Interview by: James Nelson
Laura Longmire is recognized as one of the world's most expert Benchmarking practitioners, having served 15 years as Texas Instruments' Benchmarking Practice Leader for world wide operations, and subsequently becoming KPMG´s National Director of Benchmarking & Best Practices.
In this interview, she draws on her experience to talk about the fundamentals and benefits of benchmarking, and how it can lead to world class process improvements.
What is the difference between benchmarking and competitive analysis?
Laura Longmire:
The basic difference is that benchmarking gives you the external perspective. You need to be able to measure yourself against companies or agencies you respect. The difference between benchmarking and competitive analysis is that benchmarking requires change; you take the information you find on better practices and you implement a change in your practice. Benchmarking does not just involve reading about best practices, or mentally comparing yourself against them, but actually implementing changes to the way you work.
If an organization performs the early stages of what you would consider a formal benchmarking study, but nothing changes as a result, would you still consider it benchmarking?
Laura Longmire:
I would consider that comparative analysis. Benchmarking does require you to change your practice, whether that means you copy another company's innovation or you use the information to facilitate another type of change in your own organization. Many times benchmarking gives you ideas by showing you things you simply never thought of doing in a certain way. When you see that, you bring it back home and improve on it. Often it's a matter of opening your eyes to a new way of looking at something.
What are some of the critical pieces essential to a successful benchmarking methodology?
Laura Longmire:
The key to being successful at benchmarking is first to know yourself before you try to meet with another company. If you don't know how you do work - that means creating process maps or flowcharts - and you don't know how to measure it, you don't have anything to share with anybody else. Benchmarking is a two-way street. Whatever you ask of somebody you must be willing to share. Whether it's a great process or a really poor process, your partners will learn something from it. It's very important first to know yourself. The next most important thing is to analyze who's doing this process significantly better than you are.
Once you've gotten through those two points, benchmarking is a process of data gathering, analysis, and process improvement. 60 per cent of all benchmarking work is done up front in step one - knowing how you do work.
What are some of the things companies should be doing during this initial phase?
Laura Longmire:
As you're looking at yourself, a key to successful benchmarking is to map out your practice, process, or whatever you're trying to improve. Once you do that, you will see it on paper. Just by doing that, you're going to see so many non-value-added tasks in the way work is done. At this point, you can make a decision. You can improve your process before you benchmark or you can leave it as it is - the ultimate result of which may be to throw out the whole process.
Once you get it down on paper and you see the way you've been doing your work for a number of years, you'll discover non-value-added tasks such as getting approvals that aren't really needed, requiring levels of signatures and things that represent nonsubstantive work steps. What we typically find is, for every one of the processes you'll look at prior to actually going out to benchmark, you can yield a 30 to 35 per cent improvement in both cycle time and productivity just by eliminating the non-value added tasks. A good benchmarking study will yield about that much anyway. Then, once you've got the new process in place, and you still want to make breakthrough improvements, that's when you identify potential partners, define a new set of tools, and implement a change.
How many organizations engage in benchmarking knowing in advance the nature of the change they want to make, as opposed to those that go into it completely open to best practices?
Laura Longmire:
I would say it's close to half and half. Often companies have an idea of how they want to do a process such as material handling or distribution, and they know they want to transfer to an automated system. In these cases, companies will benchmark companies that already have these systems, learn lessons from them, eliminate implementation problems, and validate what they want to do.
Other times you're going to benchmark a process because the process is one you really want to change, but you don't know how to change it. Or you might not even have that process within your firm or your company, so you'll benchmark somebody that's already doing it.
Would you talk about some of the myths regarding benchmarking?
Laura Longmire:
Let's talk about the one that says only formal benchmarking yields results. A lot of people think you have to do formal benchmarking based on a 10-step methodology that involves elaborate flowcharts to yield truly creative changes. The fact is, there's a lot of value in benchmarking that's informal, where you hear or see things you know are significantly better than the way things are being done in your organization. In this scenario, you bring these ideas back into the company, implement them immediately and yield instant results. You didn't do a formal documentation of a study, but the results are at work in your company.
"It's a myth that a well-conducted benchmarking study automatically yields results."
Such examples usually occur in the areas of human resources. They're what I call "soft studies." It's not always easy to arrive at a formal metric indicating that system x is an effective method of reward or recognition. But you know it's better than what you've got. Many companies have formal annual performance reviews - that may be the one time of the year they talk to their people. But as they integrate total quality management and employee involvement into their organizational structure, they find annual meetings may not be the best practice. Through research, they'll identify which companies are talking to their people more often, and determine how they evaluate them. They might make a couple of trips, gather information, bring back a performance review form, and implement a new evaluation format.
Then there's the myth that says a well-conducted benchmarking study automatically yields results. Bob Camp, the father of benchmarking, talks about a key example. A company put together a full-time team that spent several hundred thousand dollars doing a formal benchmarking study, made a recommendation that would have saved millions of dollars, but the results were denied. Management will often deny that something can be done so much better than it is already being done. I've been involved in studies like that where we've gotten all the documentation, created process flowcharts, performed gap analyses, drawn up Z-charts, and everything else. What you find when you're ready to implement is that management denies the findings, and therefore nothing happens.
What can we learn from that?
Laura Longmire:
When you want to use benchmarking, always involve the people who are doing the work. Otherwise, you will never really understand how the work is already being done, and when you are ready to implement your recommendations, they'll be perceived as just one more management diktat. That disempowers people. The second thing is to arrange for the people who own the budget to sponsor the study up front. If the people who are doing the benchmarking do not own the budget and it ends up requiring additional resources in terms of time, people, or capital, you may not get implementation because they'll say, "We don't have the money," or they'll deny the findings.
Another myth is the belief, often held by executives, that benchmarking is a quick fix for anything. They think you can benchmark a process, implement a change, and show results in two weeks. A good benchmarking study will take a team of five to seven people, working a third of their time, six to nine months before it's completed and implemented. It's not a two-week effort.
A further myth is all that's required to do benchmarking is to make a trip or conduct a visit. That's what we call "industrial tourism" or "trip fever." You're going to see things, but you're probably not the right person to make a change. Furthermore, you'll make the visit without having anything to share with your partner.
Something I find in a lot of companies is they think the only way you can benchmark is to make a site visit. There are over 5,000 electronic databases containing doctoral theses, process information, engineering institutes, conference proceedings, all accessible through public domain research. You can often make process improvements resulting from information you can find through research. Experts in benchmarking will tell you a lot of benchmarking can be accomplished through secondary research.
The win-win dimension of benchmarking really sets it apart from other management practices that are more protective of a company's competitiveness. What is it about the partnering process in benchmarking that makes openness and sharing acceptable?
Laura Longmire:
People often think, "If you're so good, why would you share with me?" When I call a company, they know I've done my homework and in a way, I am appealing to their ego. What I'm really telling them is they have demonstrated a world class best practice. When I ask to share in your knowledge, that's a validation you're doing the right thing. If I am a good partner, I'm going to share with you how I do work as well. Even if the process I want to benchmark isn't one of my best, I wouldn't be in business if I wasn't doing some things right. I will say to a potential partner, "There might be one or two steps within my process you haven't thought about doing and you could use to improve your process and maintain your leadership position."
If there's nothing you can learn from my process, I can always reciprocate by offering another opportunity to benchmark somewhere else within my company. For example, I may ask to benchmark their product design process, which may not be one of my strengths. On the other hand, I may be world class in procurement systems. I could offer you the opportunity to benchmark my procurement process. They may say we've been thinking about doing acquisition but we've never done it before, so we'd like to talk to someone in your acquisition department in a couple of months.
It sounds as if people coordinating benchmarking processes within an organization need to become internal ambassadors.
Laura Longmire:
Right. Also what often happens when you do a benchmarking study with 10 companies is you promise to share findings with them. You usually share key metrics. The companies that shared with you typically get a blinded matrix of participants' process results. One or more of them may come back to you and say, "I recognize my numbers, I'm Company C" - plus you've probably highlighted their numbers on their matrix. They may say, "Company A is doing something significantly better. Would you tell me who that is and can we benchmark with them?" Then you become a thirdparty ambassador. You can open up doors to other companies. When you do that, you become valuable to all those companies. You get opportunities all over again because they'll come back and say, "You helped us, is there anything else we can do for you in the future?" Benchmarking is an ideal networking opportunity. I'd say about 25 per cent of the time partners will come back and ask for help in contacting other partners.
Do you recommend that organizations provide training to benchmarking teams?
Laura Longmire:
Teams should first receive training in business process management. This is training in how to understand and flowchart a process. That should be an eight-hour class.You can eliminate classroom training by taking your teams through the tutorials. Team-based benchmarking classes instruct teams on the methodology of benchmarking, and in addition, typically put the processes they intend to benchmark through that methodology during the class. If a team is having a hard time working together, it would be of some benefit to go through a change management or basic team-building skills session. Three of these skills - business process management, change management, and teambuilding skills - are tools you will need no matter what quality tool you're using.
Is it always necessary to include a facilitator on a benchmarking team?
Laura Longmire:
Different companies use different methods. I like to see a resource pool of benchmarking champions who have been trained in the tool as well as having been a practitioner. This person should have been involved in benchmarking and received training. Then when a team wants to benchmark, you can assign one of those people to the team and set your regular team meeting schedule. They will help the team with the benchmarking methodology, and actually see it through implementation. By doing it this way, you have a group of the same people using the same language and a consistent approach starts to be deployed in the entire company. By relying on lessons learned and direct experience, the facilitator can draw from examples of cases they have been involved with instead of citing examples out of a book.
What are some of the most common pitfalls to avoid in benchmarking?
Laura Longmire:
Many organizations think it's an easy tool to use. It is easy, but it can be very time consuming. Often teams pick too many partners. You need to go through a process of elimination and only benchmark with the best of the best.
Is there an ideal number of partners?
Laura Longmire:
There really isn't an ideal number. We teach people to brainstorm for potential partners and then validate through data gathering. During brainstorming, you'll usually come up with between 30 and 60 names. You'll normally benchmark three to seven of those. The best of these will emerge as a result of the screening survey.
One of the mistakes people make is only wanting to benchmark Malcolm Baldrige National Quality Award or Deming Award winners. What they don't realize is those companies have pockets of excellence and they have areas that don't represent the world's best practices. You may have just picked one of their processes that is not the world best practice, but you think because they're a Baldrige winner they're the best at everything.
People want to benchmark companies like Motorola, Xerox, and AT&T because they think they're doing everything right. You really have to do your homework and identify where best practices occur. Often the company that's doing things right is the McDonald's down the street. You didn't think about going to them because they're right next door.
Will you describe how a typical benchmarking study begins?
Laura Longmire:
I'll talk about a project I´ve worked on for KPMG. The first thing we did was pull together public domain research using key words having to do with the process we're benchmarking. To narrow down the field of potential partners, I use a process called triangulation. If I can find at least three resources in the public domain referencing the same company on the same process, historical data shows I have between a 90 and 95 per cent success rate of finding a best practice company.
Initially, there were over 60 companies referenced on this practice. Through the process of triangulation, we found there was a group of about 18 companies that were each referenced between 9 and 20 times during the last six months alone. If you keep getting the same names over and over again, you know they're doing some things significantly better.
What can companies that don't have an in-house research capability do to obtain public domain information?
Laura Longmire:
They can go to local universities, public libraries, and on-line services. With the Internet, you can almost do it all from home. And then there's the Benchmarking Exchange, the International Benchmarking Clearinghouse, and the Federal Quality Institute which all do research, but they do charge fees.