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Lifting the lid on benchmarking

Lifting the lid on benchmarking

Effective benchmarking is a very useful and powerful way to leverage your World Class Manufacturing (WCM) or Lean initiative, and it can substantiate the vision of what you need to create. Yet, most visitors to external sites do not get lasting benefits from these visits. Somehow, enthusiasts expect benchmarking’s magic to provide every detail about the competition and their journey… they want answers on a silver platter without having questions, then wonder why they are disappointed.

Firstly, benchmarking involves both gathering information and acting on it, as can be seen in Diagram 1. Typically, novices spend more than twice as much time gathering data as experts. This arises from an obsession with ‘measuring the gap’, rather than an ongoing commitment to finding and implementing gap-closing strategies. A strong action bias is needed.

With early information-gathering efforts on how the best perform, benchmarking often generates information that describes the size of a gap, with little on what the competitor did to achieve an advantage, how long it took, and its current strategies. No wonder the gathering process achieves little; such information mostly only leads to an unfocused short-term frenzy of activity in response to an MD’s call to arms.

Every effective benchmarking approach has the following characteristics:

  • Benchmarking must be an integral part of the ongoing initiative to enhance competitive position

This implies that information gathering alone is insufficient; an improvement strategy must either be in place or envisaged, with benchmarking as a necessary component of this strategy.

This characteristic focuses on the model’s ACTION sector. By developing and communicating an improvement strategy, the board generates a creative tension with the benchmarking initiative. In the absence of a strategy, benchmarking only identifies the gap that separates vision from reality, thus generating negative tension.

By generating a creative tension through a benchmarking process and a plan to close the gap, the management board can then provide ongoing assistance to operating units to facilitate successful implementation through properly developed Leader Standard Work. Having operating units well represented on the benchmarking team ensures that benchmarking gathers actionable data, and confers legitimacy at shop floor level. It also means that hands-on people are available to assist with planning and implementing the required changes.

The interface with existing shop floor improvement initiatives is through regular reflection on Current Best Practice, which is updated continuously.

  • Look internally first before seeking external comparisons

Diagram 1: The benchmarking processThe benchmarking process

Internal analysis has three fundamental objectives:

  • to define factors critical to delivering customer needs
  • to understand internal performance on every critical success factor
  • to define which operational practices drive improvement in the critical success factors

Avoid the temptation to blindly benchmark old favourites (e.g. labour utilisation, labour cost per unit), as these numbers may be irrelevant, even detrimental, to the journey. With a clear sense of what matters to customers and a definition of the key operational success factors (KOSFs), internal measurement can commence, followed by obvious corrective actions.

To gain a deep understanding of internal operational processes, use a proven method to measure the underpinning practices that drive performance, rather than just outcomes or performance measures. Part of TRACC’s power is its built-in assessment regime, which underpins operational practices. This robust process lets improvement actions commence long before anyone gets on a plane bound for foreign shores and that ‘pin-up’ site. Trips abroad will be more effective much later.

Tips for external benchmarking:

External benchmarking efforts should not fixate on direct competitor analyses, which are often difficult. It also takes long for the requisite mutual trust levels to develop before meaningful sharing can occur.

Experienced benchmarkers hold that out-of-industry comparisons provide the greatest benefits, but this takes another form of maturity, because what we see is not automatically pre-packaged for our industry or company. What is observed must first be distilled, then translated into useful, applicable insights. However, if the capability to apply existing knowledge to a new situation can be established, out-of-industry benchmarking can deliver leapfrog opportunities. (Think Toyota’s legendary early adaptation of supermarket practices to auto parts supply, and the application of aircraft maintenance approaches to industry, as examples).

While a long-term sharing relationship with a selected benchmarking host is worthwhile, I recommend approaching every visit as though it were to be the last to that site, i.e. plan carefully to extract all the information you need, and select the benchmarking team for the best ongoing effect. This requires deep understanding of your own WCM/Lean strengths and weaknesses, so as to focus carefully on the right questions.

The post-visit conversation is often filled with self-affirming comments about the target’s weaknesses, instead of carefully distilling learnings on its strengths in areas appropriate for application in one’s own plant. Be alert to this tendency because it stifles true learning.

Another tendency is to try to visit only ‘exceptional’ plants, accompanied by a view that visiting non-world class plants yields inferior learnings. While world class operations are interesting, they are unlikely to yield the best outcomes for visitors who are at the start of their journey. In addition, there are very few truly world class operations, yet a great many which are very good at various aspects of WCM/Lean and which are thus good benchmark targets for those who know themselves well and know what they need to learn about.

In highly advanced sites, the host has often long forgotten the challenges it faced early on, and process pioneers have often retired or moved on, so the corporate memory has been lost. I have witnessed highly advanced hosts being unable to understand questions posed by inexperienced visitors, let alone answer them.

The reverse situation can yield great lessons for astute visitors, i.e. where they are further down the journey than their host. An astute visitor, knowing his own maturity, can draw learnings from every environment.

Diagram 2 illustrates the relationship between Lean implementation artefacts and the necessary support systems and thinking that underpins Lean. I developed this model, which has important implications for benchmarking, in response to the behaviour of an executive team during a benchmarking trip to several leading European manufacturers.

relationship between Lean implementation artefacts and the necessary support systems

It became clear that the visitors were too inexperienced to ask probing questions about their host’s Lean journey, management approaches, and systems. They focused almost exclusively on what they could see.

An analysis of the 1 200 questions at the basis of the TRACC best practice assessment tool (part of the TRACC implementation guides framework) reveals that only 7% of the questions relate to issues that one would expect to detect visually. In other words, 93% of what CCI considers important components of a holistic Lean management system is not detectable simply by way of a site visit by inexperienced implementers.

More importantly, these ‘invisible’ elements are the ones that contain Lean’s true value, yet they require an experienced ‘eye’ by way of asking the right questions. This is why it is far more valuable to undertake external benchmarking visits to advanced sites once you have attained a significant Lean implementation depth.

  • Make benchmarking dynamic

The need for dynamism arises from changing company priorities and evolving practices outside the company. Internal priorities should develop as the firm successfully closes individual performance gaps and shifts its focus to new areas for improvement. Externally, customer needs evolve and mature.

As a result, once-off benchmarking efforts merely provide a snapshot of a continually changing company landscape. All businesses experience variations in performance over time, and if they themselves are on a Lean journey, they undergo their own change process. Only by establishing ongoing (internal and external) benchmarking exchanges can we account for these changes, and begin to understand them. External relationships that can accommodate this require much nurturing, and must add mutual value to be sustainable.

  • Link benchmarking to implementation

In Benchmarking: The Next Generation, Barbara Ettorre writes, “No one has yet been able to extract pure numbers from a benchmarking data gathering exercise, and make them relevant to someone who did not participate in the process.”

The benchmarking team should comprise various disciplines, with operations people strongly represented. Also, your company cannot expect merely to access existing data. Existing data have been gathered by others for another purpose. You must source your own information.

The link between data gathering and best practice implementation ensures that ongoing data gathering efforts are continually refined through experiential feedback during implementation. Questions like “Did they experience this problem?” and “How did they overcome it in their case?” can be answered, and the answers can be built into the iterative improvement process on the shop floor.

  • Plan Do Check Act/Adjust

The Plan-Do-Check-Act/Adjust cycle that pervades a Lean environment must also shape the benchmarking process.

PLAN encompasses the steps needed to understand your operation and which factors and practices drive improved performance, and the planning of the benchmarking process itself.

DO covers the Lean improvement actions under way and the conduct of benchmarking exercises.

CHECK is about checking the learning that results from benchmarking, and the effect of the application of that learning, once implemented.

ACT/ADJUST is the process of entrenching learnings through standard work if the application has been successful, or the possible adjusting of the benchmarking process or the implementation process if not.

Benchmarking must involve careful thought, i.e. prior planning as well as interpretation of observed results (i.e. an action’s outcome). It must involve action, i.e. learning by doing. Feedback from the reflection stage to the observation stage provides new possible corrective action data and leads the iterative learning process towards true continuous improvement.

Benchmarking in isolation, as a standalone tool, is ineffective. However, it has proved invaluable as an integral part of a holistic, performance-enhancing strategy. Benchmarking fits well into WCM or Lean initiatives under way in learning, progressive organisations. It is a way to establish or confirm a vision of what is possible and/or attainable and adds richness to one’s own implementation process.

For best practice operating strategies such as benchmarking to have a sustainable impact, we recommend that it be implemented as part of a process-driven integrative improvement system.

The TRACC framework helps organisations build standardised and integrated good practice and performance capacity across their Plan, Source, Make and Deliver functions. Simultaneously it accelerates their collaboration and alignment capacity to build world class end-to-end value chains, enabling the organisation itself to become the ultimate source of sustainable competitive advantage.
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