Benchmarking Paradigm blindness Is a dangerous pitfall that any business can fall into. It effectively causes the business to become stagnant with lax management and a lack of fresh Ideas and Input by settling over business and lulling It with the thought of comfort In the routine. Paradigm blindness can be summarized Into something that is done best in a certain way, but the reasoning is for this is because it has always been done this way, not because it is the most efficient way to do it. To avoid paradigm blindness many businesses actively practice benchmarking.
Benchmarking s a potent tool for company management, pushing them to explore new ways to organism the business and challenging previously set standards. The process of benchmarking was first utilized in the asses by Xerox. In an attempt to regain lost market share they actively compared themselves to rival companies in order to find some way in which to Improve their operations (Lempel and Catwalk, 1997). Benchmarking can be used both in short term and long term management, but finds particular value In strategic management where management can decide how best the business should be run.
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Although benchmarking may not be a constant management tool It Is a continual one with which organizations can fine tune their operations to suit market and environmental fluctuations. To date there has been no benchmarking method that has become universally adopted, the fact that different businesses require different approaches being one reason to this. However one of the first utilized was developed by Robert Camp, the core principles revolving around a twelve step methodology. “1 . Select subject ahead 2.
Define the process 3. Identify potential partners 4. Identify data sources 5. Collect data and select partners 6. Determine the gap 7. Establish process differences 8. Target future performance 9. Communicate 10. Adjust goal 11. Implement 12. Review/recalibrate. ” (Camp, 1998). The general Idea behind the twelve step Camp method Is to focus on a specific area of the business, decide what sort of and how to collect data, analyze the results and then determine different processes that could be used to achieve the same task.
As well as there being several different methodologies for benchmarking there are also several different types of benchmarking, this being the main reason that no one ethnology NAS Eden unalterably opiate I nee Deterrent types AT Demarcating are difficult to embrace through one method. The different types of benchmarking include process, financial, performance, product, strategic, and functional benchmarking. Businesses can implement several of these benchmarking types to help improve their productivity, although due to the costs of benchmarking smaller businesses may be limited to a few or one type of benchmarking.
Process benchmarking involves the organization centering their examination and study of internal protocols. They will cross examine their results with observations with those room other benchmarking firms if possible, but otherwise conclusions can be drawn from purely internal results on activity in relations to cost and efficiency. The Camp methodology can fall under the category of process benchmarking; a real life application of it can be seen in fast food chains. Employees are pushed to consistently serve customers within a certain time frame and their performance is recorded.
This allows the organization to cross reference their performance with environment and procedure factors, allowing the organization to trial different procedures and conclude which is the most efficient for different conditions. Financial benchmarking is more simplistic in nature in comparison to process benchmarking. Financial benchmarking involves making a financial analysis of the business and then making a comparison to the results of competitors to assess the business’ competitiveness in the market.
This is generally achieved by using ratios such as acid tests, liquidity ratios and the like to determine the different financial capabilities of the business in comparison to competitors. In contrast to process benchmarking, which can be costly to perform due to needing specific equipment and personnel to collect otherwise irrelevant data. The data required for most if not all of financial benchmarking analysis can be found in the business’ financial reports and overviews.
An example of financial benchmarking can be seen in the 2007 Games Workshop financial report. The company noted that they had been consistently posting lower profit margins over the last few quarters, and upon review had lost a fair portion of their market share to competitors such as Privateer Press miniatures. In reflection the following was printed in their 2007 financial report: “We grew fat and lazy on the back of easy success. We forgot about customer service ND forgot that hard work is and always has been the route to success.
We forgot that we are a company which pursues profit and likes paying surplus cash to its owners. ” (Kirby, 2007) Games Workshop acquired licenses from with New Line Cinema in to produce miniatures based upon the Lord of the Rings movies in 2001. During the period the movies ran, these were highly successful, but after they finished their sales rapidly fell. As chairman Tom Kirby states, the company fell into the trap of paradigm blindness by ignoring what was happening around them and continuing on with unchanged business operations.
In response to this the normally slow moving company has picked up pace and released several expansions to their main game systems in a comparatively short amount of time, boosted advertising, and reorganized their management structure. Whether or not this has been successful remains to be seen. Performance benchmarking is used by businesses to assess their competitiveness in comparison to other businesses by comparison of their products and services. This can be done both internally and externally. An example AT external performance Demarcating can De Tuna In supermarket chains.
It’s not uncommon to see employees from rival chains wandering the aisles of their competitors and recording daily price changes and stocked goods, allowing them to decide whether or not to mark prices up or down in their own stores as well as an idea of what products are selling overall. An example of internal performance benchmarking can be found in fast food chains, such as McDonald’s. McDonald’s records employee service response times of each order placed and records them. By taking an average, the efficiency of an entire store is established and is compared to other stores within the franchise.
The results of this are made known at employee meetings, and plans are made to improve the response times of those that are comparatively slow. This may include implementing further process benchmarking. One particular value of an established system like this is that employees can monitor themselves as they work through a display board playing an import part in performance quality improvement (Sinclair and Mohammed, 1995). Product benchmarking is somewhat similar to performance benchmarking except it’s less focused on competing goods and prices, and more on the actual goods and services homeless.
It may go as far as reverse engineering, where the company pulls apart competing products and services and decides how best to emulate it themselves. As a real life example, this can often be seen in professional sporting teams. The team management will almost certainly examine and dissect the game play of leading teams, using them as a benchmark to improve the performance of their own team. However, product benchmarking can be taken too far to the point where it infringes copyrights and intellectual property laws. One such example is Smith & Wesson.
Using the highly successful Clock 17 series and its subsequent derivatives as a benchmark they released their own semi automatic handgun, the Sigma series. However the Sigma series bore so much resemblance to the Clock ass to the point where many parts were interchangeable, quickly earning them the moniker “Shocks” as well as a patent infringement lawsuit from Clock in 1994. Smith & Wesson ended up paying an undisclosed sum of money out of court as well as making several modifications to the Sigma series. Strategic benchmarking is similar to product benchmarking in the fact that it involves observing how other companies compete.
It isn’t, however, limited to industry specific companies and usually involves observation of unrelated businesses to analyze whether or not any business practices can be adapted for use. Functional benchmarking can be considered extremely similar to process and performance benchmarking, however it differs by solely focusing on a single business function. The reason for this is that some parts of businesses such as Human Resources and Information Technology aren’t directly comparable in relation to efficiency, and thus isolating them for the purposes of observation improves focus pony problem areas.
Examples of this can once again be found in fast food franchises, such as McDonald’s. To allow management to isolate where problems are occurring separate response times for front counter staff and grill staff are kept. If a drinks machine is badly placed and causing congestion amongst employees behind the front counter, management will be become more aware of this because it won’t be affecting grill staff response times, as they aren’t responsible for filling drinks.
Benchmarking is an extremely valuable management tool for companies; it isn’t intolerantly always a straightforward or easy task to unaware e I nee Key touching is performance measurement of the business no matter which part it is, or even whether it internal or external. The key to improving the business is measuring it so a benchmark can be ascertained (Bringing, 1992). The problem that arises from this is that businesses are extremely complex with hundreds of different factors and inputs. It becomes a question of exactly what to measure and how to measure it.
The problem for managers is that they do not know exactly what inefficiencies they need o remove, and thus their chosen method of collecting data benchmarking may not reveal the problem. For example if the manager of a fast food chain competing with McDonald’s decides to benchmark his businesses, he might choose to try and benchmark the business by comparing financial results and seeing how many sales he made in comparison to other fast food chains. Although this is a valid form of benchmarking, it doesn’t reveal any specific problems if he finds himself underperforming in comparison.
This is because he’s allowed too many variables into the equation. The burgers could taste bad, the business could be in a bad location, another business might be selling their burgers cheaper, the grill staff might be inefficient or afore mentioned drinks machine could be placed extremely badly. Perhaps there might even be a combination of problems. Quite often benchmarking processes will identify that there is a problem(s) within the business but they won’t identify what it is.
Thus it may take the manager some time to trial several benchmarking methods to simply narrow down the field so he can draw conclusions from there and initiate responses. Because of the large amount of potential variables that increase even further with the size of the business, larger organizations often hire specific benchmarking firms who have a great deal of experience and knowledge stored in databases to perform benchmarking for them. The other problem associated with benchmarking is that it’s both costly and time consuming.
Because of the amount of data that needs to be collated and analyzed, benchmarking is by no means an overnight process. It may require several employees to perform, taking them away from regular duties and forcing more employees to be hired. Or it could come to the point where using existing employees is so inefficient that a benchmarking firm is hired to carry out the process. In conclusion, while benchmarking is an extremely potent management tool it is by no means simple to use or fool proof.