BENCHMARKING

ICP814
SRS
 OUTLINE

• Core concept • Contextualisation

– History – Application in Construction Industry
– Definitions – Benefits
– Objectives – Obstacles
– Types • Benchmarking Process
– Why Benchmarking? • 5 steps to successful benchmarking
– What to Benchmark? • Side effects to successful benchmarking
 CORE CONCEPT - HISTORY

Benchmarking linguistic roots lie in the land surveyor’s term, where

benchmark was distinctive marked served as reference point on
determining current position or altitude in topographical survey and tidal
observation (Bogan & English, 1994)
 CORE CONCEPT - DEFINITIONS
• Camp (1989) defined benchmarking as a search of industry best practices for superior
performance.
• Benchmarking as identifying and comparing performance against the owner at process regarded
best in class (Codling, 1992)
• Benchmarking is also defined as learning by borrowing from the best and adapting their approach to
fit own needs (ASTD, 1995).
• Benchmarking is continues process of identification, learning and implementation of best
practices in order to obtain competitive advantages, whether internal, external or generic
(McCabe, 2001)
• Benchmarking is a systematic and continues process of searching, learning, adapting and
implementing the best practices from within the organization or from other organization towards
attaining superior performance (MPC, Malaysia, 2007).
• It is regarded as one of the simplest tools for effective performance improvements
(Williams et al., 2012)
BENCHMARK:
A measured, “best-in-class” achievement; a reference or
measurement standard for comparison; this performance
level is recognised as the standard of excellence for a specific
business process (Cain, 2004).
BEST PRACTICES:
Superior performance within a function independent of
industry, leadership, management, or operational methods or
approaches that lead to exceptional performance; relative
term and usually indicates innovative or interesting business
practices which have been identified as contributing to
improve performance at leading companies (Archer, 2006).
CORE CONCEPT
- OBJECTIVES
• The objective of most Benchmarking studies is to
discover new practices that are radically different
from its usual practice that will improve overall
performance.
• Benchmarking provides a methodology for
learning best practices.
• This methodical process helps us to gain
management support for improvement, identify
those who perform well, determine what needs to
be improved, and incorporate what we have
learned to change our performances for the better.
• Benchmarking in itself does not
result in improvement. Instead, it identifies
shortcomings, or inefficiencies, in the product,
process, systems, or organisations. The real
challenge and opportunity, therefore, is to leverage
the knowledge gained from benchmarking
processes into competitive advantage for the
organisation.
CORE CONCEPT – TYPES OF BM

(Bhutta & Huq, 1999)

Generic benchmarking:
• It focuses on the best work but is costly and
difficult to implement.
• This type of benchmarking improves the efficiency
of the processes in a generic manner with a
minimal sense of competitiveness.
• The comparison is conducted regardless of the
location or type of industry.

Functional benchmarking:
• This type of benchmarking study is undertaken if
non-competitor organization exhibits some
excellence in certain areas of the business such as
use of IT, admin Procedures, logistic processes.
• This benchmarking approach allows co-operation
between the organisations because there is no risk
of competition among them.

External benchmarking:
• This is competitive benchmarking. T
• he goal is to compare an organization to its
competitor in the same industry (e.g., COAA
database).
• It helps organization to understand where it is
standing in regards to performance.

Internal benchmarking:
• The objective is to determine the overall internal
performance standard of an organization and can
only be used to compare different departments in
an organization and not external competition.
• This type of benchmarking can also be applied to
government sector organisation where a
systematic comparison of best practices can be
made.
 CORE CONCEPT – WHY
BENCHMARKING?
Striving for superiority
•Focus on external environment and
emphasis on increasing process
efficiency
•Present climate of dynamic change and
fiercely competitive markets; essential
for survival
 CORE CONCEPT – WHAT TO
BENCHMARK?
• Based on Critical Success Factors (CFS) (Camp, 1989) Key Performance
Indicator (KPI) then to be identified based on CSF (McCabe, 2001).
Critical Success Factors (CSF) is limited number of factors that highly
impact the company’s competitiveness (Andersen & Pettersen, 1996).
• Key Performance Indicator (KPI) is a measurement on the progress
being made to insure that the critical success factors are being
achieved. It represents the measures of progress in achievement of
the CSF (McCabe,2001)
• Based on the business function of the company (Zairi,1996)
• Factors are being crucial to the development of the organization’s
ability to provide excellence service and standards to customers
(Andersen & Pettersen, 1996)
• Being those that are in most need of radical change and
improvement (McCabe, 2001)
Prestige Economics Conducts Benchmarking t o Reduce Costs and Drive Growth

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Richard Delbridge, James Lowe, Nick Oliver, (1995) "The process of benchmarking: A
study from the automotive industry", International Journal of Operations & Production
Management, Vol. 15 Iss: 4, pp.50 - 62
 Contextualisation – Application in
Construction Industry

• Extremely useful tool and an essential ingredient in

the process of continuous improvement
• There remains, a reluctance to adopt this tool in the
construction industry
• Possible reasons:
– Fear of disclosing competitive information
– View that the organisation is the best
– A lack of support & understanding within the
organisation
– Difficulty in implementing the process properly;
same specifications
 CONTEXTUALISATION – BENEFITS?
Benefits include:

· Better performance in meeting customer needs & requirements.

· Establishing effective business goals and objectives.
· Measuring true productivity.
· Becoming competitive.
· Identifying & implementing best practice in business processes.

“The benefits of adopting benchmarking approach are numerous. Some examples are;
increasing productivity, generating more revenue, saving cost, improving
processes and being more creative, helping organization to understand what
could be doing better, helping to identify room for growth organization are
unaware of, helping organization to know where they stand in relation to
others, helping organization in budgeting and planning”
(Ikpe, Kumar & Jargeas, 2015)
 CONTEXTUALISATION – OBSTACLES?

• Applies to big organisation • Unrealistic timetable

• Too time-consuming • Team being wrongly composed
• Customer reasonably happy • Improper emphasis
• Counting everything • Limited support by senior
managers
• Must be complex • Inadequate preparation
• Industrial tourism

Adebanjo et al. (2010) identified some reasons why organizations

are not adopting benchmarking as lack of resources, lack of
benchmarking partners, lack of knowledge to plan benchmarking
project, lack of top management support, and lack of
understanding of benchmarking. In addition, labor shortage and
incomplete data collection can be a major barrier of benchmarking.
Adrien Presley, Laura Meade, (2010) "Benchmarking for sustainability: an
application to the sustainable construction industry", Benchmarking: An
International Journal, Vol. 17 Iss: 3, pp.435 - 451
Benchmarking Process and its 5 St ages

Decide Identify Gather

What to BM Info Analyse
BM Partners
5 STEPS TO SUCCESSFUL BENCHMARKING
• Clearly establish what needs to be improved
• make sure it is important to you and your
Plan customers – and determine the data collection
methodology to be used (including any KPIs).
• Gather the data and determine the current
performance gap
Analysis • against a competitor, the industry or internally –
and identify the reasons for the difference.

• Develop and implement improvement plans &

Action performance targets.

• Monitor performance against the performance

Review targets

• Repeat the whole process

Repeat • benchmarking needs to become a habit if you are
serious about improving your performance
 • Select and document
the process to be
benchmarked
• Identify who perform
this process best
• Observe and analyze
how the
benchmarking partner
performs this process
• Analyze the causes for
the gap in
performance
• Implement
improvements based
The Benchmarking Wheel
on this analysis
(Andersen & Pettersen, 1996)
 Phase Objective Relevant Question
Plan The objective of this phase is to prepare a ▪What subject to be benchmarked?
plan for Benchmarking ▪What is the current status of the subject?
▪What is the best data collection method?
Find The primary task in this phase is to ▪What is the list of criteria?
search for and identify suitable ▪How the candidates will be compared and
(Search) Benchmarking partner analyze?
▪How networking will be established?
Collect The objective of the phase is to study the ▪How information and data will be
selected Benchmarking partners to assessed?
(Observe) understand their process. The data will ▪What are the methods and tools for
be collected using designed data collecting information and data?
collection method. ▪How data will be observed and debriefed?
Analyze The objectives of this phase are to ▪How the data will be sort and normalized?
uncover gaps in performance, the root ▪What are the performance gaps
cause of the gaps and the enabler that ▪What are the cause and the enabler of the
particularly contribute the gaps gaps?
Improve The objective of this phase is to create a ▪What are the recommendations to close
positive change and improvement in both gaps and attain superior performance?
(Adapt) benchmarking partner and proposed ▪How the findings will be communicated
constructive recommendations in order to across the organization?
gain superior performance ▪What the implementation plan to improve?
Recycle (Continues The objective of recycle of phase in ▪How the benchmarking recommendations
wheel is attain continues improvement will be calibrate?
improvement trough Benchmarking ▪How implementation plan matured and
trough evolve into best practices?
Benchmarking)
SME Competitiveness Rating for Enhancement (SCORE) – SME
Corp & CIDB
 What are the side effects to successful
benchmarking?
Benchmarking has some inadequacies which must be clearly
recognised and understood before continuing the exercise:

✓ Don't try and benchmark too many things to begin with. Select
two or three key areas, and then gradually add others over time.

✓ Don't waste time benchmarking things that are just "nice to

know". Every benchmark should aim to improve performance in an
area that contributes to profits or customer satisfaction.
✓ Be precise in defining what is to be measured. A lack of clarity can
lead to confusing an inappropriate benchmarks
✓ Test the benchmarks internally before consulting with outside
companies.
✓ Remember that your organisation's priorities may change with time,
and so your benchmarks should be regularly reviewed (and
changed if necessary) to reflect this.
 Benchmarking does not.....

• Copy... Instead, you must adapt the inform ation t o fit

your needs, your culture, and your system. And, if
you copy, you can only be as good as your
competit or, not better.
• Steal ... To the contra ry, it is an open, honest, legal
study of another orga n izat ion's business practices.
• St op ... Rather, it is a continuous process that
requires reca librat ion.