Bench Marking

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Best practice benchmarking in the UK Matthew Hinton, Graham Francis and Jacky Holloway

Open University Business School, Milton Keynes, UK Keywords Benchmarking, Implementation, Performance management, Innovation, Success Abstract Reflects on a three-year project examining the evolving nature of ``best practice'' benchmarking in UK-based organisations. The findings describe the current state of benchmarking and some of its advantages across a wide variety of public and private sector organisations. Also investigates the disincentives to benchmarking activity experienced by practising benchmarkers, as well as the factors which inhibit the initial take-up of this technique. In addition, the notion that a maturity curve exists for organisations engaged in benchmarking is explored.

Introduction Benchmarking increasingly occupies the time and energy of managers and staff in many UK organisations. Undertaking benchmarking activities leads to not inconsiderable resource commitments. By contrast, little research has taken place into the relative costs and benefits, with the benefits often being intangible. Despite this, the growth of benchmarking in the UK has continued apace (Yarrow and Prabhu, 1999). Yet there is evidence that in some circumstances the costs may outweigh the benefits (Lincoln and Price, 1996; Sheridan 1993). Simpson et al. (1999) point out that the adoption of benchmarking concepts in the UK has tended to lag behind developments in the USA and that the benchmarking literature is dominated by US research. The degree to which lessons from the USA may translate into UK organisations is not clear; however, both consultants and government have sought to close the knowledge gap (Coopers & Lybrand, 1994b; DTI, 1995). Given these issues, our research has sought to review what is being done in the name of benchmarking, and more explicitly: . to gain an understanding of the factors which influence the outcomes of benchmarking activities, particularly the factors which contribute to positive outcomes; . to examine the disincentives to benchmark and the problems of measuring both qualitative and quantitative benefits; and . to understand how organisations assimilate the lessons learned from benchmarking activities and how such lessons may stimulate organisational innovation. Benchmarking: An International Journal, Vol. 7 No. 1, 2000, pp. 52-61. # MCB University Press, 1463-5771

This paper reports the findings of an ongoing research programme, partly sponsored by the Chartered Institute of Management Accountants (CIMA). The data reported here are from the largest survey with 559 respondents from UK

organisations and from follow-on questionnaires, collected between 1997 and 1999. In the following sections we define what is understood by benchmarking, followed by the survey evidence which covers the disincentives as well as the positive factors affecting benchmarking activity. Defining benchmarking One feature of our survey was the wide range of activities that emerged as being undertaken in the name of benchmarking and a variety of definitions existing, which may partly explain this confusion. Similar findings emerged from a study conducted by Coopers & Lybrand (1994a). In recognising the key aspects the authors have arrived at the following definition: The pursuit by organisations of enhanced performance by learning from the successful practices of others. Benchmarking is a continuous activity; key internal processes are adjusted, performance is monitored, new comparisons are made with the current best performers and further changes are explored. Where information about these key processes is obtained through a co-operative partnership with specific organisations (rather than via a third party such as an independently maintained database), there is an expectation of mutual benefit over a period of time (Holloway et al., 1999b).

This recognises other definitions of benchmarking, in particular the UK Government's definition, issued by the Department of Trade and Industry (DTI): A systematic approach to business improvement where best practice is sought and implemented to improve a process beyond the benchmark performance (Partnership Sourcing, 1997, p. 7).

Zairi and Ahmed (1999) have identified no fewer than eight different categories of benchmarking. These reflect the different focuses that benchmarking activity may take. In seeking to describe the nature and extent of benchmarking activity in the UK, we have made use of Camp's (1995) typology to classify respondents' practices: . Internal. A comparison among similar operations within one's own organisation. . Competitive. A comparison with the best of the direct competitors. . Functional. A comparison of methods with those of companies with similar processes in the same function outside one's industry. . Generic process. A comparison of work processes with others who have innovative, exemplar work processes. Alongside this, benchmarking activity can be categorised as either process or results benchmarking. A further distinction preferred by the Society of Management Accountants of Canada (1995a; 1995b) is that of strategic, operational and functional benchmarking. This reflects the level of the organisation where the benchmarking activity is carried out. In the public sector, Bowerman et al. (1999) distinguish between compulsory and voluntary benchmarking (see also Davis, 1998).

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The critical characteristic of all types of benchmarking is the examination of processes, as it is only through an understanding of how inputs are transformed into outputs that the attainment of superior results can be pursued effectively. Furthermore, a benchmarking ``culture'' characterised by a desire to change processes as well as outputs, and willingness to look externally for ideas, appears to be a key antecedent factor for successful benchmarking. So too is a preference for empirical evidence. As Camp states: Benchmarking is an integral part of the planning and ongoing review process to ensure a focus on the external environment and to strengthen the use of factual information in developing plans. Benchmarking is used to improve performance by understanding the methods and practices required to achieve world-class performance levels. Benchmarking's primary objective is to understand those practices that will provide a competitive advantage; target setting is secondary (Camp, 1995, p. 15).

The continuing popularity of performance league tables, especially in the public sector, and the tendency for ``benchmarking'' and ``benchmark'' (a target or standard) to be used interchangeably (see also CIPFA, 1996) would appear to be at odds with the idea of process improvement. An organisation's position in a league table fails to explain how better performers achieved their status and hence how to move up the table (Goldstein and Spiegelhalter, 1996). While targets are an integral part of benchmarking, the notion that there is one best way to do something and that once this target is attained no further change is needed runs counter to benchmarking's inherently dynamic nature. Cox and Thompson (1998) also offer similar criticisms of benchmarking. The prevalence of benchmarking One could be forgiven for thinking that this current research is ``shutting the stable door after the horse has bolted''. After all, benchmarking has been with us for many years. For some organisations it has indeed become routine and, as such, is an integral part of their organisational culture. There is evidence in the literature of the growing popularity and continued adoption of benchmarking as shown in surveys in the UK and Europe (Partnership Sourcing, 1997; Cook and Macauley, 1996; Coopers & Lybrand, 1994a; 1994b). This triangulates with our own surveys, where it was under active consideration in 7 per cent of our respondents' organisations that were not currently using the approach. Indeed, organisations who are rapidly adopting the business excellence model (British Quality Foundation, 1997; European Foundation for Quality Management, 1993) as a framework for performance management across Europe would be hard pressed to do so effectively without benchmarking. The concept of benchmarking has been familiar to public services in the UK for some years in the form of independent reports on best practice produced by the National Audit Office and the Audit Commission. The actual practice of benchmarking in local government is set to increase with the forthcoming requirement to use it to demonstrate ``best value'', the long-awaited replacement for compulsory competitive tendering (Bassam, 1997; Kite and Davidson, 1997; Bowerman et al., 1999).

In the next section, we draw on empirical evidence of benchmarking practice. Quotes from respondents are used to exemplify certain key points (and respondents are identified in the text by an ID number [cxxx]). The state of UK benchmarking Just under half (45 per cent) of the organisations we studied were engaged in what they described as benchmarking. Table I shows the percentage of organisations we identified at each stage of Camp's (1995) typology. Our research has also identified several other basic facts that help to provide the backdrop for benchmarking activity in the UK. Benchmarking may be seen as a function of size: the larger an organisation is, the more likely it is to be benchmarking (see Figure 1). Furthermore, if an organisation is part of a larger organisational group the likelihood of finding benchmarking activity is raised even further ± this we call subsidiarity. Figure 2 shows the percentage of organisations benchmarking per sector. What is surprising is the low levels of benchmarking in retailing and the services, and to a lesser degree in manufacturing. Perhaps surprisingly, benchmarking is seen by many organisations as a solo effort (internal benchmarking). While this may prove to have some value, not least in gaining experience of benchmarking, it does limit the opportunities for organisational learning and process improvement. The main reasons for this lie in the inability to find ``like'' organisations who are willing to share potentially competitive information, as well as the mistaken belief that benchmarking can only take place when like data can be obtained. This point helps to explain the tendency for organisations to benchmark that which is readily quantifiable. The focus on unadventurous comparisons means that benchmarkers often overlook the qualitative aspects of their processes which may be enhanced by looking at how others operate their activities, what Camp (1995) calls ``functional'' and ``generic'' benchmarking.

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Is there a benchmarking maturity curve? Our work seems to suggest that some organisations exhibit a form of maturity curve. Organisations that persevere with benchmarking would appear to progress from simple comparisons of easily-measured discrete activities using similar or even internal partners, to comparing more complex processes with dissimilar and/or external partners. Internal benchmarking would appear to be a natural starting point for large divisionalised organisations, and ``competitive'' is a logical next step (or a starting point for those smaller Stages of typology Internal Competitive Functional Generic process

Percentage 25 42 25 8

Table I. Nature of benchmarking activity

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Figure 2. Percentage benchmarking per sector

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companies that do investigate benchmarking), but the jump to ``functional'' is arguably a qualitatively different transition. True generic benchmarking requires a particularly imaginative leap in order to be able to exploit good practice in what might be at least superficially a radically different situation. In an attempt to address the problems of comparability in the indicators, many of our case-study organisations deliberately set out to conceptualise their activities as more generic processes, thereby broadening the range of potential benchmarking partners (see Holloway et al., 1999a). Such process-orientation has the additional benefit of involving partners who might not regard each other as direct competitors, thereby enabling an interchange of ideas as well as indicators (see Francis et al., 1999). Thus, one has to conclude that, although many organisations appear to have travelled along a ``maturity curve'' from relatively uncontentious internal benchmarking to more challenging and innovative approaches, there is no

guarantee that this sort of journey will take place or be effective in all organisations. Just as there is considerable variation in the nature of benchmarking there is similar variety in the ways in which that activity develops. Perhaps a more appropriate characterisation of benchmarking development is that of moving from looking at results to processes (see also Trosa and Williams, 1996). So what facilitates this journey? Our findings suggest that benchmarking is frequently started by a champion. This is someone who has learned about benchmarking from a range of sources, most notably practitioner-oriented literature, networking, sometimes more academic literature, and reflections on their own practice. A further characteristic is that they are able to be authoritative when promoting benchmarking to colleagues. However, the champion can only take benchmarking so far. If it is to be developed in terms of scope and generic ideas it is clear that a culture of sharing learning throughout the organisation has to evolve. For example, at Royal Mail, a database has been developed so that staff can learn from the benchmarking practices of their colleagues rather than reinvent the wheel. Similarly, at a leading semiconductor manufacturer, performance improvements of all types are promoted through the interaction of cross-functional and cross-factory teams. To further speed up the exchange of good practice an intranet is being developed which will provide a portfolio of knowledge that can be drawn on by any member of staff. In fact, it is by no means a certainty that the right conditions will exist to stimulate benchmarking's progression. In the particular case of a rolledaluminium manufacturer, benchmarking activity started at the specific indicators stage. As continuing benefits are still being found through this activity, there is little stimulus to move benchmarking on, for the foreseeable future at least. Benchmarking problems The most common problems organisations claim to experience when they benchmark are the identification of suitable partners as well as identifying comparable data. A common response (50 per cent) was ``interpretation of comparative data (i.e. are we comparing apples with apples, or apples with pears!?)'' [c144]. The inability to be able to compile strictly comparable information is consistent with our earlier observation that there was an abundance of internal benchmarking, rather than participation in benchmarking clubs or networks. This situation is compounded further by the problem of access to potential partner organisations. It was frequently stated that problems occurred in areas such as ``collecting base data'' [c502] as well as the belief that ``no two companies are alike, anyway'' [c474]. Perhaps if organisations co-operated more on their benchmarking methodology, such problems could be surmounted. Examining underlying processes can also remove some of the difficulty with direct comparability. This implies that organisations are still concentrating on more performance-oriented aspects, more in tune with the internal and competitive parts of Camp's typology.

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Other difficulties include resource constraints and staff resistance. Resource constraints included time, finance and expertise, although time was by far the greatest factor. There was a widespread acceptance that ``benchmarking is quite time-consuming for our staff and quite expensive'' [c219]. Interestingly, 5 per cent of respondents believed that the biggest problem with benchmarking was that it was insufficiently helpful. As one respondent asserted: Reliance on benchmarking breeds a lack of invention, more so than quantum leap thinking. Companies never catch up with market leaders as there is little or no information on how best practice performance standards are achieved [c079].

Staff resistance had been problematic at various stages from inception to acting on the results of benchmarking, indicated by comments such as ``problem of how to involve all the workforce right down to individual operators'' [c243], and ``increased pressure to reduce costs ± benchmarking is used as a pressure device'' [c210]. This perhaps reflects mistrust among many employees towards management techniques which may be used to undermine their own positions (Holloway et al., 1999b). Confidentiality problems such as ``commercial sensitivity'' [c503], ``openness of some companies in taking part'' [c318] and ``difficulty in making detailed indepth comparisons due to commercial sensitivity'' [c220] were cited relatively infrequently. This may indicate that experienced benchmarkers were well aware of the need to address this formally at an early stage, particularly if they were operating within existing codes of practice recommended by the practitioner literature. Confidentiality is seen as less of a problem once a benchmarking partnership (and trust) has been established but is often an impediment to initiating a benchmarking project. Why do all organisations not benchmark? So far, we have reported mainly on the experiences of those organisations that were or have been actively benchmarking. However, the majority of respondents (55 per cent) had not taken up the opportunity presented by benchmarking, in spite of the hard sell from many consultants and practitioner journals. The main reasons given were again resource constraints and comparability of data. Stephens and Bowerman (1997) have reported similar findings to this. In addition, many felt that it was inappropriate or that their organisation was too small to gain anything (see Figure 3). Those who considered it inappropriate generally appear to have made informed decisions based on an appreciation of the characteristics of benchmarking and their own circumstances, rather than merely rejecting it out of hand. There was a common feeling that most of the examples used in the media focused on the ``successful'' organisations over and over again. This ``industrial tourism'' was not seen as particularly helpful in starting a benchmarking project. A total of 7 per cent of organisations were currently considering benchmarking; however, a further 5 per cent of organisations were ignorant of what benchmarking was.

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Figure 3. Reasons for not benchmarking

Conclusions We have found that benchmarking is a relatively common tool for performance improvement in the UK. However, there are various factors which influence and even inhibit its take-up such as company size, subsidiarity and organisational sector. Our findings also show that a great deal of benchmarking activity can be described as ``results'' benchmarking as opposed to ``process'' benchmarking. While it is harder to develop process measures they can prove far more valuable in improving performance and help to overcome problems such as comparability. This suggests that most organisations have not progressed beyond the first two categories of Camp's typology. Whether organisations have to build up experience at these earlier levels before they can move forward to more generic benchmarking is not yet clear. However, a number of positive factors can be identified. The role that a champion can have in promoting benchmarking is apparent. Equally, it is important for other members of an organisation to exchange what they have learned and create a climate where knowledge transfer is actively encouraged. Given these points, we would strongly recommend that: . Wherever possible benchmarking should not be restricted merely to comparisons of results but include an examination of the underlying causal processes. . Organisations undertaking benchmarking should seek to ensure that organisational culture(s) are sympathetic to the ethos of benchmarking. We would urge potential benchmarkers, and those who seek to improve the effectiveness of their benchmarking practices, to pay at least as much attention to the organisational climate as to the technical or formal steps undertaken. . When benchmarking activities are planned, attention should be paid to training in team working, communications and change management equal to technical skills associated with the steps of benchmarking.

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When trying benchmarking for the first time, include somebody with prior benchmarking experience in the team or as a partner wherever possible. Prior experience seems to be an important catalyst, so novice benchmarkers could consider co-opting someone with experience, working with an experienced partner or joining a benchmarking club or network.

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Sheridan, J.H. (1993), ``Where benchmarkers go wrong'', Industry Week, 15 March, pp. 28-34. Simpson, M., Kondouli, D. and Wai, P.H. (1999), ``From benchmarking to business process re-engineering: a case study'', Total Quality Management, Vol. 10 Nos 4/5 (Special Issues), pp. S717-24. Society of Management Accountants of Canada (1995a), Management Accounting Guideline 16. Society of Management Accountants of Canada (1995b), Management Accounting Guideline 35. Stephens, A. and Bowerman, M. (1997), ``Benchmarking for best value in local authorities'', Management Accounting, November, pp. 76-7. Trosa, S. and Williams, S. (1996), Performance Measurement in Government, Vol. 9. Yarrow, D.J. and Prabhu, V.B. (1999), ``Collaborating to compete: benchmarking through regional partnerships'', Total Quality Management, Vol. 10 Nos 4/5 (Special Issues), pp. S793-S802. Zairi, M. and Ahmed, P.K. (1999), ``Benchmarking maturity as we approach the millennium?'', Total Quality Management, Vol. 10 Nos 4/5 (Special Issues), pp. S810-16.

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