Hagan School of Business

Deciding What to Benchmark

Process benchmarking studies analyze the processes or practices that are important to the performance of the organization (APQC, 1993). The catalyst for the study may be identified from institutional problem areas uncovered, internal or external strategic change initiatives, or the currently popular continuous quality improvement efforts. A basic lesson learned in the quality movement relates to processes and the Pareto Principle, which states that 20 percent of all activity affects 80 percent of the results (Watson, 1993). Therefore, the focus of improvement efforts should be on those few critical few processes that have the highest potential for "return on attention," as Watson labels it. Processes are often chosen to be benchmarked because they have a broader range than business practices, and are important for achieving critical success factors (APQC, 1993). The American Productivity and Quality Center defines these terms for business and other organizations:

• Business processes are logical combinations of people, equipment, materials, and methods that organized into work activities to produce a given output. These activities have varying levels of scope. The underlying principles of TQM include the concept that organizations basically consist of a set of interrelated processes, nested within in each other.
• Critical success factors (CSFs) are those characteristics, conditions, or variables that have a direct influence on a customer’s satisfaction with specific business process and therefore on the success of the entire process.
• Business practices are methods or approaches that facilitate the execution of a process. (from APQC, 1993, pp.6-7).

1. What is the most critical factor to my function/organization’s success (e.g., customer satisfaction, expense to revenue ratio, return on asset performance)?

2. What factors are causing the most trouble (e.g., not performing to expectations)?

3. What products or services are provided to customers?

4. What factors account for customer satisfaction?

5. What specific problems (operational) have been identified in the organization?

6. Where are the competitive pressures being felt in the organization?

7. What are the major costs (or cost "drivers") in the organization?

8. Which functions represent the highest percentage of cost?

9. Which functions have the greatest room for improvement?

10. Which functions have the greatest effect (or potential) for differentiating the organization from competitors in the marketplace? (Spendolini, 1992, p. 71)

These questions help the benchmarking participants prioritize the potential benchmarking processes based on need. The main focus of these questions are on cost reduction, problem reduction, customer satisfaction, continuous improvement, and marketplace superiority, each of which could accurately be defined as a critical success factor. Additional advice includes the benchmarking SMART acronym, which means that the processes are Specific, Measurable, Achievable, Realistic, and Time-framed (Dale, 1995).

If an organization is conducting benchmarking because a problem has already been uncovered on a process or business practice (problem-based benchmarking), then the identification of what to benchmark should not be difficult. If however, an institution is not immediately sure where to begin, then deciding what processes to benchmark must be planned thoroughly (process-based benchmarking). Participants in organized benchmarking studies, such as NACUBO, can choose from more than 26 institutional areas and processes to analyze, or benchmark them all.  Functional Areas in the NACUBO National Benchmarking Survey include areas such as accounts payable, central budget department , facilities, treasury-cash management, food services, general accounting, human resources, information technology, payroll, purchasing, and risk management.

If a college or university does not plan to participate in the NACUBO or other association benchmarking project, or if the desire for benchmarking is coming from an institution or academic unit on campus that does not have the option for an existing study, then a new benchmarking plan will be needed. Camp (1989) recommends that the best place to start is at a high strategic level and then cascade down to an individual deliverable. The mission statement of the organization is a good place to identify candidates for benchmarking from a strategic point of view, and the mission statement of the individual units within the organization can be useful as well. Mission statements usually identify customers, products and services, critical success factors, process used, and more (Camp, 1989). The college or university mission statements often have very general descriptions of their objectives. For higher education, the unit level mission statements such as those written by individual schools or departments may be a good place to start.

The disadvantage of benchmarking at the departmental or "grass-roots" level is that the team or committee of employees conducting the benchmarking may not be able to gain admittance to the world-class organizations needed for industry or generic benchmarking (Watson, 1992). Therefore, for maximum effectiveness benchmarking efforts should be promoted and supported by senior level managers, and conducted by and for the departmental units that will make the most use of the information.

Potential benchmarking topics should be specific, will give a competitive advantage, can identify the "customer," and should interest others as well. After deciding which activities to study, a blend of internal, competitive, industry and generic benchmarking will probably be needed because of the diversity of processes found in colleges and universities.

APQC. (1993). The Benchmarking Management Guide - American Productivity and Quality Center. Portland, Oregon: Productivity Press.

Camp, R. C. (1989). Benchmarking: The Search for Industry Best Practices That Lead to Superior Performance. Milwaukee: ASQC Quality Press.

Dale, B. (1995, October 30 & 31, 1995). Practical Benchmarking for Colleges and Universities. Paper presented at the AAHE Workshop, Key Biscayne, Florida.

NACUBO. (1995). Benchmarking Prospectus . Washington, DC: National Association of College and University Business Officers.

Spendolini, M. J. (1992). The Benchmarking Book. New York: AMACOM.

Watson, G. H. (1993). Strategic Benchmarking: How To Rate Your Company's

Performance Against the World's Best. New York: John Wiley and Sons.