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What is Benchmarking?
Best Practices Benchmarking® is the process of seeking out and studying the best internal practices that produce superior performance. We supplement the traditional metrics-focused approach with an analysis of why and how practices produce exceptional results. Best Practices, LLC does more than help our clients understand their strengths and weaknesses--we give them a road map for improvement.
Benchmarking can yield great benefits in the education of executives and the realized performance improvements of operations. In addition, benchmarking can be used to determine strategic areas of opportunity. In general, it is the application of what is learned in benchmarking that delivers the marked and impressive results so often noted. The determination of benchmarks allows one to make a direct comparison. Any identified gaps are improvement areas.
Benchmarking can take several forms. Internal benchmarking studies the practices and performance within the client organization. External benchmarking determines the performance of other, preferably world-class, companies.
"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. Clients are then able to identify shortcomings, prioritize action items, and then conduct follow-on studies to determine methods of improvement.
Another form of benchmarking includes "process benchmarking," generally higher-level and less numbers-intensive than metrics. These studies demonstrate how top performing companies accomplish the specific process in question. Such studies can take the form of research, surveys/interviews, and site visits. By identifying how others perform the same functional task or objective, clients gain insight and ideas they may not otherwise achieve. Such information affirms and supports quality decision making by executives. This insight is one key benefit and value-added feature of benchmarking,
The benefits of process benchmarking are realized when clients employ recommendations and embark on a change process – making marked improvements in the productivity, costs, and revenues of the company.
Examples of results in this area include:
Norwest, the nation’s largest mortgage company, embarked on a benchmarking campaign, and was able to quantify the following benefits:
- Sales brochure consolidation: $430, 000 in savings;
- Customer and direct mail consolidation: $1 million in savings;
- Opportunity lending: $20 million in added growth;
- Teller referrals: up 15%, 33% of which result in additional sales;
- Use of sales road maps: sales increase up to 102%;
- Use of partner letters: 150% increase in commercial sales; and
- Performance Coaching: 5.08 products per new customer.
Rank Xerox, the British unit of Xerox, benchmarked the best practices of its operating countries. Documented benefits of adopting these best practices include:
- Country units improved sales from 152% to 328%; and
- Over $200 million in new revenue.
Lucent Technologies identified best individual engineer practices which boosted their productivity levels by 10 percent in eight months, paying for the program within one year and yielding an ROI more than six times after two years.
By closely working with the client, Best Practices, LLC is able to identify such improvement opportunities and make recommendations on addressing each of them, delivering additional and tangible benefits of the benchmarking process.
What is a Best Practice?
To us, "best practices" are documented strategies and tactics employed by highly admired companies. These companies are not "best-in-class" in every area - such a company does not exist. But due to the nature of competition and their drive for excellence, the profiled practices have been implemented and honed to help place their practitioners as the most admired, the most profitable, and the keenest competitors in business.
We gather this information from a variety of sources. For the most part, this information is based on interviews, surveys, and other mechanisms of "primary" research - information that is simply not available in the public sector. Other database documents are distilled insights from secondary research -- books, magazines, libraries, Internet, and other public-domain resources. This ensures that the contents are truly valuable and are not simple re-hashing or re-publication of press releases and articles.
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