The TRADE methodology is focused on the exchange (or” trade”) of information and best practices to improve the performance of processes, goods and services.
Read about benchmarking and TRADE below:
Types of benchmarking
What is the payback from benchmarking?
What is TRADE?
Why choose TRADE?
How do I start?
Types of benchmarking
It is useful to distinguish between the main types of benchmarking:
Firstly, there is “Informal Benchmarking”. This is the type of benchmarking that most of us do unconsciously at work and in our home life. We constantly compare and learn from the behaviour and practices of others – whether it is how to use a software program, how to cook a better meal or play our favourite sport. In the context of work, most learning from informal benchmarking comes from the following:
- Talking to work colleagues and learning from their experience (coffee breaks and team meetings are a great place to network and learn from others)
- Consulting with experts (for example, business consultants who have experience of implementing a particular process or activity in many business environments)
- Networking with other people from other organisations at conferences, seminars, and Internet forums.
- On-line databases/web sites that share benchmarking information such as COER’s BPIR.com provide quick and easy ways to learn about better practices from organisations all around the world.
Secondly, there is “Formal Benchmarking“ of which there are two types – Performance Benchmarking and Best Practice Benchmarking.
Performance benchmarking describes the comparison of performance data that has been obtained from studying similar processes or activities. Comparisons of performance may be undertaken between companies – or internally within an organisation. It is useful for identifying strengths and opportunities for improvement. Performance benchmarking may involve the comparison of financial measures (such as expenditure, cost of labour, cost of buildings/equipment, cost of energy use, adherence to budget, cash flow, revenue collected) or non-financial measures (such as absenteeism, staff turnover, the percentage of admin staff to front-line staff, budget processing time, complaints, environmental impact or call centre performance).
In COER’s experience, most people equate benchmarking to performance benchmarking. This is unfortunate, because performance benchmarking on its own is of limited use. Too often performance benchmarking data is collected (often at significant cost) and no further action is taken after the data has been obtained. Whilst performance benchmarking enables a performance gap to be identified, it does not provide the idea, best practice or solution as to how performance can be improved and the gap closed.
Best Practice Benchmarking describes the comparison of performance data that has been obtained from studying similar processes or activities and identifying, adapting, and implementing the practices that produced the best performance results. Best practice benchmarking is the most powerful type of benchmarking. It is used for “learning from the experience of others” and achieving breakthrough improvements in performance. Best practice benchmarking focuses on “Action” – i.e. doing something with the comparison data and learning why other organisations are achieving higher levels of performance. Best practice benchmarking projects typically take from 2 to 12 months. As these projects can be resource intensive, they should be undertaken in areas of high strategic importance – and a cost/ benefit analysis should be undertaken before proceeding. Often such projects can deliver major bottom-line benefits.
What is the payback from benchmarking?
The easy answer to this is that it varies from project to project, since it depends on the aim of each individual project. All projects should begin within a cost/benefits analysis and if the expected benefits are unclear or small, then the project should not proceed. If projects are carefully selected, planned and managed, there is no reason why major benefits (financial and non-financial) should not be obtained.
There are many case studies focusing on success gained through benchmarking. The best known of these describe the experiences of Xerox and Chrysler. In the late 70s and early 80s, faced with ruin due to more efficient Japanese competitors, benchmarking turned the giant Xerox organisation around and put it back at the top of the market. At Chrysler, the benchmarking of Japanese new product development techniques prior to the development of the Viper sports car is credited with saving three billion dollars from development costs and one year of development time.
One study of Fortune 500 companies found compelling figures relating to first year payback from benchmarking projects. Within organisations of 'average' benchmarking experience, an average $76-million payback was reported by more than 30 of these companies for their most successful benchmarking project. From 'more experienced' organisations, this figure was a staggering $189.4 million. Even among developing organisations, the study found average first year payback levels at $370,000.
COER’s own research indicates that organisations obtain substantial benefits through benchmarking. For instance, New Zealand Benchmarking Club members improved on average by 50 points per year, as assessed against the Baldrige Criteria for Performance Excellence, through their increased focus on benchmarking and business excellence initiatives. Read the research. COER is currently undertaking further research in this area and will shortly report the benefits obtained from facilitating eight benchmarking projects in Singapore.
What is TRADE?
TRADE is a best practice benchmarking methodology.
The TRADE benchmarking methodology focuses on the exchange (or” trade”) of information and best practices to improve the performance of processes, goods and services.
This methodology was initially developed for the New Zealand Benchmarking Club, which existed between 2000 and 2004. Since then, the methodology has been used on many benchmarking projects all over the world. However, it was not until 2007 that the project management system and training materials supporting the methodology were substantially enhanced (bringing together the experience of running many benchmarking projects).
TRADE consists of five stages:
- Terms of Reference (plan the project)
- Research (research current state)
- Act (undertake data collection & analysis)
- Deploy (communicate & implement best practices)
- Evaluate (evaluate the benchmarking process & outcomes)
Within each of these stages are a number of steps to be followed as part of a benchmarking project. For instance, the Terms of Reference stage consists of the following steps:
- Determine area of focus for benchmarking project
- Develop project brief
- Form project team
- Train project team
- Understand benchmarking code of conduct
- Prepare Terms of Reference
- Plan benchmarking tasks
- Develop documentation system
- Review Terms of Reference process
- Obtain approval to start the next stage of TRADE
Organisations using TRADE follow all the stages and steps of TRADE to successfully complete a benchmarking project and identify best practices in the area in which the project focuses.
Benchmarking projects should be targeted at a process area or activity that will deliver the best value to an organisation. Often senior managers will have used techniques such as a business excellence self-assessment to determine which projects and their outcomes are likely to deliver the greatest benefits.
The project aim can be broad or specific. The project aim may relate to improving the performance of a
- process
- activity/task
- business improvement tool
- equipment
- strategy
- behaviour
Examples:
- Customer complaint management, e.g. to improve our customer complaint management process to a world-class standard.
- Balanced Scorecard, e.g. to identify and implement best practices in the application of the Balanced Scorecard.
- Supplier relationship process, e.g. to become an industry leader for our supplier relationship process.
- Team culture, e.g. to develop a winning team culture.
- Recruitment time, e.g. to reduce the time taken to recruit new staff.
Why choose TRADE for your best practice benchmarking projects?
- It offers a proven approach. It is endorsed by the Global Benchmarking Network and has been used by private and public sector organisations of all sizes (for example, it is the approved methodology for Singapore’s Public Service and is actively promoted and used in countries such as NZ, Taiwan, UAE and UK).
- It is flexible and can be used for exploratory (1-12 week) or in-depth (13-36 week) projects.
- It is easy to explain and communicate as it only has 5 stages and a memorable name!
- It provides a step by step approach. Within the 5 stages there are simple steps to be followed.
- It provides a rigorous approach to planning which ensures that the project will only proceed after a cost /benefit analysis has been undertaken.
- There is a strong likelihood of success, as projects are supported through a TRADE project management spreadsheet, a TRADE training manual consisting of a comprehensive set of benchmarking resources and template forms, and a benchmarking certification scheme.
- It saves time and money. TRADE materials and templates have been developed and refined over the past fifteen years from working with hundreds of organisations. TRADE licence holders will have full access to these (and future updates) and so will not need to develop their own materials at considerable expense.
- It delivers results. After each stage of TRADE the project is reviewed to ensure it is on-track. If not, the project can be stopped or the direction of the project changed. Therefore all projects should deliver the expected results and major benefits (potentially saving or generating millions of dollars for large projects).
How do I start?
To assist organisations in undertaking benchmarking a number of services are offered:
- TRADE Benchmarking Licence for Organisations
- TRADE Benchmarking Licence for Individuals
- TRADE Benchmarking Workshop (In-House)
- TRADE Benchmarking Workshop (Open to the Public)
- TRADE Benchmarking Certification
- TRADE Benchmarking Support and Mentoring.
For further information on these services and associated fees, contact Dr Robin Mann, COER.
E-mail: r.s.mann@massey.ac.nz
Telephone:
+64 (0)6 350 5445, +64 (0)6 326 7377, +64 (0)21 142 6531
