The power of benchmarking.

Author:Julien, Frederick W.
Position:Includes related articles - Cover Story

Identifying, understanding, and adapting best practices -- in fly fishing, in auditing, in almost any process -- can generate excellence.

BENCHMARKING is one of today's most effective business strategies. It's working for organizations of all sizes and in all industries; and, perhaps as virtually nothing else can, it has the potential to propel quantum improvement in internal auditing.

Companies driven by the need to shorten business cycles, improve quality, and contain costs cannot afford activities that don't add or improve products or processes. Management needs more than just reports about the past; it needs better operating information and more insight into what can support the organization in the future.

More value is being demanded from the audit process, especially in terms of building controls into processes, improving profitability and competitiveness, and seizing opportunities for organization-wide improvement. Most internal auditors would acknowledge that in today's business environment, they must embrace the same performance goals as other organizational support functions: helping to create organizational, product, and service value; helping the processes of the organization to flow more smoothly; helping colleagues to realize their optimal performance levels; helping to improve all activities on a continuous basis; and, ultimately, helping to satisfy customers.

Benchmarking can affect internal auditing in at least two important ways. First, the benchmarking process compels a critical review of existing audit processes, which leads to a better understanding of what and how audit work is actually performed as opposed to what auditors think is being performed. In other words, the first result of a benchmarking initiative will be that practices and processes within the internal auditing department can be dramatically improved, and that the internal audit staff becomes more involved and aware of the need for continuous improvement.

Second, and even more critical to internal auditing's long-term viability, auditors' benchmarking experiences arm them with the knowledge and skills they need to support, initiate, and enhance appropriate benchmarking efforts throughout the organization. Internal auditors will already have proven to themselves that the identification of best practices does result in process improvement. They will have honed their own research abilities and heightened their awareness of opportunities to adapt the best practices of others to their organization. When internal auditors are able to help their internal customers identify benchmarking opportunities and apply the knowledge gained, both the perceived relevance of the internal audit function and the value of actual audit work are enhanced.

Benchmarking is no "magic pill;" but when it is executed correctly, the process not only yields best practices, it promotes the kind of thinking that generates breakthroughs and supports continuous improvement -- the kind of thinking that keeps business strategies vital. In looking beyond numbers and quantities to focus on processes, the internal auditing function can develop vital new patterns and practices. Applying benchmarking to the audit process and to other processes as an audit tool can help auditors respond to heightened management needs and expectations.

* Benchmarking/Best Practices

Benchmarking is the continuous process of comparing and measuring an organization's business processes against those of business leaders anywhere in the world. The objective is to identify and understand best practices; and a best practice is, simply, the best way to execute a process.

Given this definition, the current tendency to describe benchmarking as merely the measurement of, comparison to, or duplication of other functions' best practices is simplistic. And implying that the process is akin to spying is dramatic, but misleading. As companies like Xerox, DuPont and AT&T have demonstrated, the point of the benchmarking process is not to engage in competitive espionage or to identify hard-to-achieve objectives or processes, but to support business strategy -- by comprehending the processes that fuel continuous improvement in products and services; by studying the experiences of successful companies; and by using the insights gained from such observations to enhance parallel functions inside one's own organization.

Those who have been extensively involved in benchmarking have learned that some of the most powerful best practices may originate in industries and even in functions outside their own. For example, one hospital benchmarked against hotel registration practices to improve its admittance processes. An airline benchmarked against Indianapolis 500 pit crews to reduce turnaround time for its aircraft at gates. One internal audit director benchmarked against communications functions and change management consultants to improve the audit reporting process. The point is that an external search can build internal strength.

The true power of benchmarking lies in the ability to apply the insight gained from another organization's best practices -- with the full understanding that it is adapting them, not adopting them. No single best practice works for everyone. In fact, the term "best practices" is something of a misnomer. A practice can be deemed "best" only in the context of a particular company's culture, its strategies, its use of technology, its products' life cycles, and its customers' needs and wants.

* Why Internal Auditing Needs Benchmarking

The potential of benchmarking is significant for the internal auditing group that seeks to enhance both its effectiveness and its influence in the changing organization. Benchmarking can introduce the notion of continuous improvement in a concrete, positive way. It can clear a path for innovation in processes, activities, and attitudes.

Continuous Improvement

The mind-set and cultural change encouraged by benchmarking often evolve quietly. Almost unobtrusively, benchmarking helps establish continuous improvement as the new context for all work activity, because the process objectively presents the benefits of change as other companies have experienced it. It...

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