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November
2004
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In 1988, the first winners of the Malcolm Baldrige National Quality Award were announced: Motorola, Globe Metallurgical Inc., and Westinghouse Electric's Nuclear Fuel Division. In subsequent years, Xerox, Fedex, IBM, Cadillac, Milliken, Texas Instruments and The Ritz-Carlton all received the honor. They all had one thing in common that set them apart from their competitors: they all used the same measurement tool to dramatically improve customer service, quality, reliability, and accuracy of their business processes. Benchmarking became one of the world's mostly widely talked about and used measurement and management tools. Companies in North America, Europe, Asia, Australia and New Zealand all wanted to understand and implement Benchmarking as a means to achieving competitive advantage. In those early days of Benchmarking, there were very few companies and fewer individuals who had the expertise to effectively implement this new tool. All Baldrige winners have the responsibility to teach anyone who wants to learn how they achieved their results. Desire to learn was soon replaced by the need to learn. As more companies deployed benchmarking, their results led to breakthrough improvements. There were no benchmarking clearinghouses, no consortiums, no benchmarking exchanges, no websites to log onto. In order to understand the what, how, and why of these award winning and top performing companies, they had to talk to each other. They established dialogues that provided a meaningful exchange of information. This exchange of information let us to ask more and more questions about how and why companies did what they did to achieve their results. We were able to understand the practices and most importantly, the context the practices lived within. Companies around the world used Benchmarking to dramatically improve their business processes and achieve new levels of competitive advantage. Benchmarking was more than a numbers game! Benchmarking has become a misused and misunderstood measurement tool. Today, companies rely upon others to collect information from anyone interesting in submitting it. The data is scrubbed and filtered, massaged and manipulated, and mathematically calculated. The end result is a number that provides little insight, no context, and has little value. This number is then used by a company to make a decision that can have negative consequences on the bottom-line, on quality, customer service, or employee satisfaction. Take the example of the "benchmark" for number of employees served by 1 HR FTE: 1:85. This number was provided by a well known HR consulting firm and published in the August 2004 issue of a popular HR journal. The unfortunate scenario that unfolds when a CEO sees this ratio will play out in far too many companies. The CEO first asks the head of HR, "What is our ratio?" If the ratio is lower, the directive is to cut staff. If the ratio is higher, the head of HR is questioned on their function's effectiveness: "What do other organizations get from HR that we don't?" The questions that should be asked by the CEO are:
Not one of these questions can be answered by the ratio 1:85. The only way to answer these questions is to enter into a dialogue with the companies that are performing at the level you want your HR organization to perform at. Once these questions are answered, it may prove that this ratio has no significance to your HR Strategy or service delivery. Benchmarking is more than a numbers game! Metrics and ratios do play a role in Benchmarking. Metrics are best used in the Benchmarking process as result measures. Metrics should be used to determine if the results achieved by another company are more successful or effective than your own results. If another company is achieving a result that exceeds your own, then the opportunity to understand the what, how, and why of their practice or process forms the basis of the Benchmarking study. The metric is not the driver of change. The practice or process that produces the desired level of performance is the driver of change. Comparing your metric to someone else's metric is NOT benchmarking. Benchmarking is: "a continuous, systematic process for evaluating the products, services, and work processes of organizations that are recognized as representing best practices for the purpose of organizational improvement." The Benchmarking
Book The proper deployment of the Benchmarking process can make significant and dramatic improvements in organizational performance. Emergency medical teams benchmark pit crews at the Indianapolis Speedway. To ensure that Benchmarking does produce the breakthrough results that top performing companies experience, we offer the following suggestions:
Benchmarking is a measurement and management tool that has the potential to enable breakthrough thinking for an organization. Einstein was right - "the significant problems we face cannot be solved with the level of thinking that was used to create them." As has been outlined here, Benchmarking is NOT simply the comparison of metrics across a group of companies. It requires thoughtful preparation, discipline, tenacity, and an open mind. Benchmarking is more than a numbers game! For more information
on Benchmarking, contact Brian Lowenthal, Managing Partner, The
Benchmark Partners, LLC, blowenthal@thebenchmarkpartners.com
or 216.295.9589. |
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Greater Madison Area SHRM, Inc. 2830 Agriculture Dr. Madison, WI 53718 (608) 204-9814 fax (608) 204-9818 chapteradmin@gmashrm.org © 2004;
Greater Madison Area SHRM, Inc. |
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