The saying goes, If you don’t know where you are going, any road will get you there. Having no objective or goal may work for those who are comfortable wandering aimlessly through life, but it won’t work in business; indeed, that aimless philosophy is the antithesis of business process improvement (BPI). An organization that wants to improve and stay profitable and competitive in the marketplace must be continually aware of where it is, where it’s going, and what is required to get it there. That’s why Step One of any business process improvement initiative worth its salt is benchmarking.
The purpose of this Benchmarking 101 article is to introduce you to the basic components of benchmarking in the context of BPI. We’ll explore three key topics: Process Mapping, Measurement, and Comparison.
Benchmarking begins with thoroughly defining a process as it is today. You can begin by gathering the stakeholders of the process (including cross-functional departments) and conducting a general assessment: What do you do today? What challenges do you have? What things cause you angst? What things do you think are going well?
Next, document step by step the “as is” structure of the process, including who does what, when it’s done, and how often it’s done. Literally map out the process end to end, including the places where cross-functional processes intersect. Never map a process in a vacuum; you have to take the entire end-to-end process into consideration before you can really have a full understanding of interdepartmental impacts and where the gaps are.
Mapping the as-is structure of a process highlights error-prone steps, bottlenecks and other areas for improvement. Duplication is a common discovery. For example, you probably will see that one department is doing X part of the process, and then the next department does a little bit of X, and then yet other department does another little bit of X. As a result, three different people in three different departments are doing the same administrative task within a process. There are other “red flags” to look for: How many times do you have to rework this? How many times do you have to touch it over and over again? Do you have complaints from your customers? (After all, even if you improve internal processes, if your customers are not happy, your business will ultimately fail.) It’s not uncommon to enter into a process analysis thinking you know exactly what the problem is, only to find that other hidden issues may have more bearing.
Another important consideration during the mapping phase is the security of the process. Risk can be magnified in a process when necessary controls are omitted. An example would be a process that allowed for inputting and paying an invoice without necessary approvals. Risk can also be magnified when duplication adds complexity to the process, particularly when two people are doing the same task different ways.
Mapping the as-is structure forms the foundation for developing benchmarks and setting the objectives and goals of the BPI effort.
The next phase of benchmarking is devoted to measuring. A very important part of “knowing where you are,” is understanding your current process metrics: how long does each process take, how many people are involved, and so forth.
Let’s say that I am in an accounts payable process. I receive 10 invoices, and right now five people are keying in those 10 invoices. It’s taking each of them 25 minutes to key in each invoice. Unless I have that detail before I make an improvement to the process, I will not know how much we have improved after we have made the changes to the process.
There are obviously various types of KPIs and metrics that you can use. When you’re picking the metric, it needs to be relevant to your process. What’s relevant for AP may not be relevant for AR or Month End Processes. Don’t pick things just for the sake of picking them; focus on the critical milestones in each process that really should be captured in a metric.
The development of KPIs and metrics are critical to benchmarking accuracy. Without solid measurements, there is no way to accurately analyze the progress and impact of change.
Every organization is different, but yours likely has peer organizations to look to for best practices. How do you decide how long it should take to process an invoice, for instance? Look to comparable companies in your industry. In particular, look to your competitors. Are you staying relevant and competitive?
I often hear from companies “we want to do it like IBM,” or “we want to do it like one of the big Fortune 1000 companies,” and my answer always is, “you cannot benchmark yourself against someone who is not comparable.” You can’t compare apples and oranges. You must compare apples to apples. Ideally, find an organization in your industry that is about the same size and that has similar goals and objectives. Finding a peer of the same scale is really important; if a small company compares itself to a massive one, the scales of operations are so different that the comparisons won’t be realistic at all.
Don’t get me wrong: I’m not saying to completely ignore the performance standards of market leaders. Some of their performance standards may well be worthy and appropriate for your aspirations. Just remember to take into consideration the inherent differences between your business and theirs, and keep your KPIs realistic.
The benchmarking skill set I’ve just described—process mapping, measurement, and comparison— is something that should be valued, developed and exercised within every organization. After all, benchmarking is not a one-time exercise. Just because you fix your process today, doesn’t mean it’s going to work in a year’s time. Within the next year, you may acquire new systems, you may hire a whole team of new people, you may acquire a new business that requires a different business structure, or other policies and procedures may change (regulations, for instance) that impact this process. Change happens.
Another point to note: depending on the process that will be affected by the change, it may be realistic to break the improvement process into bite-sized chunks. This will reduce the impact and make the change a little less disruptive.
Whichever scenario rings true for you, the fact is, processes are not traditions. They need to be continually re-evaluated and re-engineered to extract greater efficiencies and to unlock opportunities. So make “Benchmarking 101” a must-know component of your organization’s training and development program.
Authored by Lynne Drea