The Value of Benchmarking

K-Smith

Description

The Value of Benchmarking





Cheryl Yaeger
BenchMark Consulting International



find value in using internal benchmarking programs OVERVIEW
to improve their performance across geographic
sites, business lines and functional support units.
Benchmarking has begun to play an ever increasing
role in the acquisition of business intelligence in Benchmarks may be very specific and narrow in
many organizations. Obtaining a “referenceable” scope, focusing on a discrete segment of a process
benchmark from others performing similar activities chain or product offering, or in some cases a much
can help organizations understand the range of broader measure. Generally, the broader the scope
performance levels that are possible. And of measurement, the more difficult it becomes to
understanding the underlying attributes or drivers of align the measures for comparability. For example, a
that performance is equally important. Only then narrow comparison might be “number of items
can the information be used to improve encoded per machine hour” while a broader measure
performance. might be “total number of items processed per paid
FTE”. Since the number of discrete activities
Obtaining accurate, credible benchmarking data can included in both the “total number of items
be a challenge since this generally comes from processed” and the “per hour or FTE” will vary
competitors. The value of this challenge has long from organization to ...

Sujets

• Linternaute.com
• Measurement Science and Technology
• Informatique décisionnelle
• Productique
• Business Aviation
• Sport aérien

Informations

• Publié par: Zyom
• Nombre de lectures: 104
• Langue: English

Extrait

Copyright © 2006 BenchMark Consulting International, N.A., Inc. All Rights Reserved.

Cheryl Yaeger

BenchMark Consulting International

OVERVIEW

Benchmarking has begun to play an ever increasing

role in the acquisition of business intelligence in

many organizations.

Obtaining a “referenceable”

benchmark from others performing similar activities

can help organizations understand the range of

performance

levels

that

are

possible.

And

understanding the underlying attributes or drivers of

that performance is equally important.

Only then

can

the

information

be

used

to

improve

performance.

Obtaining accurate, credible benchmarking data can

be a challenge since this generally comes from

competitors. The value of this challenge has long

been recognized by high performing organizations

and improving companies alike. Knowing what to

measure, when and how, all create the foundation

for successful benchmarking.

What is benchmarking?

Webster

defines benchmarking as

“the

study

of

a

competitor’s product or business practices in order to improve

the performance of one’s own company”.

While Webster’s definition of benchmarking focuses

on external competitors, many organizations also

find value in using internal benchmarking programs

to improve their performance across geographic

sites, business lines and functional support units.

Benchmarks may be very specific and narrow in

scope, focusing on a discrete segment of a process

chain or product offering, or in some cases a much

broader measure. Generally, the broader the scope

of measurement, the more difficult it becomes to

align the measures for comparability. For example, a

narrow comparison might be “number of items

encoded per machine hour” while a broader measure

might be “total number of items processed per paid

FTE”.

Since the number of discrete activities

included in both the “total number of items

processed” and the “per hour or FTE” will vary

from organization to organization, it becomes more

difficult to compare the values without benefit of the

underlying details.

Why benchmark?

Determining Value

Those who engage in benchmarking look to

incorporate this information into a larger picture not

only evaluating overall performance, but more

importantly,

understanding

what

levels

of

performance

are

possible.

The

value

of

benchmarking is driven by several key components.

The Value of Benchmarking

BenchMark Consulting International

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Value of Benchmarking – April 2006

What to measure –

determining the appropriate

granularity of data required to be meaningful; if you

could measure the activity accurately, and if you

could get comparable data from others performing

similar activities, what would the data tell you?

Simply having the data isn’t enough, understanding

the drivers behind the data are required to enable

change or improvement.

In any process chain, there are multiple steps or

activities.

It is often difficult to measure these

discrete activities accurately. It can be even more

difficult to compare those measures against others

with any degree of certainty regarding comparability.

Organizations beginning the benchmarking process

often seek out high-level industry measures which

may be available and then subsequently attempt to

align their measures to them.

A more effective

approach would be to measure the discrete activities

within a process that can be accomplished in a well-

defined range; where reliable measurements are easily

attainable, then build more detailed measures going

forward. Seeking benchmarks from others for the

most significant processes measured may help to

prioritize the efforts.

Your business may or may not align well with others,

from a measurement or a performance standpoint.

If your business is concentrated in a unique strategic

position, then measuring against those targeting

other audiences may not be particularly helpful. For

example, many loan servicing activities may be

similar or comparable between a prime and non-

prime portfolio; however, it is not likely that you

would find comparable results when measuring

delinquency or collections activities.

In this case,

benchmarks would be required from others with

similar portfolios.

The value of benchmarking is derived when you

have the combination of comparable data and

understand the drivers behind the performance

generating the data or results. The outcomes may

show widely divergent results across companies for

various processes.

While your business may not

desire to achieve the same performance levels in

some of these activities, it can be important to

understand the trade-offs you are making vis-à-vis

the competition.

Accurate

benchmarking

can

produce

tangible,

quantifiable targets and goals which can be measured

in a consistent fashion over recurring time cycles.

This allows management to understand where they

are positioned today and to measure performance

against future goals in order to modify actions

accordingly.

Benchmarking Cycles

In

general,

frequent

recurring

benchmarking

generates the greatest value. This removes some of

the variability created by large interval measurements

(seasonality or cyclicality).

A natural outcome of

frequent and regular benchmarking is the ability to

measure changes in your own performance relative

to changes in the industry during comparable

periods.

For example, you may elect to pilot a

change

in

one

of

your

processes;

frequent

benchmarking allows you to see if the change has

moved your performance faster than the industry as

a whole or if you’re just closing a gap.

Frequent benchmarking will also reduce the risk of

“measurement error” that can occur with a single

snapshot in time. Measurement anomalies will be

normalized over time in a frequent measurement

cycle. Depending upon the processes measured and

the amount of change these are subject to, annual

benchmarking can be used as a general guideline. In

areas that are being impacted by changes, either

internally

or

externally

imposed,

increased

measurement

and

benchmarking

frequency

is

recommended.

As the financial services industry

continues to evolve into shorter and shorter cycle

times for customer service, the need for increased

benchmarking cycles will also accelerate to ensure

customer service delivery supports the strategic plan

and remains competitive.

Benchmarking Models

The term “benchmarking” is often used loosely by

organizations

referring

to

general

product

or

performance comparison. The acquisition of data or

information about the competitions’ products or

performance is helpful in a number of regards. Most

organizations gather business intelligence from a

variety of sources. This often includes participating

in

industry

surveys,

conducting

research

or

purchasing available data sets. While each provides

an increased breadth of knowledge that is useful, it

should not be confused with benchmarking which

requires common measures to quantify a company’s

performance position relative to others in the

industry. Benchmarking is specific to products or

processes that are currently in existence.

BenchMark Consulting International

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Value of Benchmarking – April 2006

Surveys versus benchmarks

Surveys typically measure opinion. The better the

survey design, the more accurate the results;

therefore, increasing the ability to rely on the

information.

In combination with other statistical

data, survey outcomes can play a powerful part in

predictive models.

A number of surveys attempt to measure the

organization’s performance at the process level. One

shortfall of surveys to keep in mind is that

respondents may influence the outcome given their

desire to achieve a higher score. Or the respondent

may chose not to answer questions that ask for data

perceived as confidential, thereby reducing the value

of the results. Perhaps more frequently a cause for

concern is the lack of understanding or definition of

the discrete activities the survey is attempting to

measure.

One key advantage to surveys is the collection of

attribute or non-quantitative data.

This type of

information often supplements the quantifiable

benchmarking data an organization uses. It allows

companies to identify attributes of interest or

forecast

future

capabilities

which

cannot

be

accurately measured from current processes.

There is some general trending which can be drawn

from surveys, however, caution should be exercised

to determine the statistical significance of the data

used, in particular, what is the respondent mix year-

over-year.

Research versus benchmarks

There are a number of industry research houses that

provide ongoing information about financial services

trends.

They typically cover a plethora of topics

ranging from consumer behavior to business buying

practices and forecasting growth in new products

and services. Their publications are often based on

primary

research

conducted

via

survey

and

interviews within the industry; therefore, the value is

often the combination of the survey results with

their interpretation of the data.

This type of information is particularly helpful to

organizations considering significant changes in

business lines, product offerings, infrastructure, etc.

They provide insight into future trends, associated

issues and applicability for various segments of the

industry.

Shopping for pre-existing data

Data at your fingertips is always an attractive

prospect.

The

risk

can

be

mitigated

by

understanding the source of the data and the details

that support it. Data for purchase typically has two

inherent risks associated with it.

1)

It is generally survey based, therefore carries

all

of

the

potential

flaws

of surveys

mentioned above, and

2)

It is generally at a fairly high-level which

may make it difficult to understand the

underlying activities and relate them to your

organization.

The data may be helpful as a part of your overall

business intelligence; exercise caution in how you try

to apply it.

Sources of benchmarks

Traditionally benchmarks have been fairly specific to

each industry.

Organizations tend to focus on

measuring

their

performance

against

their

competitors. As markets expand, the need to reach

beyond current benchmark partners is likely to

occur. Banking services today are being provided by

a variety of financial services companies, no longer

limited

to

“banks”.

Business

models

for

sales/product as well as delivery are changing

rapidly.

There is an ever-increasing demand for

information about related services inferring that

competition is likely to spill over into these markets

soon.

Can it be benchmarked?

There are any number of processes that are difficult

to benchmark, including those that cause some of

the greatest challenges to organizational success. An

often

cited

challenge

is

organizational

communication. This may be an example of an area

that

would

achieve

limited

benefit

from

benchmarking.

The specific activities would be

difficult to define in a way that is common across

other organizations.

That is not to say it isn’t

important to measure the process internally and

evaluate its effectiveness.

There may also be

significant value in surveys and research to identify

alternative methods and processes that may have

value.

BenchMark Consulting International

14 Piedmont Center NE, Suite 950

Atlanta, GA 30305

[phone]

www.benchmarkinternational.com

Benchmarking Partners

One of the largest obstacles to benchmarking is

bringing together competitors in the industry for

purposes of self improvement. There is a natural

cause for concern on multiple fronts.

1.

Confidentiality of information

2.

My high performing ideas will now be

available to the competition

3.

Defining consistent measures

4.

Validation of measures

Effective benchmarking requires the sharing of

information for learning. This will not occur unless

participants trust the partner and the credibility of

the results.

A third party is often the vehicle to

facilitate this process.

Select a partner that has

demonstrated expertise both in benchmarking and in

the subject matter. Subject matter expertise ensures

the data collected will not only be comparable, but

will be valuable and actionable.

Summary

Benchmarking is one form of business intelligence

that

organizations

can

use

to

improve

their

performance.

Using well defined measures and

ensuring comparability at frequent intervals will help

create a foundation for actionable information.

Before entering into a benchmarking program, give

consideration to how the information will be used in

your organization.

Access to empirically derived,

factual data can be a powerful catalyst for change. It

helps many organizations overcome the internal,

emotionally-based arguments that have the potential

to sabotage change initiatives.

The use of a strategic partner to provide your link to

the industry facilitates trustworthy, credible results.

The right partner can not only align you with the

appropriate competitive organizations, but can also

help you identify the performance drivers underlying

the

data

that

could

positively

impact

your

organizational performance.

Cheryl Yaeger

is President of BenchMark Consulting International. She has extensive experience in the financial

services industry with the delivery of large integrated change initiatives such as bank mergers and consolidations,

technology integration activities and strategic alignment evaluation and adjustment.

BenchMark Consulting International

has specialized in improving the financial services industry since 1988.

The company is a management consulting firm that improves the profitability of its financial services customers

through the delivery of management decision-making information and change management services to realize the

benefits of business process changes.

BenchMark Consulting International’s expertise is in the measuring,

designing, and managing of operational processes.

The firm has worked with 38 of the top 50 (in asset size) commercial banks, all 14 automobile captive finance

corporations, several of the largest consumer finance corporations and many regional and community banks

throughout the United States. Internationally, BenchMark Consulting International has worked with the five

largest Canadian commercial banks, more than 40 European organizations in 11 different countries, in addition to

financial institutions in Latin America, Australia and Asia.

The company is a wholly owned subsidiary of Fidelity National Information Services, Inc., with clients in more

than 50 countries and territories, providing application software, information processing management,

outsourcing services and professional IT consulting to the financial services and mortgage industries. BenchMark

Consulting International has dual headquarters in Atlanta, Georgia and Munich, Germany.

For more information please visit

www.benchmarkinternational.com