10 Steps to
Best-Practices
Benchmarking

by Charles J. Burke

You have probably encountered the word "benchmarking" before. You may have assumed that it was just another management tool to be utilized or rejected according to your individual circumstance. In fact, benchmarking in the 1990s is not a choice; it is a necessity. The method that Japan adopted after World War II to create an economic superpower is the same that the American corporate world must learn to master to survive in the increasingly competitive global marketplace. The penalty for neglecting proper benchmarking is loss of competitive edge, at a time when the consequences of such a loss are more devastating than ever.

The term "bench" comes from topography and refers to a mark made upon some object in a landscape indicating its elevation, to be used as a reference point by surveyors. Topographers have the whole landscape to measure; nothing is concealed. Benchmarking in the business context involves taking measurements of a corporate landscape whose dimensions will probably not be immediately apparent. To be successful, it requires a combination of solid detective work, honest self-examination and the will to innovate.

Four types of benchmarking

There are four basic types of bench-marking:
n Internal-The process of comparing one particular operation within your organization with another. Success in this area is a matter of "the left hand knowing what the right hand is doing." Internal benchmarking is by far the easiest, both to research and to implement. Productivity improvement achieved in this type is usually about 10 percent.
n Competitive-The process of comparing an operation with that of your direct competitors. For obvious reasons, this is the most difficult type of benchmarking to carry out successfully, and legal considerations must always be kept in mind. Productivity improvement achieved in this type is usually about 20 percent.
n Functional-The process of comparing an operation with that of similar ones within the broad range of your industry (e.g., copper mining techniques compared with coal mining techniques). Functional benchmarking is relatively easy to research and implement. Productivity improvement achieved in this type may be 35 percent or better.
n Generic-The process of comparing operations from unrelated industries (i.e., ones often used by a wide variety of industries). An example would be a film library using the warehousing techniques of another industry to store more efficiently its catalogue of old movies. The advantage of this type is that the problems of competition do not apply, increasing the access to information and reducing the possibility of legal problems. Productivity improvement achieved in this type may be 35 percent or better.

Best practices

The recognition of best practices is somewhat subjective, but to increase the "objectivity" of identifying a "best practice," here are a few guidelines. A practice, method or process may be deemed a best practice when:
n It produces superior results. Superior is defined as 25 percent or higher results than the normal output.
n It is clearly a new or innovative use of manpower or technology.
n It is recognized by at least three different references as a best practice (that is, three or more public domain sources have referenced this practice).
n It has received an external award for this practice.
n It is recognized by their customers or suppliers.
n It is recognized by an industry expert.
n When the organization(s) utilizing it have a patent for this practice.
n It leads to exceptional performance. An example here would be General Electric's "Workout" practice.


More than just learning what benchmarking is and what it can do, the organization's leaders must develop a specific, organized approach to implementing benchmarking. It is fine to extol the virtues of benchmarking and encourage its use throughout the organization, but just like any other program, it must be established into the organization as a working process. The following 10 steps will keep any organization on track in its benchmarking endeavors.

Step 1-Determine processes
to be benchmarked

This step involves defining as accurately as possible the process to be benchmarked. It is the cornerstone of the entire benchmarking process. An incorrect identification at this stage could result in a waste of precious resources at later stages. Consider the following questions:
n Have departmental priorities been established? Determine whether the department has strongly defined its overall purpose. This includes setting long-term goals and short-term objectives.
n What is the level of change? Does an entire system require rethinking? Perhaps a particular process within that system needs to be improved. Can improvement be achieved by upgrading some particular task within the process?
n Has the work process to be selected been flowcharted? A good first step in gaining an overview of the entire process is to flowchart it. This will help identify problem areas and locate potential trouble areas. Then establish the critical measurements by which to compare future progress.
n How much change is possible? Given your organization's resources and circumstances, find out whether reforming the process is affordable at the determined level of change.
n Have critical performance measures been determined? Investigate whether measures have been determined in accordance with customer requirements. Have the measures been expressed in terms of a ratio or percentage? Are there other measures and, if so, which measure has priority?
n Has a project description been written? Make sure the description includes the following:
1. A reason for the project
2. Goals and objectives
3. The cost and duration of the project
4. Critical measures
5. Potential gains
6. The project's impact on the entire organization

Gather proof that the project is necessary in terms of potential costs against potential benefits.

After you've accomplished step 1, you will have a sharply focused, clearly defined procedure that tells management what needs to be changed, how much change can be achieved within given limitations and how to measure accurately your processes against those of others and against your own future projections.

Step 2-Determine organizations
to be benchmarked

This step determines which organizations should be studied by identifying "the best of the best"-organizations whose practices can be adapted to your requirements. An incorrect choice could lead to electing partners that are not true benchmarks for the selected process, that are uncooperative or whose practices are incompatible or irrelevant to your needs. Consider the following questions:
n From which sources could an effective partner list most likely be created? Research which published sources (industry periodicals, annual reports, etc.) would yield the most useful, accurate and up-to-date information. Find out which reliable individuals or groups (industry experts, watchdog groups, etc.) could be consulted to expand the list. A good source to consult is a library, either corporate or public. Librarians usually are eager to help in such efforts.
n Which of the preliminary organizations selected are really "the best of the best"? Determine which prospective partners truly are the benchmarks for your organization.
n Are the systems of the selected organizations really comparable? Select the organizations with practices that are the most compatible with yours.
n Is sufficient and accurate data obtainable? Decide which prospective partners would be expected to produce the most reliable information. Then see which organizations (e.g., foreign entities) would present the fewest logistical problems when gathering data. Also, figure out which organizations would be the least likely to present legal problems when gathering data. From which organizations would cooperation most likely be obtained?


When you've gone through step 2, you will have compiled a large list from which to choose organizations to contact as potential partners, based on the superior quality of their processes.

Step 3-Gather data

This step involves creating a plan for collecting data from selected targets, conducting site visits and creating a site visit report. The correct implementation of this step will result in data that can be used directly to enhance your organization's performance. Incorrect implementation of this step could result in data that is useless or inadequate to your purposes. Consider the following questions:
n Has an adequate data-collection plan been created? Determine what are the simplest data sources and the most difficult. Then figure out which data would have the most value. Other important factors are the time and cost limitations of collecting data.
n Which are the best sources of practice data? Decide which combination of the four types of sources-internal, published, external or original research-would yield optimal results.
n Have the best internal sources been consulted? Good sources to consult are your organization's library and other internal groups or teams.
n Have the best published sources been consulted? Internal publications (e.g., annual reports, quarterly reports) of the target organizations should be studied as well as any periodicals and directories containing information about the target organizations. Appropriate data bases can also lead to pertinent information.
n Have the best external sources been consulted? You can acquire significant information from professional organizations dealing with the business of your target organizations. You can also gain valuable information by contacting industry experts and independent consultants.
n Has original research been carried out? Identify the appropriate contact person of each benchmarked organization. Make sure to notify all contacts by telephone, explaining that their organization has been selected as a potential benchmarking partner. Explain the purpose of the process in clear language.

Proceed by preparing a preliminary survey from a checklist of topics to be covered. Do the questions emphasize process and customer-satisfaction measures? Fifteen or fewer questions are usually appropriate. Make sure they are objective and presented in an appropriate format (preferably multiple choice).

Then send the preliminary survey to the contact person. Where appropriate, conduct telephone interviews. Perform personal interviews with target personnel. After selecting the most appropriate benchmarking partners, decide where to conduct site visits.
n Have the proper preparations been made for your site visits? Prepare a site visit plan and send a summary of the topics that will be covered to the contact person. Determine which questions to ask, keeping in mind the questions that are more important than others for a particular target. It is best to have the questions reviewed by an internal source to confirm their relevance.
n Has the proper procedure been followed before, during and after the site visit? When notifying the contact person at the target organization of the impending visit, confirm that the contact person understands its purpose. Make sure to send the contact the necessary information (questions, etc.) in advance of the meeting.

On arriving at the site, the team should repeat its mission to the contact person. Obviously the appropriate questions should be asked during the visit, and the team should personally observe the process to be benchmarked. Instruct them to make extensive written observations of the process and to document observations as soon as possible after the visit. The agenda should allow for equal time for both benchmarking teams.
n Has a site visit summary report been prepared? The report should accurately reflect the documentation of the site visit.
n Have the appropriate ethical issues been considered? In obtaining information from a competitor, avoid any possibility of misrepresentation. Always approach consultants or former employees of the target organization with total candor and in an appropriate manner. Be careful to identify whether any of the information prepared could be considered proprietary (e.g., insider trading).


Upon finishing step 3, your organization will have complete, accurate and relevant data with which to compare its own processes with "the best of the best."

Step 4-Analyze for gaps

This step involves analyzing the data collected, discovering to what degree present performance lags behind the best in each area and combining the best features from the best practices into an ideal process. The correct implementation of this step will result in a clear picture of your processes in comparison with others in your business or industry. The incorrect implementation of this step could result in vague information that would not ultimately be useful in improving your operations. Consider the following questions:
n How can the data compiled in step 3 be most effectively analyzed? Make sure to properly analyze the results of the benchmarked organization(s) in terms of output and customer satisfaction. Also analyze thoroughly the results in terms of the work practices leading to them. Express both results quantitatively.
n How does each best practice compare with your organization's practice for each procedure involved? Create a chart that compares the benchmarked organization's practice with your own. Have the correct measures been employed for comparison (e.g., cost, speed, ease of use)? Has the difference between the benchmarked organization's practice and your own been expressed in quantitative terms?
n How can the best practices from these sources be combined? The best practice for each of the procedures involved should be combined into a single ideal process. How could the overall output of the process be projected? You may find that some procedures need to be eliminated because of cost or other considerations.

After you've accomplished step 4, relevant features from each of the best practices will combine into an ideal practice that can be implemented within budgetary and other constraints of your organization.

Step 5-Determine future trends

During this step, your team will examine your organization's past performance in relation to its competitors, forecast potential change in your industry and project future performance, both with and without the proposed benchmarking changes. The correct implementation of this step will give management a clear idea of its options and allot it a realistic conception of the potential benefits of adopting the benchmarking practices. An incorrect implementation of this step will give management an incomplete or inaccurate picture of its options. Consider the following questions:
n What have been the industry trends of the recent past? Determine the measure (e.g., revenues, productivity), related to the practice being benchmarked, by which your organization can most appropriately be compared to others. Based on this measure, figure out the benchmarked organizations' recent performance, as well as your organization's performance.
n What is the current performance gap? Compare your organization's current performance with the benchmarked organization. Is the gap widening or narrowing, according to recent trends? Discover the reason, based on the data analyzed in step 4, for the gap and its increase (or decrease).
n What will be the future performance gap if no benchmarking changes are implemented? By projecting past trends into the future and allowing for anticipated changes, learn what the benchmarked competitors' position will be within the next specified time period. Decide what your organization's position will be if no benchmarking changes are made. Will the gap widen or narrow?
n What will be the future performance gap if all proposed benchmarking changes are implemented? If the proposed benchmarking changes are implemented, determine your organization's position, in comparison with its competitors, within a specified time period. Has the change been expressed quantitatively (e.g., dollar amounts, percentages)? Has the potential benefit of the change been compared with the estimated cost (e.g., equipment, production delays, etc.) of its implementation?

Upon completing step 5, you will have identified the quantitative benefits of implementing the proposed benchmarking changes.

Step 6-Reveal results
and sell the process

This step involves communicating the benchmarking results and their implications to significant audiences in the organization and motivating them to carry out changes. The correct implementation of this step will result in a complete understanding by the target audiences of the necessity for changes in the processes involved and a desire to carry them out. Incorrect implementation of this step will leave both management and employees confused or inadequately informed, reducing the potential for effective change. Consider the following questions:
n Which audiences should be addressed? Decide whether the organization's entire management needs to be "sold" on the changes or only some managers. Educate those departments that need to be educated about the changes, and inform the entities outside the organization (e.g., customers, suppliers) that need to be informed.
n How is the report to be written? Determine what kind of publications (e.g., full-length report, newsletter, video presentation) would be most appropriate to communicate the benchmarking results, based upon the nature of the organization and its goals. Express the purpose of the benchmarking process in the appropriate manner. Has emphasis been placed on the results of the study, rather than methodology? Has emphasis been placed on fact rather than opinion?
n Has understanding and commitment been obtained from the target audience? Check the feedback from the report to see whether it indicates that the target audiences understand the necessity for change. Gain management approval for the concept of an implementation program. Also ensure that nonmanagement employees are completely "on board" for the changes. Do the outside entities involved understand how the changes will benefit them?

Step 6 will ensure that the advantages of change have been explained to the parties involved in order to motivate them to carry it out.

Step 7-Achieve consensus
on revised goals

This step involves revising goals to close the performance gap determined in step 5 and achieving consensus on those goals. The correct implementation of this step will create realistic and unambiguous new standards for the processes involved. Incorrect implementation of this step could create poorly understood or unrealistic standards that would only increase the frustration level of both management and employees. Consider the following questions:
n Have operational goals been effectively and realistically revised? Determine what type of change (e.g., basic goal priorities, measurement units, quantity or frequency of units processed) must be implemented. All goals should be expressed in quantifiable, easy-to-measure terms. The degree of change should also be realistic based upon benchmarking findings.
n What impact will the revised goals have within the organization? Some departments may need to be reorganized, and some employees' positions will need to be redefined, created or eliminated. Also, some lines of authority may need to be altered. Analyze how the revised goals will impact departments not targeted for change. How will these changes be justified to the parties affected?
n What impact will the revised goals have outside the organization? Try to ascertain what effect the changes will have on customers and suppliers. Then decide in what detail they should be informed of changes and how to present the changes to generate support rather than anxiety.
n Has management committed to the specific revised goals? Management must understand the proposed goals and fully support them. And management must communicate the goals to all affected employees in such a way as to obtain their full commitment.

Step 7 establishes clear-cut goals that management has approved and that all employees understand.

Step 8-Establish action plans

This step establishes the step-by-step plan designed to bring about the goals created and approved in step 7. Incorrect implementation of this step could result in vague procedures which would either be rejected by management or would prove unworkable if approved. Consider the following questions:
n In what order should work practices be implemented? Choose the factors (time, cost, software, etc.) that are most crucial in determining priorities. Discuss the pros and cons of each factor. Then analyze all factors so that a schedule of action can be determined. Project future performance based on the schedule of action.
n Has the procedure been prepared? Break down all tasks into comprehensible steps, with specified results. Then put the tasks in sequence. Determine which resources are needed to accomplish the tasks.
n Has management approved the procedure? Clearly articulate the plan's elements (task breakdown, costs, etc.) to management.
n Have individuals been empowered to manage the process? Identify the appropriate level of management for the procedure (e.g., line manager, management team, process owner). Select the employees and give them the training and authority to manage the process.
n Has the implementation plan been printed and displayed? Create the complete plan in printed form. Display the plan so that tasks, responsibilities and deadlines can be clearly seen and understood.

Upon completing step 8, management has approved the specifics of the plan, appropriate individuals have been empowered to carry it out, and every individual knows what changes in his or her work procedure are expected.

Step 9-Implement plans
and monitor results

This step involves executing the approved best-practice procedures and the day-to-day monitoring of changes. The correct implementation of this step will result in a closely watched process in which deviations from the plan will be corrected and the ultimate goals achieved. Incorrect implementation of this step could result in inaccurate or spotty measurement, leading to poor control of the process and disappointing overall results. Consider the following questions:
n Have timeline charts been created? Make sure that the charts accurately reflect the factor to be measured over the selected period of time.
n Have control charts been created? Charts must accurately measure the factor to be controlled (e.g., unit cost, quantity per hour) over the selected period of time.
n Has any variance from the plan been dealt with effectively? Appropriate action needs to be taken as soon as deviations are detected. Keep lines of communication open to all affected parties, providing feedback on the process.
n Has final evaluation been made of the benchmarking process? Accurately record the results, and determine whether acceptable goals have been achieved. Prepare a final report, including which elements of the incorporated changes should be rejected and which should be accepted as permanent practices within the organization.

Step 9 develops procedures to enable close monitoring of the changes and tracking of results so that, over time, successful elements of the new practices can be retained and the less successful ones eliminated.

Step 10-Recalibrate benchmarks

This step ensures the organization remains on the cutting edge by continuously evaluating the benchmarked practices and reinstituting the benchmarking process when necessary. The correct implementation of this step prevents complacency by creating the habit of evaluating procedures for their potential for improvement. The incorrect implementation (or nonimplementation) of this step fosters the illusion that any successful benchmarked practice creates a permanent improvement, resulting in a false sense of security and possible future loss of competitive edge. Consider the following questions:
n How often do the processes need to be recalibrated? The period between benchmarking studies should be realistic in terms of the nature and goals of the organization. The organization may be planning systemic changes that would make new benchmarking necessary. The level of customer satisfaction must constantly be monitored for the potential need to recalibrate. Also, management must commit fully to repeating the 10-step process when necessary.
n Has a plan been developed for recalibrating? The need for periodic recalibration should be communicated to all levels of the organization. Decide whether the new benchmarking process will be complementary to the previous one or will represent a new area of improvement.
n What additional factors are relevant? Investigate what industry changes (systemic, technological) have occurred since the prior benchmarking process that would impact a new one.

After completing step 10, the organization will understand when and how it needs to recalibrate benchmarks and will never put itself at risk by becoming complacent.

The success of a benchmarking process depends on the organization's permanent commitment to the process. A particular benchmarking change will often be temporary. To sustain market leadership, however, the habit of benchmarking must be a permanent part of the organization's culture.

Benchmarking Studies
Benchmarking engagements might typically involve:
n Benchmarking Process Improvements: The most extensive type of benchmarking services, these studies are not limited to competitors or functions. They typically require from 90 days to a year to complete, including implementation time.
n Competitive Benchmarking: Identifying best practices among direct competitors. These studies can typically be completed in 60 to 120 days.
n Benchmarking Lite: Short-term research that entails collecting key metrics from a number of participating organizations. In general, these studies can be completed in 60 to 90 days.

Best Practices Example
A vivid example of a best practice is demonstrated by SRC in Springfield, Missouri. Convinced that everyone is responsible for the company's success, SRC's management team trained every employee in "cash flow management," a tool that has enabled the company to generate double-digit growth every year since its founding 12 years ago. SRC has grown in 12 years from one company of 100 employees to 12 employee-owned companies in 16 sites with 750 people. SRC has been named the "Entrepreneurial Company of the Year" by Inc. magazine for the last three years. The current turnover rate is less than 1 percent.

The 10 Steps of Benchmarking
1. Determine processes to be benchmarked.
2. Determine organizations to be benchmarked.
3. Gather data.
4. Locate deficiencies.
5. Determine future trends.
6. Reveal results and sell the process.
7. Achieve consensus on revised goals.
8. Establish procedures.
9. Implement procedures and monitor results.
10. Recalibrate benchmarks.

About the author . . .

Charles J. Burke is a benchmarking consultant with KPMG Peat Marwick LLP in Dallas, Texas. He is responsible for assisting the firm with internal benchmarking activities and client engagement opportunities.Burke is committed to assisting organizations with their understanding and use of benchmarking and other quality tools and processes that lead to significant productivity improvements.Reprinted with permission from Benchmarking Handbook. © 1995 KPMG Peat Marwick LLP. All rights reserved.