Part III Other types of audit
D. Adebanjo. Leatherhead Food Research Association
9.3 Understanding your organisation and its processes
electricity supply company as such a company will not have manufacturing operations. It would be possible, however, to benchmark a more generic process such as recruitment, invoicing, handling of customer complaints, etc. These are processes that are carried out widely by almost all organisations.
A competent understanding of the relevant process is important for generic benchmarking. The main advantage of this form of benchmarking is that there are potentially huge gains to be made since learning is from an organisation that has already demonstrated the process to work. The difficulty with generic benchmarking is identifying which organisation is ‘best’. To some extent, this will be influenced by what is most important to the seeking partner. For example, the company with the fastest process may not necessarily be the cheapest or the most efficient. Thus a company which is best practice for one organisation may not be for another organisation although it is also possible for one company to be best practice partner for many organisations.
In order to determine what type of benchmarking to use, an organisation must carefully consider its circumstances and its objectives. It is also important to be familiar and comfortable with the benchmarking process. In this respect it may be advisable to attempt some internal benchmarking, where possible, as a starting point. When experience has been gained, benchmarking may then be given an external, and possibly less friendly, dimension.
• Strategic evaluation. The broad objective is to identify strategic objectives and subsequently determine the functions and processes that underpin them.
The strategic objectives may result from company needs (e.g. low level inventory), mission statements, statutory obligations (e.g. waste or emission levels), etc. They may also be determined more formally by means of a strategic assessment of the organisation. Self-assessment against an excellence model or framework provides a good opportunity for this. Self-assessment not only helps identify deliverables but also quantifies the organisation’s performance. This quantification often helps determine what aspects or functions of the organisation would most benefit from improvement. Figure 9.2 shows the EFQM Excellence Model, which is widely used for self-assessment throughout Europe.
• Questioning. This involves asking a series of questions, often related to business and customer objectives, in order to arrive at a functional or subject area for benchmarking. Generally speaking, the subject areas selected should be of strategic and business importance to the organisation. Questions that may be asked include:
• What is our business about?
• What is most critical to business success?
• What factors would impact most on our customer/supplier relationships?
• What functions or areas of our business are underperforming?
• What problems have been identified in these functions?
• What areas, when improved, will have the greatest impact on our business results?
• In what areas of business are our competitors outperforming us?
Fig. 9.2 The EFQM Excellence Model. (Source:ß 1999 EFQM. The Model is a registered trademark of the EFQM (European Foundation for Quality Management).)
• Use a team approach. Xerox identifies a team to apply an Analytical Hierarchy Process to identify areas to benchmark. This involves weighting and ranking the alternatives by taking into account decision criteria such as resources required, ease of finding benchmarking partners, etc.
• Brainstorming. This can be a powerful tool in identifying potential benchmarking areas. It is always helpful to get as much buy-in from different aspects of the business as possible. Questions that may be considered during such an exercise could include the following:
• What are the most problematic areas?
• What must we do to achieve business success?
• What factors are most critical to our business?
• What can we do to improve our stakeholder perceptions/relationships?
• Where do we face the greatest competitive pressures?
• What are our most important resources/costs?
• What factors impact most on our profitability?
• What performance measures have we applied?
• Performance measurement. All organisations make use of performance measures in their reporting systems. These may, on their own, indicate areas for benchmarking or otherwise act as a basis for developing other measures.
It is, however, important that the current performance measures are wide-ranging and do not lean heavily towards financial results. In this respect, the organisation may consider the use of the balanced scorecard, which splits organisational performance into four different perspectives. Figure 9.3 illustrates this.
• Offshoot from other initiatives. Other initiatives such as customer complaints management, strategy development and problem solving may highlight subject areas that need significant improvement and that may benefit from benchmarking.
9.3.2 Detailed analysis
The identification of the broad subject area is followed by cascading downwards until the processes are at a level where they can be easily represented, evaluated and benchmarked. ‘Single’ processes are usually a combination of activities that may be complex and may become secondary and tertiary processes. For example, if we take serving a customer in a restaurant as a single process, this will involve a sequence of operations such as seating the customer, taking his/
her order, passing the order to the kitchen, delivering the food to the table, etc.
Each of these steps is not as simple as it initially appears – seating the customer may involve finding a table in a non-smoking area, ensuring the table is clean, making sure there are enough chairs for the group (perhaps including baby chairs), etc.
The process steps need to be identified, sequenced, described and recorded as fully as possible. Furthermore, the critical measurements to be used for the
benchmarking exercise need to be identified. This involves rationalisation to determine where measurement is appropriate, the units of measure to be used and the ability of the measures to reflect the process performance accurately.
These activities will require the input of all members of the team, including those who are not process owners. However, it is important that at least one member of the team works on the process and has a thorough understanding of the sequence of activities involved. This often reduces or eliminates the need to spend time on the shopfloor at the initial stages of the process analysis.
However, shopfloor visits are advised in order to verify the result of the analysis or where there are significant differences between the ‘theoretical’ process and the ‘actual’ process.
Ishikawa cause-and-effect diagrams, workflow diagrams and other widely used analytical tools are commonly used in the detailed analysis of the process(es) to be benchmarked. Figures 9.4 and 9.5 show examples of the Ishikawa (or fishbone) diagram and the workflow diagram (or process map). To use the Ishikawa diagram, the following steps should be followed:
• Write the name of the primary process at the head of the fish.
• The name of each sub-process or major activity that impacts on the primary process becomes a label for one of the bones.
• Smaller bones can then be drawn from the main bones to represent activities that occur in the sub-process.
Fig. 9.3 The balanced scorecard.
The workflow diagram consists of four symbols:
1. a start symbol (circle) to indicate the beginning of the process
2. an activity symbol (rectangle) to indicate some form of action taking place 3. a decision symbol (diamond) to indicate a point where an inspection needs
to take place and a decision needs to be made
4. an end point symbol (ellipse) to indicate the completion of the process.
The use of these tools in themselves can lead to improvements even before the benchmarking process is completed. As a final check, it is advisable to re-evaluate how the chosen process relates and contributes to the identified strategic issues and, ultimately, the business objective(s) of the organisation.