Ask these questions:
Once you have made some progress in understanding the underlying factors which are impacting the level and fluctuations in activity level, you can start to establish targets for what you consider to be reasonable levels of acceptable performance.
With more investigation, you should be able to find ways of improving performance.
Unlike many management tools, benchmarking is an ongoing process. To support this continuous process, APQC uses a four phased methodology that has proved successful for more than 25 years. The phases are: plan, collect, analyze, and adapt.
Plan: During this phase, the study focus area, key measures, and definitions are established and clearly documented. Additionally, the data collection tools are refined and finalized, and research is conducted to identify the best-practice organisations to study. Representatives from the sponsoring organizations select the best practice organisations to be visited.
Collect: This phase has two distinct objectives: 1) collect qualitative data and 2) learn from the best. The study questionnaire is administered to all participants, and the site visits are conducted at the best practice organisations selected in phase one.
Analyse: Key activities during this phase include analyzing trends and identifying practices that enable and hinder superior performance. The study team presents a final report containing key findings and insights at a knowledge transfer session. At this concluding meeting, the sponsors discuss the key findings and have an opportunity to interact with each other and the best-practice organizations.
Adapt: Adaptation and improvement resulting from the best practices identified throughout a consortium benchmarking study occur after the participants take the findings back to their organizations. For an additional fee, APQC staff is available to help study participants create action plans tailored to their organizations based on the study findings.
Refining the process: Organisations refine this model to meet their needs as they become more experienced in benchmarking. The number and names of steps are not as important as the use of an integrated, systematic approach to benchmarking. The time frame for each phase is typically:
Source: https://www.apqc.org/portal/apqc/site/generic?path=/site/benchmarking/methodologies.ihtml Accessed 13th Sept 2005
Some activities will be deemed critical for performance setting and performance appraisal of an individual, group or department. These are often called Key Performance Indicators or KPIs. Improvements in KPIs are considered to be very important for improving the overall efficiency and effectiveness of an individual or group. Some care needs to be taken with KPIs however. It is very easy to measure the wrong activity or to set unrealistic targets. As a guideline consider the SMART guidelines for KPI use.
S = Specific: clear and focused to avoid misinterpretation.
M = Measurable: can be quantified and compared to other data.
A = Attainable: achievable, reasonable, and credible under conditions expected.
R = Realistic: fits into the organization’s constraints and is cost effective.
T = Timely: doable within the time frame given.
Key performance indicators should be trendable, observable, reliable, measurable, and specific.
Source: https://www.mt-online.com/articles/0405meridium.cfm Accessed 12-9-05
Basic improvements should be quite obvious. More refined improvements might require more extensive investigation and, perhaps, external advice. At the same time that you are undertaking this activity, you should also be assigning responsibility for the activity. A principle of what has been called ‘Open Book
Management’ is that every expense should be assigned to an individual. The cost or revenue item should be assigned to the person who has the most influence over the activity, or the most knowledge of how the expense is incurred. Their task is to manage the activity or expense, suggest ways to make improvements and provide projections of that activity or expense for budgeting purposes.
Post the numbers: Put up the numbers in an easy-to-understand format where everyone can see them. Set up a thermometer, a wall chart, or an area on your intranet. Pass out financial and operation reports with critical numbers highlighted. Ask for a volunteer scorekeeper. The scorekeeper’s job: update the board as often as possible. Get the word out any way you can.
Teach the numbers: An important financial or operational number that nobody understands is meaningless. How do we measure operating efficiency? What counts as a warranty expense? Everybody in the company should know (and ideally be able to explain) the importance of key numbers. Give some pop quizzes, and hand out gift certificates or $20 bills for correct answers.
Brainstorm: How can we affect our numbers? Gather feedback from the people closest to the numbers. Conduct experiments. Get volunteers to research key variables and report back to the group.
Forecast the numbers: Can a department accurately predict where its numbers will be next month? Next quarter? If you can forecast a number correctly, you truly understand it.
Play critical-number games: Managers and employees set a short-term target for their critical number, with a small reward for success.
Develop critical-number bonuses: Your bonus system can be pegged to yearlong targets for your company’s critical numbers. Critical numbers get everyone in a company (not just managers!) looking at the same metrics and thus working toward the same goals.
Copyright © 1999 Open-Book Management Inc.
Source: https://www.inc.com/articles/1999/12/15979.html Accessed 4th January 2006
A critical part of any plan for releasing business productivity potential is to involve people from all over the company. You need to tap into their knowledge, ideas and enthusiasm and encourage them to be part of the improvement process. Developing measures of activity, setting targets and assigning responsibility, changes the way people think about their contribution to the firm. Asking them to get involved in forecasting activity levels taps into their intimate knowledge of what they do – probably a much better basis for forecasting than using a spreadsheet to assign numbers to expense categories.
“The launch of the first “bottom-up” budget took months of coaching (and about 90 hours of managers’ time) over a six-month period. Three budgets later, the process is much smoother. And the results are persuasive. Explains Wilson, “Employees were always saying, ‘Why doesn’t the company do this?’ Now every issue comes down to a financial matter. The biggest payoff is that there are fewer disputes over day-to-day spending decisions.” Also, expenses are running 15% below their 1991 levels now that 17 people control costs. That’s helping profits: for 1994, net pretax income was expected to come in at 11.3% of $5.6 million in sales, up from 3.5% three years earlier.”
Source: https://wwwinc.com/tools/2000/10/13788.html Accessed 12th Sept. 2005
Active involvement of responsible individuals in setting and measuring performance will generate some interesting issues, such as:
The next step in using a benchmarking approach is to look for benchmark data for your industry and for world class companies which you can apply to your business. There are numerous sources of benchmark data in most countries and for most industries. You might start with your industry association and the department responsible for business activity in your local city, state or national government. Ask colleagues in similar companies as well as customers, suppliers and strategic partners for contacts. A quick search of the internet will provide an extensive list of organisations which undertake benchmarking studies.
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