What can be benchmarked?

In the previous section we defined the three types of benchmarking while in this section we shall describe what can be benchmarked. Table 8.1 shows what can be benchmarked and which types of benchmarking can be applied.

The purpose of this table is to show that a superior level, three main areas exist which can be benchmarked and that in principle all of these three main areas can be combined by one or more of the three types of benchmarking. This is not the same as saying that the procedure is identical for the various combinations in the table as the difficulties of applying each single combination can vary considerably from one combination to the other, for which reason the detailed benchmarking procedure will also vary considerably. The parentheses in the table imply that difficulty in applying especially competitive benchmarking can be expected.

Type/what Quality Productivity Time

Internal benchmarking √ √ √

Competitive benchmarking (√) (√) (√)

Functional benchmarking √ √ √

Figure 8.1 Characteristics of the three types of benchmarking

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It is shown from Table 8.1 that a superior level there are three answers to the question ‘what can be benchmarked?’. These three answers are (Karlöf, Bengt and Östblom, 1994):

1. Quality 2. Productivity 3. Time

However, it can be argued that only two main areas can be benchmarked –quality and productivity- as time will always be a part of either quality or productivity. When we have chosen time, despite this fact, as a special area which can be benchmarked, the reasons are the following:

- The time concept is simple and easy to understand and is thus easily accepted by all employees.

- The time concept is by definition related to processes and will thus automatically force the participants to focus on processes and process relations. Consequently, it will, by definition, invite a better cooperation between processes and departments.

- Reduction of times (e.g. times of delivery) means increased productivity and increased quality perception by customers.

Examples of times used for benchmarking are listed below:

1. Turn-around times, e.g. time from order taking to delivery. 2. Time of development for new products.

3. Installation time. 4. Time for debugging. 5. Time for handling of claim. 6. Time for handling of inquiries.

7. Time for dealing with employees’ suggestions for improvements. 8. Punctuality of deliveries in percentage terms.

Many companies have obtained major results by focusing on times. One of these is Electrolux Cleaning Services in Västervik, Sweden, which has reduced the time of delivery of vacuum cleaning motors by more than 90%. Another company, ABB, has launched a new quality improvement program named ‘Customer Focus’. The aim of this program is, inter alia, to halve all turn-around times.

Regarding benchmarking of productivity we would like to mention that comparisons by means of productivity measures are a common and often effective means of identifying potential benchmarking partners. A common productivity measure in this connection is:

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The application of this productivity measure in connection with benchmarking is often applied by analyzing the results of the following three steps:

1- The ordinary net profit per employee is calculated as described above. The potential benchmarking partners can be identifies by means of this measure.

2- A breakdown of the ordinary net profit per employee into its components is made, i.e. the following key figures are calculated:

a) Turnover per employee b) Purchase per employee c) Costs per employee d) Interest per employee e) Depreciations per employee

By comparing the above key figures with the key figures for the potential benchmarking partners, it will be possible to minimize the number of potential partners. At the same time, this comparison creates the possibility of identifying the processes which will be valuable to benchmark.

3- A further breakdown of the key figures of step 2 is made, if possible. The aim is to minimize the number of benchmarking partners further and to increase the possibility of identifying the relevant processes for benchmarking.

The application of the productivity measure ‘ordinary net profit per employee’ will be dealt with later in connection with benchmarking of the total quality costs of a company.

Benchmarking of quality will either be a natural extension of time or productivity being applied first in connection with benchmarking or it can be the area which for some reason has been focused on as the first. Benchmarking of quality can be divided into the same main areas which are normally used in connection with the divisions of the concept of quality:

1. External quality:

a. Customer satisfaction

b. The technical quality of the product 2. Internal quality:

a. Employee satisfaction b. Process quality.

In relation to external quality it can be interesting to look into the following questions: 1. How can need and expectations be identified?

2. How can ‘value added’ qualities be identified? 3. How are dissatisfied customers identified? 4. How are dissatisfied customers dealt with? 5. How is customer satisfaction measured?

6. Which qualities are included in the customer satisfaction measuring? 7. How are customer satisfaction measuring applied?

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The earliest form of benchmarking we know is that under point 8. The most common way to do it is simply to become customer of the competitor, buy the competitors’ products and compare them with your own products.

In relation to employee satisfaction it can be interesting to look into the following questions: 1. How is employee satisfaction measured?

2. How are measuring applied?

3. How are employees educated and trained?

4. How do you ensure that employees are involved in quality improvements? 5. How is employee involvement measured?

Benchmarking of process quality can be divided up into a row of key processes which in relation to a production company may consist of the following key processes:

1. Research and development. 2. Production and distribution.

3. Administration supporting processes.

In relation to research and development it is important to look into the following questions: 1. How is research and development carried through?

2. How is design review carried through?

3. How are customer demands translated into construction demands?

4. Does the company have a system for shortening the time for development? 5. How is the quality of the development work measured?

In relation to production and distribution the following questions may be important: 1. How are the processes designed?

2. How can time of delivery be minimized? 3. How can process quality be measured? 4. How is the measuring applied?

5. How are continuous improvements ensured? 6. How are defects and problems dealt with? 7. How is quality audit carried through? 8. How are quality plans made?

Finally, in relation to administrative supporting processes the following could be important: 1. How can support processes be identified?

2. How can the quality of supporting processes be measured? 3. How are measuring applied?

4. How can continuous improvements of the supporting processes be ensured? 5. How are defects and problems dealt with?

6. How can quality audits be carried through?

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The questions mentioned above must not be considered as exhaustive. Beyond the examples mentioned, there will be a number of things which can be benchmarked, all dependent on the exact company and the market in question. However, we are of the opinion that the questions above form a good basis for the beginning of a benchmarking procedure.