise.

Kaplan and Norton describe the innovation of the balanced scorecard as follows:

"The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation."

The balanced scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives:

Balanced ScorecardBalanced Scorecard

Begin With the End In Mind!

benchmarking: making best practices your daily practice james w. cornell, president cbc, ctp,...

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