In 1979 Xerox had a problem; it was rapidly losing market share in the copier business to lower priced, high quality Japanese competitors (Camp, 2001). To overcome this problem they started a process, which they termed "product quality and feature comparisons", in which they compared competitor products and operations to their own to uncover the source of their competitor's success. This analysis worked; they found that the answer lay in the manufacturing details; the Japanese were beating Xerox on the factory floor.
The process was developed in Xerox by Robert Camp (1981) and became known as benchmarking. Camp (2001) argues that benchmarking does not appear in the work of W. Edward Deming or any other previous material, thus benchmarking was essentially invented at Zerox by Robert Camp, who defines the benchmarking process as "finding and implementing best practices" (Camp, 2001).
Since this time camp has provided substantial literature on the subject of benchmarking, which is now recognised across the globe as a method of improving organisation performance by continually identifying, understanding and adapting outstanding practices found inside and outside the organisation and implementing results (American Productivity & Quality centre, 1994, Cited, Jarrar, 2002).
Along with Camp, other key researchers who have contributed significantly to the popularisation of the benchmarking approach are Bjorn Anderson, a colleague of Camp, and UK researchers Mohammed Zairi and Yasar Jarrar. Today benchmarking has truly revolutionised the culture of business in the west and the way it is organised, managed and run (Jarrar, 2002), enabling organisations to improve their competitive position by adopting and implementing best practices to achieve improved levels of customer satisfaction.
Benchmarking starts with the premise that whatever processes an organisation feels require a level of improvement, there are many organisations already achieving world-class performance (Zairi, 2001). Therefore, rather than attempting to develop processes that are of best practice performance from scratch, benchmarking provides organisations with the opportunity to improve processes based upon something that is already being done elsewhere.
At this point, it is necessary to highlight that benchmarking does always not indicate the need to search outside the organisation for best practices; benchmarking is generally defined at three different levels; Internal benchmarking, External benchmarking and Best practice benchmarking.
This refers to comparing processes and practices within an organisation or division, who are based at the same or a different location (Codling, 1992). So, for example, if one branch of a travel agent chain has received particularly positive customer feedback for their customer service, managers from other branches, and the organisation as a whole, could benefit significantly by identifying and implementing customer service processes that are the same, or similar to the highest performing branch.
Internal benchmarking is a useful starting point for organisations adopting the benchmarking approach. However, to significantly improve an organisation's competitive position long term it has significant limitations. Table 2.1 summarises the key advantages and disadvantages of Internal benchmarking.
> Easy access
> Identifies unnecessary inconsistencies within an organisation, enabling processes to be standardised to a greater degree
> Easy to establish a benchmark standard
> Good trial and preparation for external benchmarking
> Internally focused; does not look at what competitors are doing or necessarily what customers want
> Could cause internal conflict across the organisation
> Only useful to larger organisations; SME's are limited to what they can benchmark against
Table 2.1; Summary of key advantages & disadvantages of internal benchmarking. Source; Adapted; Zairi, 1998:74
After implementing internal benchmarking, many organisations view external benchmarking as a natural progression. External benchmarking refers to:
> The comparison of products, processes and practices with those of competitors
> Collaboration with partners from a completely different industry to compare processes and practices (Codling, 1992).
Competitor benchmarking is where Xerox began; stripping down competitor products and comparing their manufacturing processes to those of Japanese competitors. Competitor benchmarking can be conducted in several ways; the use of market research survey results; direct product comparison or the sharing of practices for mutual benefits are the most common (Zairi, 1998).
The alternative to competitor benchmarking to provide an external perspective to an organisation, is to search for external partners who implement similar processes, but provide completely different end product and services and therefore are not in competition. For example, multi-national manufacturing organisations may produce completely different products, yet their warehousing and distribution needs might share many similarities, allowing them to benchmark against one another to identify and develop best practices. Table 2.2 summarises the key advantages and disadvantages of external benchmarking.
> Helps prioritise areas of improvement to stay ahead of, or in-line with competitors
> Helps determine initial areas of interest and potential improvement for most organisations
> External, marketing focused approach; removes internal blinkers and resistance to change
> Teaches that it is always possible to learn from others
> Access to information can be limited when competitors are involved
> Can only improve on "known" practices
> Hard to recruit direct competitor participants for detailed, worthwhile information sharing
> Does not necessarily identify "best practices" within or across industries
Table 2.1; Summary of key advantages & disadvantages of competitor benchmarking. Source; Adapted; Zairi, 1998:74-75 and Codling, 1992: 16-17.
2.3 Best Practice benchmarking:
This requires an organisation to seek out the undisputed world leader in the process that is critical to business success - regardless of sector or location (Codling, 1992). Once best practices have been identified, organisations face the complex task of understanding, adapting and implementing these in their own organisation. For example, when Zerox wanted to improve their billing process they went to banking and credit card organisations, because they believed that these types of organisations have the most effective, large scale systems to prevent errors arising in their billing documents (Zerox, 2001). Table 2.3 below identifies the key advantages and disadvantages of Best Practice benchmarking:
> Examines multiple industries
> Identifies radically innovative improvements and practices
> Provides a very broad perspective
> Strives for the "ultimate goal" to improve competitive position
> Often difficult to identify "best in class"
> Findings might not be appropriate or comparable to the organisation
> Access may be difficult - best practice organisations are consequently besieged with requests to benchmark with them
Table 2.1; Summary of key advantages & disadvantages of best practice benchmarking. Source; Adapted; Zairi, 1998:75
The Benchmarking Process:
Whatever type of benchmarking an organisation chooses to implement, it is logical that a sound methodology must be employed for implementation to be successful.
Since benchmarking first became popular in the late eighties, many methodologies have been proposed by various authors and organisations (Camp, 2001). Zairi & Leonard (1994), cited; Fridley et al, (1997) benchmarked fourteen benchmarking process models and highly rate the first, and most commonly adopted approach; the Xerox model, which Robert Camp developed, and eventually published in 1989. Camp's model follows five stages and ten steps, as shown in model 2.1 below. Other models developed subsequently follow a very similar pattern; Zairi & Leonard (1994), cited; Fridley et al, (1997) state that all of the processes they examined contain planning, analytical, integration and action phases. Therefore it is reasonable that Camp's model is an acceptable example of the type of methodology an organization should pursue when implementing any type of benchmarking activity.