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Discover Best Practices Through Benchmarking

November 1, 1995
Related Topics: HR Services and Administration, Total Quality Management, Strategic Planning, Featured Article
There's nothing like a whiff of reality to make you realize yesterday's winning formula can easily turn into tomorrow's recipe for disaster. And Mike Burns is well aware of the fact. The vice president of HR and Total Quality Culture at Goodyear Tire and Rubber Co. has seen the automotive and tire business undergo massive change during the last few years—part of a larger transformation affecting industry as a whole. As the huge Akron, Ohio-based manufacturer has struggled to keep pace with the changing workscape, the organization has focused on finding new and better ways to get things done in all functions. "Success is measured by how well you can adapt. What worked in the past isn't necessarily going to work in the future. Today, change is an absolute necessity," he says.

Indeed, Goodyear has analyzed, deconstructed and then reassembled various practices in new ways, gaining remarkable insights into the way the company and its people actually work. In HR alone, the company has scrutinized everything from benefits to training procedures, looking at other companies and examining best HR practices. Then it has put all the information together—in both quantitative and qualitative forms—to provide a crystal-clear snapshot of what it's doing well and ways it can improve (see sidebar). But, perhaps most important of all, this ongoing benchmarking has harvested brainpower and enthusiasm the company didn't know existed. By measuring itself against other organizations and then soliciting input andinvolvement from its key HR employees, Goodyear has managed to empower its work force while finding more efficient ways to get work done.

And Goodyear isn't the only company using this technique. During the last several years, few things have fractured the corporate psyche more than the pressure to achieve outstanding results with dwindling resources. As one company after another has restructured and downsized, the emphasis on reengineering and TQM has grown to almost a fevered pitch—and the need to squeeze greater results out of less raw material has become de rigeur. As HR departments struggle to meet this challenge, one thing has become clear: Improvement doesn't take place in a vacuum. That's why a growing number of HR functions have turned to benchmarking—that is, thoroughly examining their own practices or procedures and measuring them against the way other companies operate. HR has learned it's essential to understand what works best and how that can be applied to a philosophy of continuous change and improvement.

It's worth the sweat.
Benchmarking embodies the idea that it's possible to examine best practices of other companies and then implement changes based on those observations. It usually requires a good deal of internal analysis and ob-servation, as well as phone calls or site visits to obtain the actual information. When it's done correctly, it's often a com-plex and formal process that involves detailed questioning, research and analysis. Benchmarking might also include statistical data that a company can plug into a matrix for determining what im-provements are desirable—and possible. Regardless of the approach, benchmarking always requires steadfast dedication to the idea of making changes in behavior as well as to the actual systems that drive a company. Explains Alfred R. Pozos, director of the International Bench-marking Clearinghouse for the American Productivity and Quality Center (APQC) located in Houston: "It demands a great deal of introspection and honesty. It's part logic and part intuition. You have to be prepared for your ego to get slapped around a bit."

Indeed, like any business practice, benchmarking sometimes can be gut-wrenching, frustrating and time-consuming. Says Charles Bent, staff director of planning and research at NYNEX Corp. in Marlboro, Massachusetts: "Benchmarking doesn't always tell you what you want to hear: it doesn't always work how you think it will and neatly solve your problems. It's possible to do all sorts of research, use the best models available and still not identify best practices and how to apply them. Benchmarking is a complicated equation."

Adds Patricia Nazemetz, director of Human Resources Policies at Xerox Corp.—the Stamford, Connecticut-based company that launched the American benchmarking bandwagon in the early 1980s: "When it comes to benchmarking, not everything fits into neatly defined questions and parameters. It's a constant and ongoing process, and it involves balancing different perspectives and needs." But it also can provide fuel for the corporate fire. "When a company asks the right questions and gets the right answ-ers, it can lead to amazing insights... and changes," says Sara Olberding, manager of the information center at the Cincinnati-based Association for Quality and Participation. Adds Pozos: "It can be a tremendous resource and can provide remarkable insights."

For these reasons, benchmarking suddenly has become fashionable and hot. More than 70% of Fortune 500 companies use benchmarking on a regular bas-is, including AT&T, Eastman Kodak, Ford Motor, IBM, Weyerhaeuser and Xerox. Not surprisingly, it has become yet another corporate buzzword and spawned its own cottage industry. Books about the topic are everywhere, and consultants increasingly are peddling expertise. Many trade associations now offer training programs and materials to help companies navigate through the benchmarking tangle. Some even provide in-formation online—including ethics and guidelines—using the Internet's World Wide Web. A few corporations now mar-ket their own benchmarking expertise to other firms as well.

Benchmarking: Learning from HR's best.
Yes, benchmarking has earned its place in the corporate arsenal. And today, it's used to study human re-sources functions as well as manufacturing functions. These days, HR departments are discovering that benchmarking is necessary and useful. Rapidly advancing technology, new ways of tackling work and leading-edge management approaches translate into a far greater need to understand the people side of the business and align human resources with company goals. Indeed, with HR increasingly involved in corporatewide reengineering and total-quality initiatives, many in the human resources field are finding benchmarking is an inescapable part of corporate life. It's essential to understanding such things as compensation, benefits, staffing, outsourcing and training. And companies that have used benchmarking successfully in HR often have leapfrogged the competition and found themselves enjoying a substantial competitive advantage.

Benchmarking revolves around a simple enough concept: A company—wheth-er it's among the fattest of the Fortune 500 or a virtual unknown—can improve and find more efficient ways to get work done. In a world in which the bar constantly is raised to ever-greater heights, it's necessary to study—and often to learn—the methods that deliver superior performance. Of course, one of the best ways to advance is to look outward at what other organizations are doing, especially those that have demonstrated outstanding results. That could mean studying an organization that has been the recipient of the Malcolm Baldrige Nation-al Quality Award or other recognition, or one that simply has a practice that seems interesting, innovative or particularly noteworthy.

Benchmarking also is effective for measuring performance within an organization and comparing it to general performance industrywide. Although companies and their cultures vary greatly, knowing what's typical within an industry can provide insights. "It's great to look at best practices, but it's also useful to take the temperature of the industry and see where you are relative to everyone else. That's what often provides the best clues about how to embark on a bench-marking project," says Robert Sahl, general managing partner for WMS and Company, a King of Prussia, Pennsylvania-based consulting firm that specializes in benchmarking studies.

Whatever tact a company takes—a variety of benchmarking models exist—one thing is certain: Benchmarking provides a method for focusing on specific factors that can lead to success or failure. It's an indispensable tool in the ongoing struggle for continuous quality improvement. And although an individual project might take months to complete and cost anywhere from a few thousand dollars to hundreds of thousands of dollars (the APQC found that a typical organization spends $40,000 to $50,000 on a project), it can reap huge rewards and pay for itself within weeks or months.

Xerox learned that fact years ago. Perhaps more than any other company, it has proven just how powerful benchmarking techniques are and what they allow an organization to achieve. The company constantly examines other organizations—as well as itself—in the never-ending quest for improvement. Within HR, virtually everything—from training to work-and-family issues—has been scrutinized at one time or another. Yet the level of sophistication continues to grow and evolve.

Xerox's benchmarking process in-cludes 10 steps:

  • Identify what's to be benchmarked
  • Identify comparative companies
  • Determine data collection method and collect data
  • Determine current performance levels
  • Project future performance levels
  • Communicate benchmark finds and gain acceptance
  • Establish functional goals
  • Develop action plans
  • Implement specific actions and monitor progress
  • Recalibrate benchmarks.

A methodical approach keeps the process on track.
Another company that follows this approach is Goodyear. Benchmarking since the late 1980s, Goodyear has examined a wide range of human resources practices, including employee training and benefits. Yet, regardless of the specific practice, they have found that the fundamentals of benchmarking remain the same. "You must ask yourself honestly, 'Where are we really at and what do we hope to achieve?' You essentially start with a blank piece of paper, you develop highly focused questions to learn about specific practices and then you seek answers," Burns explains. At Goodyear, that can mean conducting interviews over the phone or in person, engaging in academic studies or using outside consultants to gather information.

Recently, when the company began studying compensation strategies, it created an internal task force comprised of individuals from various departments. All came together to develop questions and explore topics such as variable pay, top performers' pay and what role education and training has in determining an employee's compensation level. Team members first determined what the company wanted to learn and then created a specific agenda. After conducting interviews and documenting results, the team compared notes about various practices. And it presented recommendations for change.

Unlike some companies, Goodyear doesn't relegate benchmarking to a particular group of employees. It's a mainstream activity that transcends departmental boundaries and job titles. Employees receive training as needed and are then expected to participate in the process. If the training department needs to get a better idea of how it compares to other companies in terms of cost or methodology, for instance, it engages in its own benchmarking study. "The idea is to build a whole quality culture and have the systems in place to support it," Burns explains.

But that's no easy task. Getting out of the starting block and determining the appropriate approach for benchmarking can be overwhelming. As NYNEX's Bent puts it: "There are so many things you can consider and examine that you have to make it a point to focus on what's really important. Many companies waste their own time and other companies' time asking the wrong questions or grappling with issues that aren't all that significant." What's more, firms easily can find themselves swimming in percentage comparisons and statistical formulas without identifying best practices and gleaning from them. Quantitative and qualitative data both have an important place in the overall scheme of things, but it's also important to understand what works best in a given situation.

In fact, a methodical approach can often pay huge dividends. Morristown, New Jersey-based Gemini Consulting, with 1,600 employees spread throughout the United States and beyond, finds benchmarking essential to streamlining and improving its HR function. But, according to Joseph DeGennaro, vice president of HR, the company puts a premium on maintaining an overall perspective and not getting caught up in the enthusiasm and hype. Says he: "Benchmarking can serve as a valuable tool and help you achieve outstanding results, but it's essential to figure out where you want to be—and where you should be—in the continuum."

Pre-plan, learn to network and focus your search.
How do successful companies navigate their way through the benchmarking maze and get a project off the ground? How do they ensure they're getting the results they need? Those in the trenches say it's important to develop a solid strategy and use methods that have a proven record of success. And that almost always begins with identifying specific practices that require a closer look and putting the entire matter in perspective.

"Benchmarking a manufacturing or assembly process is much simpler than dealing with people issues," says the APQC's Pozos. "The softer side of HR requires those involved in the benchmarking process to take a step back and consider cultural issues and attitudes that aren't easily quantified or understood." And that usually means carving out enough time to do some worthwhile thinking. "If you can't focus on the important issues and see the broader picture, then you're likely to wind up in a situation in which you're constantly running around putting fires out. You wind up with no time to reflect. It's crucial to block out time to identify areas that require benchmarking and then think about the issues that need to be resolved and how that can best be achieved," says Nazemetz.

When Goodyear embarks on a benchmarking project, it also spends up to three months planning and preparing for the task. There are meetings, analysis, strategy sessions and developing materials to help streamline the process. There are lively discussions about what the company hopes to get out of it and what it hopes to achieve in the long run. Those who participate in the process receive training on how to use their analytical skills to benchmark successfully. "It's essential that the project is a good investment and not just something that seemed like a good idea," Burns explains.

Because it's such an investment of time and money, it's not surprising that many who engage in benchmarking have learned that having a trusted network of colleagues can prove invaluable. NYNEX's Bent is one of them. By participating in the Alexandria, Virginia-based American Society of Training and Development's (ASTD) Benchmarking Forum, for example, he not only has access to background materials on benchmarking and industry data, he also can connect with colleagues at any of the 50-plus firms who are equally committed to studying best practices.

Of course, learning about the inner workings of other companies is a key element to effective benchmarking. And while ASTD and APQC can open doors, these organizations aren't a one-stop shopping service. Many desirable companies simply don't participate in these forums. So what's a company and HR department to do—especially when award-winning companies are inundated by requests? Olberding of the Society for Quality and Participation suggests targeting previous award winners that no longer are so highly sought after, but have the materials and public relations infrastructure in place to deal with requests. It's also important, she notes, not to overlook lesser known companies that have received media attention—even in trade magazines. First-tier companies, such as Motorola, Xerox and Federal Express, typically are flooded with requests and simply can't accommodate everyone. Finally, Olberding points out, a prospective candidate for benchmarking shouldn't mirror too closely one's own company. "The whole idea is to compare," she explains.

Effective benchmarking requires more than knowledge of how to network, however. Asking the right questions is vital. Says Patrick Murray, principle of HR Effectiveness Inc., a Beaverton, Oregon company that advises and consults on benchmarking and publishes an annual report of best practice companies: "The industrial tourism business—let's go find out everything we can about a topic—isn't particularly effective for benchmarking. It's far more useful to find companies that have great programs and then focus on important questions in specific areas. That's what gets results."

Adds Bent: "It's essential to know what you're looking for and stay away from a fishing trip. One of the weaknesses of benchmarking is that people call up and say they're involved in a project and they have a set of questions. The fact is, they have 20 questions all over the place. They aren't focused on anything in particular—let alone a particular process. They ask how you structure your funding for training or how you evaluate things in general. That's not benchmarking. It's just an interview and it wastes everyone's time. The questions must be tightly focused. It can't become a scattergun approach."

When Kodak's human resources department embarks on a benchmarking project, Kay Stammers, director of re-engineering and benchmarking for HR at the firm's Rochester, New York headquarters, tries to include staffers who are knowledgeable and interested in the topic to head the research. "It's important to have people who understand the nuances of the topic and [who] understand the underlying issues," she says. Yet she's quick to point out it's also vital to ensure fresh input into the process. "Sometimes, it's good to have someone who knows absolutely nothing about the process involved. The questions they ask can be quite different."

At Xerox, benchmarking teams often bounce ideas back and forth. And by the time Xerox is ready to use the telephone or a meeting to conduct a benchmarking interview with another organization, the focus is perfectly clear. As expected, this no-nonsense approach spills over into the meeting itself. "You have to establish trust and confidentiality up front," says Nazemetz. "You have to be able to talk about the ugly stuff as well as the pretty stuff and be sure it's not going to wind up on the front page of The Wall Street Journal."

Adapt to your own culture.
Murray also says that the group must be prepared to ask tough questions: "What does this mean to us? Which of these ideas fit into my environment? What kind of changes do I need to make to produce the kind of improvements I'm seeking?" And more than anything else, successful benchmarking demands flexibility and commitment. Elaborate reports that chronicle the way other companies manage people and processes don't transform an organization on their own. And firsthand knowledge of how high-flying organizations succeed doesn't lead to instant change by osmosis. "Benchmarking is more than the act of collecting data," says Murray. "It's one step in the overall process of organizational change. The data must be applied in a way that's meaningful and useful."

Indeed, as cultural, practical and financial issues become intermingled, it's important to maintain your perspective. "To make benchmarking work, you must have people who can step back from the issues and figure out what changes need to take place and how to go about doing that," says the APQC's Pozos, who formerly conducted benchmarking for telecommunications giant Pacific Bell. Yet aligning HR with corporate goals and extracting solutions from all the data isn't an easy task. "What works well within one culture will often fail within another. It's easy to lose sight of The Big Picture when you're sorting through all the details," says Bent.

In fact, understanding one's corporation and its culture is key. As Kodak re-engineered operations—including HR—it has increasingly turned to benchmarking to supply answers. Using detailed questionnaires, surveys, E-mail, videoconferencing and other methods to communicate with other firms, it constantly surveys the landscape for new ideas and ways to tweak existing practices. Once armed with the information, Kodak incorporates ideas and outstanding practices into its own corporate fabric—while striving to retain its own identity. "Benchmarking isn't about duplicating what others are doing, it's about implementing ideas and modifying them so they'll work within your own culture," explains Stammers.

Xerox's Nazemetz agrees. In 1988, Xerox began rethinking its health-care program as costs began creeping upward and employees began complaining that it wasn't meeting their needs. At the time, other firms were beginning to move away from single replacement products and toward one large insurer. So the company embarked on a thorough benchmarking project—combined with surveys, interviews and focus groups—only to discover its demographics and culture were better suited to the existing system, with some changes and improvements. "It would have been very easy at the time to buy a cookie-cutter product and show management we were taking action. It was the easiest and least risky solution. But today, we have a product that works well and one that other companies are taking a close look at," says Nazemetz.

View benchmarking as an evolution.
Because maintaining perspective can be so difficult, many companies now opt to use outside consultants to help them steer through the choppy waters of benchmarking. Not only can consultants help keep the discussion open and honest, they often are able to provide additional perspective and ideas—since they're looking at the company from the outside in. They know the critical-success factors, they know who the leaders are within the industry and they know how to obtain the necessary information and use it. An added benefit—a consultant also can design a benchmarking survey to protect the confidentiality of sensitive material. And that's usually ideal for industry surveys.

But don't neglect your internal resources. Murray believes one of the keys to benchmarking success is to adopt a philosophy of involvement and participation from the start. "The bigger the change, the greater the resistance. But the more people are involved and understand what's going on, the fewer the problems." He suggests HR managers try to involve employees as much as possible. That might translate into opening up a planning meeting, using team-based interviews, passing around tape transcripts after an interview and establishing debriefing sessions that allow questions and an honest critique to flourish.

Experts say it's also wise to view benchmarking as an ongoing and continual process. Although completing a best-practice analysis might take a year or more, it's essential to keep an eye on that practice and not allow complacency to set in. It's not a question of will it require future attention, but when, says Nazemetz. And while it certainly isn't possible, or desirable, to benchmark every process on a regular basis, "it's important to pay attention to the broader environment and consider what might be outdated," Nazemetz explains.

It's also important not to fall into the trap of considering benchmarking a panacea for a company's every ill. It's simply one piece of an organization's ongoing commitment to quality; it's nothing more than a tool for achieving larger organizational goals. As such, it shouldn't substitute for original ideas and creativity either. These two qualities can lead to far more spectacular gains. "Many an innovative leap forward has been achieved without ever analyzing what other companies are doing or examining best practices," says Gemini's DeGennaro. "It's vital to allow new ideas to come to the surface."

Besides, benchmarking can create its share of problems. One of the most nettlesome, according to Pozos, is that those involved with a benchmarking project can easily fall into the trap of thinking employees aren't performing their duties well if another firm's workers are achieving better results with the same practice. Another problem is that animosity and fear typically arise when employees know they're being studied. Then there's ego and political issues. As Olberding puts it: "Unless you're willing to be totally critical and honest, you're not going to get valid results. You're only short-circuiting the process." Finally, there's the not-too-surprising fact that a poorly designed program can wreak havoc. And not all management teams are willing to fund or support benchmarking to the degree needed.

However, when benchmarking works, the results are often impressive. It's possible to shave days off a training program without losing results or save millions of dollars a year on outsourcing. Benchmarking within HR can help identify ways to structure a medical plan more effectively or determine whether turnover exceeds the industry norm and what the ramifications might be. "In many cases, the cost of doing benchmarking is paid back many times over. It's simply an investment, but one that can provide a spectacular return," says Nazemetz. And not just in obvious ways. Today, Xerox actually is profiting from the sale of benchmarking materials it has developed over the years to other firms willing to buy its knowledge and experience. Most firms, of course, never make it to the level of Xerox. But if they successfully benchmark, they gain rewards of their own.

A few years ago, for example, when forest-products manufacturer Weyerhaeuser saw its performance had slipped from near the top of its industry to the bottom quartile, it began an ambitious benchmarking project—with much of the effort focused on human resources. Working with HR Effectiveness, it began to study ways to cut the human resources bureaucracy down to size. A seven-member team spent approximately two years benchmarking several high-leverage areas: staffing and selection, compensation, development and technical training, and the organization's performance management process. After examining numerous companies—mostly using the telephone—the $9.2 billion company with 38,000 employees—began making some changes. When the sawdust had finally settled, the Tacoma, Washington-based company had cut HR staffing by 25%, redesigned its pay-for-performance system and created a job-description system that more closely reflected the company's business goals.

Concludes Xerox's Nazemetz: "The realization that companies can share information—particularly in HR—and that it can benefit everyone is important. It can help people do their jobs more effectively and efficiently and greatly streamline processes. Benchmarking isn't about copying other companies or importing best practices wholesale, it's about integrating bits and pieces of useful information into a company and its culture. When that happens, and when goals are aligned with the larger mission of the company, it's possible to make tremendous progress."

Personnel Journal, November 1995, Vol. 74, No. 11, pp. 62-73.

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