A bible for benchmarking, by Xerox.

• Author: Camp, Robert C.
• Position: Includes related article

To benchmark effectively, a company needs solid support from the top, but the concept also must be an integral part of the organization, cascading down to every employee.

For Xerox, benchmarking sprang from a competitive crisis. One Sunday morning in the late 1970s, our vice president of manufacturing and engineering read in the paper that a U.S. dealer, supported by its overseas manufacturer, was selling a xerographic device equivalent to a Xerox device at a price equal to our manufacturing cost. To analyze the huge gap between the competitor's market price and our manufacturing cost, we first went the traditional route with a product tear-down/reverse engineering and a visit to our foreign affiliate, Fuji Xerox, which gave us a window into the competition. But the visit merely confirmed that we were 50 percent off the mark. So we decided to try benchmarking, and we haven't looked back. In fact, after our first big successes, senior management required all organizations within Xerox to pursue benchmarking. After 12 years, we are, if anything, intensifying our benchmarking activities.

A Chinese proverb says, "If we don't change our direction, we might end up where we're headed." Benchmarking is a direction-setting exercise, and it is nothing more than a quality tool, just one of many ways to improve and become more productive. However, it has been extremely important for us, so you may want to know why and how it fits in with an overall quality agenda.

Our quality program is called "leadership through quality," and it encompasses three processes: quality, problem-solving and benchmarking. We have trained more than 100,000 employees in the quality process, which shows them our output, as well as who the customers are and what they want. The problem-solving process is a simplified version of the quality process for employees on the line and in the field. It enables them to quickly and simply analyze their own jobs, leverage the personal talents best-suited to their work and improve their performances.

After instituting the first two processes, we realized that they didn't help employees understand where we wanted them to concentrate their improvement activities. That's where benchmarking comes in. It's the process of finding better practices, bringing them back and handing them off, first to quality teams and then to employee involvement teams to see how they can use the first two facets of the quality program to implement those practices.

A TOUGH YARDSTICK

The formal definition of benchmarking is the continuous process of measuring our products, services and practices against those of our toughest competitors or companies renowned as leaders. We have never changed this definition, because it embodies some very tough lessons we learned while introducing benchmarking.

The first lesson concerns the competition. Although you must focus strongly on the competition, if that's the sole objective, playing catch-up is the best you can do. Watching the competition doesn't tell you how to outdistance them. The mix of our benchmarking activities has changed 180 degrees. In the early days, we spent 80 percent of our benchmarking time looking at the competition. Today, we spend 80 percent of that time outside our industry, because we have found innovative ideas from business in other industries.

Other companies have done the same. For example, Remington Arms, a division of the Du Pont Co., makes shotguns, rifles and ammunition. Its customers asked for smoother, shinier ammunition shells. The Du Pont team members wanted to achieve that goal with competitive benchmarking in their own industry, but Du Pont engineers targeted instead the cosmetics industry, which makes smooth and shiny lipstick containers. So Du Pont did some benchmarking with Maybelline and incorporated some practices into its manufacturing process to accommodate customers' request. Anecdotes like that demonstrate why we look beyond our industry for ideas.

In the beginning, we associated benchmarking with numerical measurements. We still do, because we must be concerned about financial ratios like selling, general and administrative expenses as a percent of...