This article summarises a wider report on the current state of best practice benchmarking in UK and US commercial banking

Bátiz-Lazo, Bernardo

English

Open Research Online (The Open University)

Open Research OnlineThe Open University’s repository of research publicationsand other research outputsBenchmarking best practice in financial servicesOtherHow to cite:Ba´tiz-Lazo, Bernardo (2001). Benchmarking best practice in financial services. EconWPA, London.For guidance on citations see FAQs.c© 2001 The AuthorVersion: Version of RecordLink(s) to article on publisher’s website:http://ideas.repec.org/p/wpa/wuwpio/0211016.html#abstractCopyright and Moral Rights for the articles on this site are retained by the individual authors and/or other copyrightowners. For more information on Open Research Online’s data policy on reuse of materials please consult the policiespage.oro.open.ac.ukResearch assistance of Elena Moran as well as helpful comments from Neil Tyler (LaffertyPublications), and Graham Francis  (OUBS) are gratefully acknowledged. The usual caveats doapply.Benchmarking Best Practicein Financial Servicesby Bernardo Bátiz-Lazo, Ph.D.Open University Business Schoolforthcoming by Lafferty PublicationsJanuary 20012Executive summaryThis report builds on the fact that there is a defined best practice process and that thisprocess is not exclusive of exemplar organisations. Benchmarking partnerships or clubs help inorganisational learning and knowledge creation by promoting access and transfer of differentways of doing things. Benchmarking is a method to achieve best practice driven by thoseorganisations wishing to do something better, supported by technology, measured in credibleframeworks and aimed at creating value through purposeful application.This report will also show that benchmarking has become an indispensablepractice to develop skills that allow effective search and internalisation of relevantinformation. Search and selection of relevant information is more important todaythan ever before as today there is an overwhelming amount of information availableto managers. Although alert managers are constantly seeking new information, theyoften find that only few sources provide relevant information. Moreover, the reportwill show that benchmarking has become invaluable to reconcile the organisationwith the fact that information that can help the decision making process is alsoavailable to direct and indirect competitors.This report finds that organisations throughout the banking, insurance and brokeragesectors are pursuing benchmarking activities with different levels of intensity.  While some areaggressively engaged in ways to redefine best practice, others are still devising plans to bettercompete. In Benchmarking Best Practice in Financial Services we use over twenty case studies(including a mini-survey of attitudes towards benchmarking) to look at practices of toporganisations which have developed procedures to benchmark best practice across the banking,brokerage and insurance sectors. For each of case history, the report focused in a topic as shownin the table below and considering the following:· Internal. A comparison among similar operations in an organisation looking for thoseprocesses and procedures that promise to improve performance (i.e. internal comparison) orwhich are responsible for making that organisation unique (i.e. managing knowledge).· Competitive. A comparison with direct competitors looking for ‘best in class’ whileprotecting information that could potentially damage competitive advantage.· Functional/Industry. A comparison of methods, similar processes or procedures in the samefunctional area (finance, sales, marketing, etc) between organisations which are not directcompetitors.· Generic/Best Practice. A comparison of work processes to others who have innovative,‘world class’ process and procedures.The organisation becomesmore competitive whensources are carefullyselected, data retrieved isinterpreted and integratedinto established processesand procedures.Information is thusrelevant when data can betransformed to help thedecision making process.3Type of BenchmarkingInternalCase Name(alphabeticalorder) ComparisonsManaging ofKnowledgeCompetitiveFunctional /IndustryGenericProcess /BestPractice Country/RegionAbbey National   UKAmerican Express(origins)  USAAmerican Express(present day)   USABank One   USABanks andPharmaceuticals  EuropeBest e-BankingPractice  EuropeCall Centres  UKCall Centres   USACompetitiveBenchmarking -A Survey EuropeCorporateExecutive Board(The)  USADatabases andKnowledgeManagement IrelandEnterprise RiskManagement Canada4Type of BenchmarkingInternalCase Name(alphabeticalorder) ComparisonsManaging ofKnowledgeCompetitiveFunctional /IndustryGenericProcess /BestPractice Country/RegionErnst & Young'sInsurable Risk NorthAmericaFinance FunctionProcesses UKFund Management   UKKPMG'sMortgagePortfolio USAMergers andAcquisitions  USAMorgan StanleyDean Witters   USAOn-line Surveys   CommonWealthProcessBenchmarking Ltd  UKReal TimeBenchmarking  EuropeResource Auditand CompetencyAssessment NorthAmericaRetail BankBranchPerformance USAStrategyDevelopment  CentralAmericaThe reader of the report will find this management technique has become quite commonamongst banking, insurance and brokering organisations. The reader will also find thatthroughout the report individual cases relate theory to practice while, at the same time, presentthe state of current practice and the challenges faced by those benchmarking best practice.The report finds that there is great variety in what is termed benchmarking, much ofwhich is simply setting performance measures without examining the underlying process. This asthe report emphasises that a distinction should be made between results and process5benchmarking. The report then considers the appropriateness of benchmarking tovarious organisational contexts within financial services.Cases documented in this report also suggest other interesting findings, which include:Cross cultural differences Organisations rather than sectors seem toinfluence the decision to adopt organisation-wide initiatives (as opposed to manager-ledinitiatives).Technological innovation and the Internet New ways to share information in tandem withnew delivery channels for financial servicesare rapidly changing goal posts. Organisationsare thus challenged to develop a long termintent on how to tackle external changes.Mergers and acquisitions Benchmarking is growing in prominence tomake the best of internal resources, capabilitiesand skills during an amalgamation.Role of cross-industry (i.e. generic)comparisonsTo redefine service levels and meet moredemanding expectations organisations areincreasingly pressed to look for inspirationbeyond the boundaries of financial services.In brief, the reader of this report will find that it critically examines the nature andpurpose of best practice benchmarking. Chapter one establishes whether and why in financialservices there is an identifiable process for the creation, sourcing and transfer of best practice.Chapter two of the report further illustrates the methodology behind each of the five topic areasor types of benchmarking described above. Chapter three develops ideas around the role ofinformation technology and the effects of technological change over the practice of comparingpractices between organisations. Chapter four develops ideas behind process identificationtechniques to benchmark performance and the role of benchmarking forums to explain theincrease in the rate at which best practice benchmarking has moved upwards in theorganisational structure of financial service organisations.  Chapter five evaluates why in somecorners the enthusiasm for benchmarking has weaken. This as benchmarking has been criticisedwhile growing in prominence. This chapter finds that although benchmarking has been describedas just another management fad its popularity is yet to diminish. Chapter six offers a summaryand some learning points emerging from the research.

Benchmarking best practice in financial services

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