Best Practices benchmarking: A Packaged Approach

Organisations, irrespective of their success are respected by even their competitors when they follow best practices. Firms are identified by these practices. To be successful, a best practice implementation requires infrastructural support and continual action

Benchmarking is passe. Or is it? Unless used in constructive collaboration with a structured systems and improvement methodology it does not offer long term usefulness. The subject has evolved since Dr Robert Camp introduced it to the world. Loosely referred to as - Best Practices Benchmarking - it is today a strategic approach for companies seeking long-term advantage.

What is a Best Practice?
Best practices can be defined as documented strategies and tactics employed by highly admired (not necessarily successful) companies. The strongest parallel to this concept is the 7 Habits of Highly Effective People by Stephen Covey. While we are still struggling to find an organized and structured model like 7 Habits for the best practices of companies, there are a few answers. These answers, however, only raise many more questions.

For example, long before Infosys hit the stock boom it was recognised and admired for its human resource policies. The industry was in awe with the extent N R Narayanmurthy, Chairman, Infosys Technologies, went to create a positive work environment. People believed in him when he gave stock options. Hindustan Lever is revered for its distribution system. So much so that when Keki Dadiseth wanted to improve efficiency and profitability through improvements in distributions he had no model to follow. He had to evolve and create a best practice.

Is it Benchmarking?
It is and it is not. Going by the classical definition of Robert Camp and his team of practitioners at Rank Xerox, benchmarking was intended to be the search and adoption of best practices across industries. However, like most management concepts, benchmarking too was misunderstood. One of the reasons was the exaggerated emphasis on numbers or metrics. Company after company joined the mad-rush for benchmarking. All they did was to collect data and sit on it. Literally. The key to benchmarking is, not to know what the competition is doing, but how is it doing it. How is the watchword.

What are metrics?
Metrics are the benchmarks (numerical) against which a company can compare its own processes. Some examples:

• First-pass tractors 98.2 per cent
• Scrap/rework on piston assembly less than 1 per cent of total production
• Pizza delivery in less than 30 minutes
• Response to customer enquiry in 24 hours
• Per employee profitability upwards of Rs 2 crores.

A structured method is often followed to arrive at these metrics. This method involves, but is not restricted to, a detailed and care-fully analyzed survey. Complex issues will need focus groups and/or one-to-one interviews. An effective analysis can:

• Help to identify shortcomings
• Priorities action items
• Action towards improvement. However, this is not enough

What is Best Practice Benchmarking?
Best Practice Benchmarking (BPB) can be defined as the process of identifying, studying, selecting, and adopting, the best internal practices that produce superior performance. This need not be in our industry of concern.

This requires a departure from the traditional metrics-focused approach with an analysis of why and how practices lead to superior results. BPB can lead to superior results through education of executives. It is often used to determine strategic areas of threats and opportunity Benchmarks lead to direct comparisons. Any identified gaps are improvement areas. BPB can take several forms. Internal BPB studies the practices and performance within the client organization. External BPB determines the performance of other, world-class, companies.

BPB is a higher-level activity and is less numbers-intensive than metrics. It looks for how companies accomplish specific processes leading to superior results. Usual methods are research, surveys/interviews, and site visits. Proper use of BPB can lead to improvements in productivity, cost, and revenues.

Examples of results in this area include:

Norwest, a large mortgage company, embarked on a benchmarking campaign, and was able to quantify the following benefits:

• Sales brochure consolidation: US $430, 000 in savings
• Customer and direct mail consolidation: US $1 million in savings
• Opportunity lending: US $20 million in added growth
• Teller referrals: up 15 per cent, 33 per cent of which result in additional sales
• Use of sales road maps: sales in-crease up to 102 per cent
• Use of partner letters: 150 percent increase in commercial sales.

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 per cent to 328 per cent; and
• Over US $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.

How to gather information?
This information can be collected from several sources. A third party, for example a consulting firm can collect this information based on interviews, surveys, and other mechanisms of primary research. Simpler ways to accomplish this are through database documents, books, magazines, libraries, Internet, and other public-domain resources. Press releases and news articles are not good sources of this data, since most of it is anyway manipulated and planted. Mystery shoppers and clearinghouses are accepted and ethical form of gathering information today. Feature stories in Fortune, Harvard Business Review, Sloan Management Review, Business Today and Business India are recommended.

An excellent and cost effective method of gathering best practice in-formation is through attending seminars and conventions. Of course, you need to pick the right conventions. Pick the ones where actual implementers are speaking. Most conventions primarily assemble a battery of corporate stars and allow them to speak to a topic of their choice. Most of these topics or speeches have no relevance to the convention theme. Plan your investment in conventions well. It could be the most vital education you need. Avoid low-end conventions. Also, ensure that more than one member attends. This increases the probability and quality of experience sharing. Prepare a plan for information to be gathered while attending such conventions. This increases return on investment.

BPB support: International Rating Systems
A BPB initiative needs support. Infrastructure and system support. This is available as the International Rating Systems - Det Norske Veritas. International quality system certifying bodies are probably the most underestimated resources on best practice information. Or at least, they used to be underestimated. Not until the largest and most experienced quality system certification body in the world - Det Norske Veritas(DNV) realised the wealth of information it had. DNV commissioned a research project in the 1970s that resulted in the International Safety Rating System. Twenty years and several versions later it is still considered the best collection of generic best practices from a safety and work environment point of view.

Encouraged by the success of the ISRS, DNV launched another project in the late 1980s to look at the best practices for business management. The product was named International Quality Rating System (IQRS). Over 400 sites participated in this path-breaking research. The model provides best practices in a question-format called the IQRS Protocol. This set of over 800 questions across 18 elements of business management are pointers to the what and how of success. The system can be calibrated to the ISO 9000, QS 9000, Malcolm Baldrige National Quality Award, and The European Quality Award.

BPB action: Continual Quality Improvement
Once a company has identified, analysed, selected, and adopted a best practice, the real challenge is to maintain the lead. The answer lies in the classical quality management processes propagated by Dr J M Juran. He argued that all management is a cycle of planning, control, and improvement. BPB is an advanced tool used in the planning stage. The gains have still to be held, the process is to be controlled and the improved. For, to even remain where you are, you have to run faster than your competition. An obvious result of a successful BPB expertise is the subtle conversion of the hunter to the hunted. Once you begin to do well, you are the target for being benchmarked. Thus, improve.

The improvement cycle is universal and can be viewed as a chain of breakthroughs in attitude, organisation, knowledge, cultural patterns, results, and recognition. The cycle is captured in the QC3 management model. The QC3 management model is about improving, incrementally and radically, an organisation’s core processes, and making those processes better, faster and cheaper. In other words, QC3 is about:

• Increasing output quality (to satisfy customer needs)
• Decreasing process costs (reducing cost of poor quality)
• Compressing process cycle times (a measurement of process speed).

QC3 leads you to the right projects that impact the core processes that result in sustainable employee, customer, stakeholder, and societal satisfaction. Subsequently the classical continual quality improvement method discovered by Dr Juran is used to achieve dramatic results.

The corporate world only moves ahead by learning from its leading practitioners. While the importance of metrics cannot be denied - it need not be overemphasised. It is vital to know the how of a Best Practice. The Best Practice implementation journey needs infrastructural support and continual action. While the IQRS provided this support QC3 ensures continued implementation. Combined, they provide a path for sustained development.