Benchmarking

Benchmarking: Problem-Solving
Benchmarking is used by a wide variety of industries. At its heart lies the principle that it is necessary to have some agreed-upon standard or benchmark, to ensure that the organization is fulfilling its function and delivering a performance of high quality. Simply trying to be better without having data-based goals is not useful. As noted by Iacobucci & Nordhielm (2000) in their article for the Harvard Business Review, however, there are many ways to engage in benchmarking and for service-based industries, taking into consideration customer input is critical. For example, one method of benchmarking in the hotel industry is to solicit information about every step of the customer’s buying experience and perceptions of value. By setting benchmarks for each and every value delivery point, the organization can engage in more meaningful goal-setting (Iacobucci & Nordhielm 2000).
Setting goals is not enough. They must be the right types of goals. The advantage of focusing on the customer in the hotel industry ties into Michael Porter’s view of value delivery as at the heart of every company’s purpose for being. If an organization does not know what its essential value proposition is for customers, it is not capable of communicating why it is superior to its competitors. But benchmarking is not necessarily uniform at every juncture, at least according to the Harvard Business Review article. For example, for one hotel chain, benchmarking based upon price (i.e., offering the greatest discount to consumers) might be the primary driver at the beginning of the value chain, or perceptions of luxury in the case of a high-end chain. But quality and service benchmarks may emerge later on, once consumers become patrons of the chain. Then, benchmarks for speedy transportation of customers to their rooms and customer satisfaction regarding the offering of assistance with finding local attractions may be the drivers.
Although the Harvard Business Review article stresses taking a flexible and creative approach to value in most industries, within certain industries themselves, benchmarking may be viewed in a more narrow sense. According to Ettorchi-Tardy, Levif, & Michel (2012), cost and quality in healthcare are the primary drivers of benchmarking, and customer satisfaction may be less important, given that for-profit institutions are less dominant in healthcare. Also, customers may not always perceive the immediate value of the service they are receiving (customers may find a doctor cold, even though the doctor is competent and be less satisfied than customers with a warmer but less competent physician). Still, healthcare is an industry and customers still have some freedom of choice to select what institutions will serve their needs the best and healthcare providers ignore benchmarking at their peril.
Yet even in healthcare, quality cannot be considered in isolation from cost. In fact, the most serviceable definition of benchmarking in healthcare, the authors state, is that, “Benchmarking is usually considered to be a process of seeking out and implementing best practices at best cost” (Ettorchi-Tardy, Levif, & Michel, 2012, par. 2). From a personal standpoint, most people naturally focus solely upon quality when making individual healthcare decisions. But healthcare institutions must weigh their obligations to patients with inevitable cost-cutting pressures. Of course, this can result in inaccurate benchmarking, whereby a reduction in staff may result in more errors and ultimately higher per patient costs even if it results in an immediate short-term reduction in salary-based costs. But this is not necessarily so different from the benchmarking practiced in other industries. Unfortunately, the consequences of inefficient benchmarking can be much greater.


References
Ettorchi-Tardy, A., Levif, M., & Michel, P. (2012). Benchmarking: A method for continuous quality improvement in health. Healthcare Policy, 7(4), e101–e119. Retrieved from: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3359088/
Iacobucci, D. & Nordhielm, C. (2000). Creative benchmarking. The Harvard Business Review. Retrieved from: https://hbr.org/2000/11/creative-benchmarking