Contributed Column

An Entrepreneur’s Perspective

by Christopher Loso

Benchmarking for continuous improvement

How do organizations learn and grow, meet customer expectations, and avoid becoming inefficient and not effective? One approach is benchmarking, which enables your organization to compare its operations against others in your industry or in the broader marketplace. Through effective use of benchmarking, your organization can identify ways to reduce costs, increase profits, improve quality, and strengthen customer loyalty and satisfaction.

Benchmarking is defined as a process for obtaining a measure — a benchmark. Simply stated, benchmarks are the “what,” and benchmarking is the “how.” Your organization examines how other identified organizations achieve superior performance, adapting (not copying) the identified processes, approaches, and technologies to improve your own organization’s performance.

There are two primary types of benchmarking: internal and external. When benchmarking internally, organizations benchmark one particular operation against others within the same organization. When benchmarking externally, organizations compare similar operations within a broad range of industries.

While it is important to measure and monitor performance for all critical processes internally, organizations should beware of being closed off from new ideas and approaches. Looking beyond your own industry for best-in-class performance is an excellent way to challenge your organization to rethink long-standing assumptions and practices.

For example, Southwest Airlines famously analyzed the processes, approaches, and speed of automobile racing pit crews to gain ideas for improving its airplane turn-around time at the gate. The outcome of this benchmarking study helped Southwest reconfigure its gate maintenance, cleaning, and customer-loading operations, saving the firm millions of dollars per year.

The benchmarking methodology can be broken down into six primary areas:

Plan: This phase provides the foundation for the project. Organizational leadership serve as the sponsor of the effort, forming the benchmarking team. The sponsor and team agree to the identified area that needs to be improved. Remember, leadership support is critical for the success of the benchmarking effort.

Determine the baseline: The team focuses on thoroughly understanding the process to be benchmarked, mapping out each step. The team also identifies existing performance measurements, develops additional performance measures, and gathers performance information on the new measures.

Collect information: The team examines how other identified organizations perform the process being benchmarked. Secondary research is conducted to identify a list of potential partner organizations for comparison based on “best-in-class” performance. Various consulting firms offer access to good data and can help with benchmarking. Then further performance information is collected from this list of organizations via survey, conducting more extensive phone or in-person interviews with those organizations that have the best performance data.

Analyze information: The team reviews the performance information across all identified partners to identify themes and best practices that positively impact the performance of the process.

Make recommendations: Based on the data analysis, the team notes gaps in its own organization’s performance. They then determine how best to close those gaps and develop improvement recommendations that can be adapted by their own organization.

Implement and evaluate ongoing performance: Once the benchmarking study is completed, leadership establish an implementation team to move forward with the recommendations. The outcomes of this implementation are tracked through the measurements identified by the team. The team then evaluates the impact of the changes on performance, using the information to continuously improve the operations.

Knowledge is power, and benchmarking is a potentially powerful tool to promote continuous improvement in your organization.

With leadership commitment, some process know-how, and a little investment, your organization can take advantage of industry “best-in-class” knowledge to continually improve operations and meet emerging challenges. Power up with benchmarking! •

Christopher Loso is vice president of Loso’s Professional Janitorial Services, Inc. in South Burlington, www.lososjanitorial.com, and former executive at Booz Allen Hamilton and Deloitte Consulting.

Index of Contributed Columns

For information on submitting a contributed column see here.