Effective Healthcare Management Summaries Strategic Benchmarking

STRATEGIC
BENCHMARKING
Learn from the Best Companies
by Gregory H. Watson

similar offices, including your competition, valuable lessons

THE SUMMARY IN BRIEF can be learned relative to your competitive advantages and
In today’s rapidly changing business world, it is imperative disadvantages. At the next level, benchmarking your
strategy to improve quality and profitability must make sense, business with other extraordinary companies (Dell Computer,
work quickly and pay off. If your business needs an effective SouthWest Airlines, Nordstrom) in non-related industries that
way to boost quality and maximize competitiveness, read on. have demonstrated excellence may teach you better ways to
The measurement and comparison process known as profitably provide customized products, low cost no frill
“Benchmarking” delivers the bottom line result and is used by products to satisfy basic needs and world class customer
most successful businesses. service.

Benchmarking does not mean copying. Quality guru W. If you feel your office could
Edwards Deming teaches “Adapt, don’t adopt.” Your benefit from knowing more
business is not exactly like any other, but discovering which about the process of
business processes your office must excel at will increase benchmarking, read on.
your awareness of how much there is to learn from other There are three levels of
businesses. By benchmarking your business first to other benchmarking and to find
which is applicable to your
business, at this time,
consider buying the book if
In this Issue: this executive summary
does not contain sufficient
Benchmarking Basics . . . . . . . . . . . . . . . . . . . . . . . 2 detail.
Is Your Office Ready for Benchmarking? . . . . . . . 2
The Ethics of Benchmarking . . . . . . . . . . . . . . . . . 3
Steps That Detail the Benchmarking Process . . . . 3
Benchmarking For IVA Members . . . . . . . . . . . . 4

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 Effective Healthcare Management Summaries Strategic Benchmarking

Benchmarking Basics they try to find what the performance “enablers” are. These
are the tools, policies, or work practices that lead to superior
Voices to improve quality have always existed in business, customer service. At the same time, performance “inhibitors”
the arts and in any technical craft. But the Industrial of the process should be discovered. These are tools, policies
revolution and assembly line mass production technologies or practices which actually prevent better customer service.
with their inherent cost savings overwhelmed older models of It is very helpful to use systems diagrams to describe the
production which relied on individual craftsmen. Voices processes and see how they balance each other. These
such as W. Edwards Deming made a small impact in the diagrams will help your team discover where the levers are to
1950's, but few companies really changed the way they did most effectively improve your operation.
business. Certain industries in Japan learned these lessons
and by the 1970's companies such as Toyota, Sony and Nikon ACT: Once your team knows how to improve your
began to take a significant market share in their respective process, in this example customer service, the key is to act.
industries as consumers demonstrated their preference for Adapt, and in some cases improve the processes and
higher quality automobiles, home electronics and optical performance “enablers” in your business.
products.
Then continue the process by returning to the plan stage
North American and European industry fought back in the again and continue the cycle of improvement.
1980's, but found there was no quick fix to quality issues.
Instead they found their businesses, in fact all businesses,
were a series of processes. Each process is defined as a
series of transactions which ultimately must satisfy customers
wants and needs. Process analysis is sometimes referred to as
“Systems Thinking” by other writers and commentators.

The overview of the benchmark process is that it consists of

the following sub-processes which form a cycle.

PLAN: Before reaching the first stage you must understand IS YOUR OFFICE READY FOR
your business is a process made up of many different
processes. Once you know what processes are involved,
BENCHMARKING?
choose the process you want to improve. You might want to Before committing energy to benchmarking, make sure your
improve customer service. Select a benchmarking partner company is ready for it. Read the conditions below and if
that excels in the process known as customer service. Plan you or your company is not mature enough to handle these
your study by determining how you are going to measure the conditions.
differences between the processes at each business.
In quality control, there are three levels of maturity most
DO: The first stage of the “DO” sub-process is to measure companies go through. The first is INSPECTION, where
the level of customer service in your business. Do so with most efforts to ensure high quality are through product
well-designed questionnaires that allow accurate inspections. When team members perform inspections, they
measurement of performance and for customers to provide typically use measurements, standards, calibrations and
suggestions on what steps they would like to see taken to testing equipment. If this sounds like your business, you
improve customer service. Measure the same process at your should likely wait. Team members must understand and be
benchmarking partner’s business. Don’t spend too much trained to use basic quality skills - interpersonal
time worrying about designing a good customer service communications, problems solving and decision making -
survey, if your benchmarking partner excels in this area, they skills which are prerequisites to benchmarking. If you and
will have developed well-designed tools for this purpose. your staff are lacking in these areas, educate staff and
That is why they excel in this area. encourage improvement to perfect these vital skills.

CONTROL is the second level of quality control maturity.

CHECK: Your management team now compares the data
It is marked by a proactive approach to quality issues. Team
on customer service between the two organizations, looking
members now use their quality skills to prevent most quality
for ways your partner’s processes are more efficient. Then
problems. Inspection is still done, but only as a complement

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 Effective Healthcare Management Summaries Strategic Benchmarking

to sophisticated quality assurance systems. Statistical process Principle of Legality. Refrain from any discussion
control and teamwork are in evidence. If your business is at or action that might imply constraint of trade, price fixing,
this stage, you are ready to benchmark specific operations. bid rigging or acquisition of trade secrets. If you plan to
This is known as OPERATIONAL BENCHMARKING. If share proprietary information, consider having both
you were a lens manufacturer, you might study another firm’s companies sign non disclosure agreements. Use the old rule
distribution process. of thumb to ensure legality; if in doubt, don’t; if there is a
question, ask a lawyer.
PARTNERSHIP is the final level of maturity in quality
control. It occurs when employees and managers in each
operating unit work together to meet shared goals. At this Principle of Confidentiality. Treat the
level, specialists have translated their jargon and methods information you gain from benchmarking as proprietary and
into language everyone can understand. Individuals see confidential. Don’t reveal any of it to another company
themselves as members of a team dedicated to meeting the without the partner’s expressed permission.
needs of external customers. If you are at the partnership
stage, congratulations. You are ready to benchmark at the Principle of Exchange. Be willing to give your
most advanced and rewarding level, STRATEGIC partner the same type of information that you are requesting.
BENCHMARKING. The techniques used are similar to Also, hold early discussions with the partner to clarify
operational benchmarking, but the scope is much wider. expectations and avoid misunderstandings.
Rather than look at narrowly defined business processes, you
can explore company wide issues to find ways to maintain
competitive advantages, to develop new business ventures,
Principle of Use. Use information gained from
form cooperative relationships with suppliers and respond benchmarking to improve operational processes in your
more quickly to customer needs. Such a study would involve company. Never use it in your advertising or marketing.
getting information from several sources at once. You might
choose one company that has a superb inventory system, Principle of First Contact. When you approach a
another with state of the art order entry system and another potential benchmarking partner, don’t contact the operational
with excellent distribution processes. Benchmarking against unit you wish to benchmark. Rather, ask the senior manager,
companies that have achieved excellence in one or more quality manager, or human resources manager for assistance.
process allows you to combine these best practices into a
unified improvement plan for your business. Principle of Third Party Contact. Unless you
have permission from your benchmarking participants and
your benchmark contact person, don’t share the participants’
names with other companies requesting information.

STEPS THAT DETAIL THE BENCHMARKING

PROCESS
The International Benchmarking Clearinghouse studied the
benchmarking processes of forty-two leading companies such
as Motorola, Westinghouse and Xerox. They discovered the
THE ETHICS OF BENCHMARKING various processes shared many similarities. From this study,
So you have decided you are ready to benchmark. You have a detailed process for basic benchmarking was developed.
even chosen some potential partners. How can you ensure
both businesses will benefit, not lose from the process? Following these steps when you benchmark will assure
quality results from a rigorous, systematic and reliable study.
An organization developed to aid companies with this vital Each study will involve most, but not every one of these
tool of benchmarking. The International Benchmarking steps.
Clearinghouse has produced the “Benchmarking Code of
Conduct” with ethical principles. 1. Plan the Project

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 Effective Healthcare Management Summaries Strategic Benchmarking

Identify your company’s long range strategic goals, the BENCHMARKING FOR DEN MEMBERS
strengths and weaknesses of its key business processes, and
the strengths and weaknesses of factors such as cost Benchmarking is a useful method of understanding key
management, company image, and product features that are statistics that assist doctors and management to make
critical to the success of your business. improvements in practice processes/systems and profitability.
Only if you measure it, can you better manage it. Talking
about how to better manage it gives opportunity for improved
2. Choose a Process to Benchmark leadership. Taking action with confidence demonstrates a
strong commitment to vision and values.
Based on the criteria outlined in “Are You Ready to
Benchmark” decide what to benchmark based on your level Effective benchmarking within the group and with our
of quality maturity and your business objectives. Keep in competitors outside the group is one of the benefits of DEN
mind the famous 80/20 rule. While there may be 30 membership. Topics for strategic benchmarking will include
processes in your business and all could stand some overall office profitability and return on equity of investment,
improvement, your customers are likely aware of only one or wage costs and revenue sharing programs, pricing in DEN
two that require work. These few will likely offer the offices, pricing in retail competitors, pricing in non DEN
greatest payoffs from benchmarking. They often include optometric competitors and, customer service performance.
product design, sales procedures or customer service
performance. Focus on the 20% of your processes that will Benchmarking can and should be done at different levels.
yield an 80% improvement in your bottom line. Each level has inherent benefits depending on the needs and
wants of your business. Truly, only if you measure it can you
better manage it. To ensure DEN Benchmarking is relevant
3. Collect data on your own process. to your practice, three levels of measurement are being
proposed. Each level, from the bare minimum (level 1) to the
Gather and analyze data on the cost and effectiveness of your most detailed (level 3) will be related by category to enable
own process. Note the types and amounts of resources that any DEN member to compare their offices by at least the
you invest in the process, the results that process delivers, lowest level of detail and accurately compare percentages and
and any differences between what is produced and what your thus performance. The more detail your office puts into the
customers expect from the process. Compare your results to benchmarking program, the more understanding and
industry averages for this same process. knowledge you can expect to obtain for your practice. This
will help you proceed with confidence in knowing which
levers must be pushed to increase your office profitability.
4. Prepare to select a partner.
Define the type of benchmarking partner you want and the
criteria you will use to select one. Design a screening
questionnaire on which you can describe a potential partner’s
type of business, company culture, company demographics,
product size, technology, and distribution channels.

5. Choose your benchmarking partner.

Find a business that sees the value in participating in
benchmarking - for improving their competitiveness and
yours. An association such as DEN has a number of
component variables that provide opportunity for it to be the
'Optometric Benchmarking Clearinghouse'.

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Effective Healthcare Management Summaries Strategic Benchmarking

DEN BENCHMARKING CONTINUUM

Operational Benchmarking L L L L L L L L L Strategic Benchmarking

Level 1 - At a minimum, know these Level 2: Greater Detail allows you to Level 3 Complete Details
numbers in your head determine productivity ROI Determines Stakeholder ROI

Gross Sales Gross Sales by Categories: Gross Sales by Sub-Categories:

eg. Examinations, frames, lenses, eg. Contact Lenses broken down into
contacts lenses, service plans, daily spherical soft, disposable soft,
miscellaneous daily toric soft, disposable toric, gas
permeable, multifocals

Cost of Sales (lab costs) Cost of Sales by Category Cost of Sales by Sub-Categories

Cost of Wages Detailed Wages per employee Detailed Wages per hour of production

Cost of Dr./Associates Costs of Associates vs. Owners Net Productivity per OD

Cost of Office Operations Detail by Major categories such as rent, Details by Major categories to the left
repairs, equipment, depreciation, etc and then further breakdown into sub-
based on typical financial statements categories. Cost per Dr. and cost per
hour

Net Margins Net by Category Net by various categories including per

hour of production

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