Strategic Benchmarking In Improving Project Management Performance

Transcription

1 Strategic Benchmarking In Improving Project Management Performance Amin M. F. Seder, Assem Hatem Taha, Muataz Hazza F. Al Hazza International Islamic university Malaysia Article Info Received: 14/ 10/2014 Accepted: 29/11/2014 Published online: 1/12/2014 ISSN Design for Scientific Renaissance All rights reserved ABSTRACT Organizations must ramp up their performance rapidly to remain competitive in business environments today, and the pace is further accelerated in sectors where benchmarking is commonplace, where businesses rapidly and continuously learn from one another. Markets nowadays are dynamic and competitors are moving targets. Thus, failing to identify the future rate of improvement of competitors, companies may set themselves targets to find that the goalposts have moved and even find themselves further behind or less able to catch up. This forces the projects to have a very effective management in order to compete or at least remain in today s dynamic business environment. Benchmarking therefore, has been recognized as one of the most responsive evaluation tool for performance improvement within organizations by creating a culture of continuous improvement from learning best management practices. However, although benchmarking with its three types which are process, performance and strategic benchmarking is the search of best practices that will lead to superior performance in some business activity. The two former are more short-term in their scope and produce quick results. In which process benchmarking compares operational processes and performance benchmarking compares product lines, marketing and sales to determine how to increase revenues. The Strategic benchmarking takes a long-term view of company direction relative to the future strategies of competing companies. This paper presents how strategic benchmarking principles can be applied to improve project management process and performance by examining the long-term strategies and general approaches that have enabled high-performers to succeed. It involves considering high level aspects such as core competencies and improving capabilities for dealing with changes in the external environment. The benefits and challenges of strategic benchmarking management of projects are also discussed. Keywords: Strategic Benchmarking, Project Management Performance 1. Introduction Benchmarking as an efficiency tool is based on the principle of measuring the performance of one organization against a standard, whether absolute or relative to other organizations. It can be used to assess performance objectively, expose areas where improvement is needed, 196

2 identify other organizations with processes resulting in superior performance, with a view to their adoption and test whether improvement programs have been successful (Cowper and Samuels; 1997). The key philosophy of benchmarking is the ability to recognize one s shortcomings and acknowledge that someone is doing a better job, learn how it is being done and implement it in one s field of business (APQC; 1996). Benchmarking is a learning process to find better ways of doing things. It is a management process that requires constant updating whereby performance is regularly compared with the best performers that can be found. The definition of benchmarking reveals that benchmarking is not only a measurement process that results in comparative performance measure, it also describes how exceptional performance is attained (Ajelabi and Tang; 2010). Thus, it is not about copying or imitating, rather it is about adapting lessons learnt from the best for the development of an improved organizational or project performance (Barber; 2004). According to Luu et al. (2008), benchmarking makes significant improvement to performance whereby against leading companies, it has resulted in significant success for average organizations in improving their performance. The essence of the strategic benchmarking stems from the companies needs to continue enhancing their competitive position. Companies are required to continue assess and monitor their competitors because of two important dimensions: 1. a continuous updating of the level and dimensions of competition within its markets. 2. proactivity, seeking to improve its own business performance by learning from other companies about what can be done and how to do things better (Stahl and Bounds; 1991). Since the benchmarking can be effective at all levels of operation, from the conduct of individual processes, such as invoice handling, to the operational performance of organizations with tens of thousands of staff, such as a welfare benefits delivery agency (Cowper and Samuels; 1997). Strategic benchmarking moves a company from having an inward bias to incorporating external perspectives, which invariably introduces a stepped change in terms of performance. These external antennae help a company to assess what is going on and also to manage itself within its own environment. 2. Strategic Benchmarking and Its Significant There are several ways to classify types of benchmarking. Based on what benchmarking focused on, three types of benchmarking are: 1. performance; 2. process; and 3. strategic. The comparison between one company and another may depend on performance benchmarking (Garnett and Pickrell; 2000). Isoraite (2004) claim that the comparison of methods and practices for performing business processes is based on the process benchmarking so as to learn from the best and to improve one s own processes. Further Isoraite (2004) explain that strategic benchmarking is the comparison of the strategic choices and dispositions which is made by other organizations for the purpose of collecting information so that they would be able to improve their own strategic planning and positioning and avoid organizations' goals to fall in short of stakeholder expectations. Whereby without strategic benchmarking, the fact that goal-setting tends to be based on past trends and current internal practices. The external perspective which the strategic benchmarking is part of it is frequently overlooked, yet 197

3 customers' expectations are driven by their experiences with the best providers in the industry and superior providers in other industries. Thus, strategic benchmarking can capture these external references and provide a basis for comparative analysis. According to Grant (1998), strategic benchmarking is a systematic process of evaluating alternatives, implementing strategies and improving performance by understanding and adapting successful strategies from external partners who participate in an ongoing business alliance. This generation of benchmarking differs from process benchmarking in terms of the scope and depth of commitment among the sharing companies. Benchmarking is used as a driver that fundamentally changes the business, not just to tweak processes. Brad Wood (2009) argue that there are two essential reasons for organizations to apply strategic benchmark. Firstly, strategic benchmark helps the organizations to stay in business by enabling them to outperform similar organizations, including competitors. Secondly, strategic benchmark ensures that the organization is continually striving to improve its performance through learning. Strategic benchmarking opens minds to ideas from new sources, both within the same industry and in unrelated sectors. Zairi (1994) claim that benchmarking has to bring about the discipline of ensuring that there is never-ending improvement is closely associated with the external aspects of businesses (strategic planning) and the internal aspects of process management and control and further he emphasizes on taking the market/customer as a starting point and works inwards by ensuring that the business process is capable of delivering consistently to what the market/customer requires. Analysis of organization that is performing well can help provide a framework for creating new strategies for organizations that are not as successful. Strategic benchmarking ensures that strategy formulation/implementation is on the right track by constantly checking internal performance, process behavior against those of the toughest competitors and best in class organizations (Zairi; 1994). External elements such as competing companies also can help provide guidance, although they generally will not have the same information available that is available from internal organization. 3. Strategic Benchmarking Is a Part of External Benchmarking Barber (2004) stated that internal benchmarking has its shortcomings against the external one in which often management styles, values and culture, permeate throughout the organization. This may create perceptual limitations on how to improve the management of projects, leading to a tendency to conduct activities, which only conform to cultural norms External benchmarking is sometimes referred to as industry or competitive benchmarking. Grant (1998) lists five stages involved in external benchmarking. It takes place when a business compares itself with other organizations, which demonstrate best practice in the way they produce similar services. It can lead to the discovery of radically different approaches to the same problems. It prevents the company from being internally focused. It reduces incremental process change and minimizes low management commitment (Barber; 2004). With external benchmarking, a company can develop a concrete understanding of competition, utilize new ideas of proven practices and technology, and generates a higher level of commitment (Camp; 1995). 198

4 Grant (1998) stated that the Fourth Generation is referred to as strategic benchmarking. Strategic benchmarking is comparing a competitor s strategy to one s own in the same market and product benchmarking compares the features and performance of actual products. Gattorna and Walters (1996) argue that unless the strategic direction of the targeted benchmark company is understood, it is unlikely that the comparative exercise will prove successful, especially in the management strategies of projects. Management performance falls under performance benchmarking but is influenced by the companys strategies. Benchmarking project management is a subset within the managerial performance indicators. 4. Methodology (How to Strategic Benchmark) Strategic benchmarking is the process of deciding upon best practices as they relate to the strategies for reaching organizational goals and planning. The practice includes a study of elements such as core competencies, process capability and strategic intent and alliances. It primarily is an assessment of how the company is managing external changes with things such as competitors, the industry and the market overall. The goal is to devise the ideal strategy for improving organizational performance. This includes learning about the strategies of other organizations to improve upon them. Assessment of customer needs and expectations is a common task of strategic benchmarking. However, effectiveness of strategic benchmarking depends on the use of tools for collecting and analyzing information and deriving subsequent improvement projects (Dey; 2002). Common methods used to collect information about organizations include surveys, interviews and the study of market statistics. After the gap between what the company offers and what customers want is defined, a strategy can be devised to close it. Often, a company will attempt to gather as much information as possible from customers of the competitor, in addition to polling its own customers. Strategic benchmarking involves five steps. The first is to identify the object of the benchmarking project. In which, large general subjects are less appropriate for a strategic benchmarking study than single procedures or concepts. Next, is to identify a company or an organization that excels in the particular procedure or concept and study it. Strategic benchmarking looks at what other companies are doing in terms of top management capabilities, strategic initiatives, competitive product development and other long-term qualities and processes that have proved successful. The fourth step is analysis of the information that is received by looking at the other company's procedures. The strategic benchmarking process is a positioning analysis that provides the benchmarker with a comprehensive study of the relative performance of all of the benchmarking participants and identifies any gaps between the benchmarker's performance and that of best-in-class organizations. In the final step, what has been learned is applied to the current company or organization. However, to ensure having the best results from this powerful performance improvement tool, there is an essential need to a clear understanding of what strategic benchmarking can do and a well-structured process for initiatives. (Brad Wood; 2009) 5. Shaping the Strategic Plan 199

5 Operations are the key functions of any industrial organizations. However, to remain competitive, organizations are dynamically analyzing the environment to plan for increasing numbers of new and augmentations projects. The parameters for any project are on-time completion, within the specific budget, and with requisite performance (technical requirements). Unfortunately, current project management practices of organizations in the industry sector do not always ensure success. The main problems with project planning and implementation have been cost and time overruns and quality non-achievement (Dey; 2002). An implementation process is required to convert long- and short-term plans into operational plans. Thus, the task of strategic benchmarking is to know exactly how the specific strategic goals of the organizational functions within a business are to be met and then it has the responsibility for executing the necessary actions. This requires strategic benchmarking to calculate and allocate the resources required and schedule and control the implementation. The output from this strategic benchmarking effort feeds into providing vital information about best practices for current and future plans and decisions for the organizations (Dey; 2002). Figure 1 shows some ways in which strategic benchmarking can help to shape an organization's strategic direction. It depicts a typical strategic planning process for performance improvement that begins with an organization's vision for the future. The vision will always be influenced to some extent by the organization's business environment and what others have been able to achieve. Benchmarking supplies detailed analyses of this environment and a factual basis for understanding what it means to be world-class, thereby helping to bring the organization's vision into focus. Assessing current performance and measuring the distance from there to the vision are critical activities for ensuring an organization's long-term sustainability. While many tools are available for measuring current performance, including market research and competitor analysis, strategic benchmarking adds the ability to clarify the organization's position in relation to both the external business environment and the vision and to identify performance gaps. It enables the organization to adjust its strategy so that it can close the gap between its current reality and its vision of the future. Long-term plans or key strategies derived from the vision comprise strategic goals that address all aspects of the organization's performance, including business process performance, product or service performance, competitive performance, and customer satisfaction. By necessity, these goals will be constantly evolving. Benchmarking analyses enable the organization to set these objectives based on the external reality. 200

6 Figure 1: the relationship between business performance strategy and benchmarking 6. Benefits of strategic benchmarking and its challenges Strategic benchmarking is a powerful tool that can significantly enhance an organization's ability to strategically manage its performance. It forces managers to consider the broader perspective, to learn from outstanding performers, and to push beyond their own comfort zones. By revealing the best practices of top-performing operations, it can place your organization firmly on the road to world-class leadership (Dey; 2002). Strategic benchmarking enables decision-makers to understand exactly how much improvements are needed to accomplish in order to achieve superior performance (Dey; 2002). Strategic benchmarking is not to be considered as a personal performance appraisal tool. The focus should be on the organization at all operational levels, not the individuals within it. Nor is it a stand-alone activity; to succeed, benchmarking must be part of a continuous improvement strategy. Strategic benchmarking is not just a competitive analysis. It goes much further than a simple examination of the pricing and features of competitors' products or services; it considers not only the output, but also the process by which the output is obtained. And strategic benchmarking is much more than market research, because it considers the business practices that enable the satisfaction of customer needs and thus helps the organization to realize superior business performance. Strategic benchmarking is a continuous assessment of an operation s performance against that of its competitors. According to Shenhar et al (1997), four dimensions for measuring project success are project efficiency, impact on the customer, direct and business success, and preparing for the future. Although strategic benchmarking has many advantages but it is not a magic tool. Benchmarking should not utilize as a way to set goals (Lankford; 2000). It should be used as an improvement tool. Regarding main problems affecting a successful benchmarking study, Kozak (2006) pointed out time constraints, competitive barriers, lack of both management commitment and professional human resources, resistance to change, poor planning and short-term expectation as key problems. Performance measurement is the heart of ceaseless improvement. Performance management aims at offering managers and members of staff of 201

7 all ranks the ability to develop the direction, traction and speed of their organization (Cokins; 2006). For a small company, a full strategic benchmarking project may take too much time and tie up too many key people. Frequent and regular benchmarking helps to create specific and measurable short-term plans that are based on current reality rather than historical performance, and which can support step-by-step improvements in performance over time (Dey; 2002). Thus, a good way to approximate strategic benchmarking is to study a management process such as Six Sigma, then apply SWOT analysis to each area of the company that to be improved. SWOT analysis is the process of identifying the strengths, weaknesses, opportunities and threats presented by a strategy, decision or manager performance. 7. Conclusion Businesses need to improve overall performance by examining the long-term strategies and general approaches that have enabled high-performers to succeed. It involves considering high level aspects such as core competencies, developing new products and services and improving capabilities for dealing with changes in the external environment. Strategic benchmarking is concerned with the search for best practices, whatever their source, in order to achieve superior performance. It therefore involves continuously measuring a company s products, services and practices both against competitors and the leaders in any business sector. However, it is not an end in itself but a means to help to achieve levels of competitiveness. Strategic benchmarking is a systematic and continuous process that enables organizations to identify world-class performance and measure themselves against that. Its goals can be summarized as to identify world-class performance levels, determine the drivers of superior performance, quantify gaps between the benchmarker's performance and worldclass performance identify best practices in key business processes, share knowledge of best practices and build foundations for performance improvement. References Ajelabi, I., & Tang, Y. (2010). The Adoption of Benchmarking Principles for Project Management Performance Improvement. International Journal of Managing Public Sector Information and Communication Techniques, 1(2), 1-8. American Productivity & Quality Center (APQC) (1996), Emerging Best Practices in Knowledge Management, American Productivity & Quality Centre, Houston, TX. Barber E. (2004) Benchmarking the management of projects: a review of current thinking. International Journal of Project Management, 22(4), Barber, E. (2004). Benchmarking the management of projects: a review of current thinking. International Journal of Project Management, 22(4), Camp R. Business process benchmarking: finding and implementing best practices. Milwaukee: ASQC Quality Press; 1995 Clarke A. A (1999) practical use of key success factors to improve the effectiveness of project 202

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