This article summarises a wider report on the current state of best practice benchmarking in UK and US commercial banking.Banks, competition, IT innovation

Bernardo Batiz-Lazo

English

Research Papers in Economics

Research assistance of Elena Moran as well as helpful comments from Neil Tyler (Lafferty
Publications), and Graham Francis  (OUBS) are gratefully acknowledged. The usual caveats do
apply.
Benchmarking Best Practice
in Financial Services
by Bernardo Bátiz-Lazo, Ph.D.
Open University Business School
forthcoming by Lafferty Publications
January 20012
Executive summary
This report builds on the fact that there is a defined best practice process and that this
process is not exclusive of exemplar organisations. Benchmarking partnerships or clubs help in
organisational learning and knowledge creation by promoting access and transfer of different
ways of doing things. Benchmarking is a method to achieve best practice driven by those
organisations wishing to do something better, supported by technology, measured in credible
frameworks and aimed at creating value through purposeful application.
This report will also show that benchmarking has become an indispensable
practice to develop skills that allow effective search and internalisation of relevant
information. Search and selection of relevant information is more important today
than ever before as today there is an overwhelming amount of information available
to managers. Although alert managers are constantly seeking new information, they
often find that only few sources provide relevant information. Moreover, the report
will show that benchmarking has become invaluable to reconcile the organisation
with the fact that information that can help the decision making process is also
available to direct and indirect competitors.
This report finds that organisations throughout the banking, insurance and brokerage
sectors are pursuing benchmarking activities with different levels of intensity.  While some are
aggressively engaged in ways to redefine best practice, others are still devising plans to better
compete. 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 top
organisations 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 shown
in the table below and considering the following:
•  Internal. A comparison among similar operations in an organisation looking for those
processes and procedures that promise to improve performance (i.e. internal comparison) or
which are responsible for making that organisation unique (i.e. managing knowledge).
•  Competitive. A comparison with direct competitors looking for ‘best in class’ while
protecting information that could potentially damage competitive advantage.
•  Functional/Industry. A comparison of methods, similar processes or procedures in the same
functional area (finance, sales, marketing, etc) between organisations which are not direct
competitors.
•  Generic/Best Practice. A comparison of work processes to others who have innovative,
‘world class’ process and procedures.
The organisation becomes
more competitive when
sources are carefully
selected, data retrieved is
interpreted and integrated
into established processes
and procedures.
Information is thus
relevant when data can be
transformed to help the
decision making process.3
Type of Benchmarking
Internal Case Name
(alphabetical
order) Comparisons
Managing of
Knowledge
C
o
m
p
e
t
i
t
i
v
e
F
u
n
c
t
i
o
n
a
l
 
/
I
n
d
u
s
t
r
y
G
e
n
e
r
i
c
P
r
o
c
e
s
s
 
/
B
e
s
t
P
r
a
c
t
i
c
e
C
o
u
n
t
r
y
/
R
e
g
i
o
n
Abbey National ￿ ￿ UK
American Express
(origins) ￿ ￿ USA
American Express
(present day) ￿ ￿ USA
Bank One ￿ ￿ USA
Banks and
Pharmaceuticals ￿ ￿ Europe
Best e-Banking
Practice ￿ ￿ Europe
Call Centres ￿ UK
Call Centres ￿ ￿ USA
Competitive
Benchmarking -
A Survey
￿ Europe
Corporate
Executive Board
(The)
￿ ￿ USA
Databases and
Knowledge
Management
￿ Ireland
Enterprise Risk
Management ￿ Canada4
Type of Benchmarking
Internal Case Name
(alphabetical
order) Comparisons
Managing of
Knowledge
C
o
m
p
e
t
i
t
i
v
e
F
u
n
c
t
i
o
n
a
l
 
/
I
n
d
u
s
t
r
y
G
e
n
e
r
i
c
P
r
o
c
e
s
s
 
/
B
e
s
t
P
r
a
c
t
i
c
e
C
o
u
n
t
r
y
/
R
e
g
i
o
n
Ernst & Young's
Insurable Risk ￿ North
America
Finance Function
Processes ￿ UK
Fund Management ￿ ￿ UK
KPMG's
Mortgage
Portfolio
￿ USA
Mergers and
Acquisitions ￿ ￿ USA
Morgan Stanley
Dean Witters ￿ ￿ ￿ USA
On-line Surveys ￿ ￿ Common
Wealth
Process
Benchmarking Ltd ￿ ￿ UK
Real Time
Benchmarking ￿ Europe
Resource Audit
and Competency
Assessment
￿ North
America
Retail Bank
Branch
Performance
￿ USA
Strategy
Development ￿ ￿ Central
America
The reader of the report will find this management technique has become quite common
amongst banking, insurance and brokering organisations. The reader will also find that
throughout the report individual cases relate theory to practice while, at the same time, present
the 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 of
which is simply setting performance measures without examining the underlying process. This as
the report emphasises that a distinction should be made between results and process5
benchmarking. The report then considers the appropriateness of benchmarking to
various 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 to
influence the decision to adopt organisation-
wide initiatives (as opposed to manager-led
initiatives).
Technological innovation and the Internet New ways to share information in tandem with
new delivery channels for financial services
are rapidly changing goal posts. Organisations
are thus challenged to develop a long term
intent on how to tackle external changes.
Mergers and acquisitions Benchmarking is growing in prominence to
make the best of internal resources, capabilities
and skills during an amalgamation.
Role of cross-industry (i.e. generic)
comparisons
To redefine service levels and meet more
demanding expectations organisations are
increasingly pressed to look for inspiration
beyond the boundaries of financial services.
In brief, the reader of this report will find that it critically examines the nature and
purpose of best practice benchmarking. Chapter one establishes whether and why in financial
services 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 areas
or types of benchmarking described above. Chapter three develops ideas around the role of
information technology and the effects of technological change over the practice of comparing
practices between organisations. Chapter four develops ideas behind process identification
techniques to benchmark performance and the role of benchmarking forums to explain the
increase in the rate at which best practice benchmarking has moved upwards in the
organisational structure of financial service organisations.  Chapter five evaluates why in some
corners the enthusiasm for benchmarking has weaken. This as benchmarking has been criticised
while growing in prominence. This chapter finds that although benchmarking has been described
as just another management fad its popularity is yet to diminish. Chapter six offers a summary
and some learning points emerging from the research.

Best Practice Benchmarking in Financial Services

http://128.118.178.162/eps/io/papers/0211/0211016.pdf

Best Practice Benchmarking in Financial Services

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics