Benchmarking for quality
By Deven Shah and Brian H. Kleiner
While quality is a relative term, businesses need solid standards that their products and services can meet to help them compete in the marketplace. Managing a proper strategy for benchmarking helps generate data that can be used to improve a company’s offerings, as evidenced by this study of benchmarking at a major coatings manufacturer.
Benchmarking can be an effective tool in influencing the quality of products and services. A case study of a major North American paint manufacturer was used to learn how management implements benchmarking practices in the coatings industry and the role benchmarking plays in quality improvement. The study showed that benchmarking is a step-by-step continuous approach. The process generates a significant amount of data, which can be used effectively to define, measure and monitor product quality continuously. Based on its impact on quality, the study also strengthens the usefulness of benchmarking as a tool in strategy development for competing more effectively in the marketplace.
Defining, measuring and improving quality
Quality is a relative term, meaning different things to different organizations and customers. There are 12 dimensions of quality that customers perceive as associated with products and services – conformance to specifications, performance, quick response, quick change expertise, features, reliability, durability, aesthetics, perceived quality, humanity, value and serviceability. Organizations need to identify the dimensions of quality that are relevant to the products and services they offer.
Measuring quality consists of measuring the current level of performance according to expected standards. It is the systematic identification of the current level of quality that the system is achieving. Quality cannot be measured without clear standards. Likewise, measuring quality leads directly to the identification of areas for improvement or enhancement – the first step in improving quality.
Three areas of measuring quality include:
- Quality assessment
- Quality monitoring
- External evaluation of quality
Improving quality involves applying appropriate standard protocols to narrow the gap between current and expected levels of quality as defined by standards. This activity uses quality management tools like benchmarking and Six Sigma to understand and address system deficiencies, enhance strengths and improve functional processes.
The concept of benchmarking as a formal process was developed by Xerox Corp. in 1979, according to Robert Camp in Benchmarking – The Search for Industry Best Practices That Lead to Superior Performance. Benchmarking is defined as a continuous systematic process for evaluating the products, services and work processes of organizations that are recognized as representing best practices for the purpose of organizational improvement. Benchmarking is an ongoing management process that should be a part of the organization’s culture. It requires constant updating, collection and sifting of external best practices and performance into decision making and communication functions at different levels of the business. It should have a structured methodology but, at the same time, be flexible to incorporate new and innovative ways for performance improvement.
Organizations use benchmarking for a variety of purposes. Some companies incorporate benchmarking into certain departments to improve functional processes. Others use it as a part of an overall problem-solving process for organizational improvement. Multiple areas of applications for benchmarking in manufacturing or service sector companies include:
- Product/process comparisons: This benchmarking activity involves collections of data/information about the products or processes of competitors or excellent companies in the market. It will help assess how a product or a service performs against competition by comparing feature by feature with the product or service of the company performing the analysis.
- New ideas: Benchmarking also can be an excellent source of new business ideas. It exposes individuals to new work processes, new products and ways of using resources. A benchmarking study results in valuable data that can stimulate thought-provoking discussions with key stakeholders.
- Forecasting: Data/information from benchmarking can be used to gauge the state of the marketplace and forecast market demand. Benchmarking data can provide trends and key directions of the competitors in the marketplace. Companies like IBM, McDonald’s and American Airlines use this type of benchmarking approach for their forecasting activities.
- Goal setting: Benchmarking also is used as a means of identifying best practices. Small to medium-size companies can benchmark the best practices of established organizations, and this can help them establish goals that accelerate their learning curve and improve their performance.
- Strategic planning: Developing strategy requires a thorough knowledge of the marketplace, activities of competitors and one’s customer base. Benchmarking is a useful tool for gathering information in these areas during the process of strategic planning.
The benchmarking process
The purpose of the benchmarking process model is to identify the steps that should be performed when conducting a benchmarking study. In the research project leading up to the benchmarking wheel in Figure 1, 24 different existing models were analyzed that served as a foundation for the five-stage benchmarking process.
With Figure 1 in mind, the basic content of the benchmarking process is five stages:
- Plan: The first stage of the process provides the foundation to the study. It is to identify the customers for the benchmarking information and their requirements, as well as defining the subjects to be benchmarked. Next, assemble a team to undertake the benchmarking study. Then, the selected process is documented. Finally, performance measures for the process are defined.
- Find: This involves identifying information sources that will be used to collect benchmarking information. This phase often is made difficult by the lack of standard performance measures that can be used to facilitate an initial comparison to determine which companies have the better processes.
- Collect: During this stage of the process, specific information-collection methods are selected.
- Analyze: Benchmarking information collected in the previous phase is analyzed in accordance with the original customer requirements. Recommendations for actions are produced.
- Improve/action: In this last stage, recommendations/improvements generated from the previous stage are implemented. The action taken may range from producing a report to changing the organization’s products or services.
Benchmarking and quality improvement
Organizations are driven to benchmark by the market competition in order to improve product and service quality, or by their mission or by their management. But in order for benchmarking to be successful, an organization needs to have a mandate to improve and a commitment to follow through.
In every company, multiple things can be benchmarked and improved. The key lies in understanding what “quality” means for each aspect of the organization. In corporate benchmarking, quality is defined as how well the company meets its customers’ expectations. As technology and customer requirements evolve over time, defining quality measures becomes a moving target. Benchmarking is used as one of the tools in a relentless pursuit to achieve excellence in products and services. The application of benchmarking produces two results – measures that indicate process excellence and process enablers that have produced the excellent results.
According to W. Edwards Deming, the major cause of poor quality is variation. Thus, Deming’s approach is to reduce variability in the process. Figure 1 shows benchmarking as the continuous process of finding and applying adaptable best practices. As variation decreases, quality and customer satisfaction increases proportionally. Therefore, benchmarking is a means of implementing Deming’s model of quality. Planning the benchmarking study requires companies to identify critical variables or characteristics that have a direct influence on quality of the product or service, thus affecting customer satisfaction. Once identified, companies must determine the appropriate type of benchmark study, establish the benchmark targets and identify the appropriate benchmark partners. These are external/internal organizations that have best-in-class practices or standards.
As a part of the quality improvement process, the organization provides benchmarking tools for analysis and problem solving. How appropriate benchmarking is to the problem being solved should be considered. One way is to make benchmarking a part of the formally defined process. It becomes one of the steps. Another way is to require benchmarking as a part of a quality improvement project investigation. During the audit of a quality improvement project, the need for benchmarking can be reinforced.
Case study: Benchmarking at a paint company
One of North America’s leading architectural coatings companies adopted the benchmarking tool to improve the quality of its products and gain a competitive advantage.
The paint industry in North America largely is dominated by a few companies competing in the big box retailers, such as Home Depot and Wal-Mart Inc., alongside small regional companies owning franchisee stores. Quality in both product and service plays a critical role for companies to stay ahead of the competition and gain market share in a very slow growth home improvement business.
Benchmarking helps this company build quality in the product at different stages from product ideation to selling it from the retailer’s shelf. This paint company’s model has three main objectives.
Continuous improvement. This objective is achieved through continuous benchmarking in two key areas. First is testing current products vs. competitors. It helps in assessing the current quality of the products and performance gaps versus the competition. Based on the assessment, certain product characteristics are identified as the benchmarks for improving quality of existing products, or these benchmarks can be used for the next round of product development. This paint company performs continuous benchmarking internally in its labs and externally through national independent labs and Consumers Union. These labs perform competitive benchmarking of the company’s products and leading competitors in the market once or twice a year. The resulting data helps this paint company position its product in the marketplace and identify areas for improvement.
New product development. The second objective is assisting the research and development lab at the product development stage by testing prototypes versus new and existing products in the market. Data generated is used in defining, measuring and validating quality of the products released in the market. The benchmarking lab works cross-functionally with the marketing team by conducting market surveys to understand customer needs. It also works on the retailer end of Wal-Mart and Home Depot to explore new technologies that can improve product quality and satisfy end-customers. As the competition gets closer, it becomes difficult to differentiate the quality attributes of the products with old benchmarking protocols. Being a leader in the coating industry, this company takes the initiative to work with the American Standard Testing Methods organization to develop stringent testing protocols and standards. These protocols raise the standards of paint quality and further help differentiate competitors from each other, helping customers to choose products of appropriate quality.
Identifying new markets. The benchmarking lab also extends its role to identify new growth opportunities in the marketplace by working with the company’s sales team globally in China, South America and Europe. The lab gathers the information in new housing trends, construction materials and new products offered in this marketplace. Senior management then uses the thorough knowledge and information gathered in these areas for strategic planning and introducing new products in the marketplace. Figure 2 shows the company’s benchmarking model.
Benchmarking process steps for quality improvement
The first step is the planning stage in the benchmarking wheel, where the paint company’s benchmarking lab identifies the companies for competitive benchmarking. As explained above, in this step data is gathered by benchmarking the competitors’ products and from the data published by organizations like Consumers Union, independent labs and J.D. Power & Associates.
The next step is to analyze the data to determine the current performance “gap” and project future quality benchmarks. The benchmarking lab works with research and development to identify key paint properties that can be improved to enhance quality and satisfy customers. Figure 3 shows an example of data analysis and determining the performance gap.
The third step is to communicate the findings to the research and development lab and work cross-functionally with marketing to establish new benchmarks and areas of improvement. Based on the data, the company will expand its choice of colors and improve its products’ stain removal. The research and development lab then works with vendors to evaluate current technologies or develop new technologies to bring about improvement in the above areas, improving the overall quality of the product.
Develop action plans based on the selection of technologies in the fourth step. The benchmarking lab will identify key performance indicators and metrics to measure the improvement in quality and performance of paint products.
In step five, implement the action plan and monitor the results through continuous benchmarking. Results are monitored to ensure that the desired goals are being met and that the necessary corrective actions are being taken.
The final step calls for recalibrating the benchmarks after a significant amount of data is collected that shows quality improvement in the products and an increase in customer satisfaction.
The conclusion emerging from the above case study is that the effective use of benchmarking tools will bring positive gains, improve product quality and ultimately deliver value to the end-customers. The process of identifying processes to benchmark is critical and varies depending on the organization’s objectives. It is important to note that the results of this study are more tangible and measurable. This can help validate higher standards in the industry.
One of the challenges of the benchmarking study is that it gives myriad data. Employees working on the study should extract the desired information that will help to establish performance goals and develop a new strategy. Overall, the study shows how the benchmarking tool is integrated into various processes of the organization. When used in the right way, it can identify the best practices and performance measures, creating a significant impact on the quality of services and products offered by the organization.
Deven Shah is a scientist at Behr Process Corp. He has an M.S. in chemical engineering from the University of Southern California. He currently is pursuing an MBA at California State University, Fullerton.
Brian H. Kleiner is a professor of management at California State University, Fullerton. He received both an MBA and a Ph.D. in management from the University of California, Los Angeles (UCLA).