BENCHMARKING AS A PERFORMANCE MANAGEMENT STRATEGY IN THE MANUFACTURING INDUSTRY (A CASE STUDY OF THREE MANUFACTURING FIRMS IN ABA ABIA STATE)

ABSTRACT

The main aim of this study is to examine benchmarking as a performance management strategy in manufacturing industries. Data were collected from both primary and secondary sources. The major source of primary data  were the respondents randomly selected from three manufacturing industry in Aba, Abia State. The major instrument used in the data collection was questionnaire. The data were presented in tables as frequency distribution and in the analysis, the techniques of performance and frequency were applied. In testing the hypothesis, the z-test was applied. The major  findings  of  the  study  were;  manufacturing  company’s engage in benchmarking to achieve industry’s best practice and to keep abreast with competitors. Benchmarking serves as performance management strategy by setting performance standard. It identifies performance gap by comparing actual with target performance. It serves as a performance control technique by affecting changes that will eliminate the performance gap. Benchmarking is an effective performance management strategy which   is   used   to   improve   individual   and   organization’s performance.

CHAPTER ONE INTRODUCTION

1.1    BACKGROUND OF THE STUDY

Organizations  vary in  their  performances.  Some  register high performance while some register low performance. Even, some organizations’ performances show a cyclical trend over a long period of time. However, high performance can be maintained for a relatively long period if organizations take necessary measures to avoid performance drawback (Adei, 2006: 18) it is therefore important for companies to initiate and implement measures that will ensure that their performance conforms with best practices in the industry. This can be achieved through benchmarking which organizations can measure themselves against their industry practices and other competitors (Medrano,

2007:43).

Benchmarking is a performance management tool used initiate performance improvement. It measures comparative performance of companies and brings innovative ideas that can be implemented in different industries with an adopted process (Aimiuwu, 2007: 28). Through benchmarking, business processes can be compared among different

organizations. It promotes superior performance giving an organized structure for companies to learn how “the best in class” do things, understand how other companies methods differ from its own and fund the gaps that will change and improve its process (Oladunmi, 2005:40). Since benchmarking is a tool used to manage performance, many organizations use it to generate data leading to process and performance improvement.

Benchmarking opens organizations to new methods, ideas and techniques to manage their performance with a view to improving  their  effectiveness.  It  helps  to  crack  resistance  to change by demonstrating other methods of solving problems than the one currently employed by the company. Through benchmarking a company ensures that it produces a high quality product whose standard compares with “the best in class” in the industry (Ugbaja, 2008:19).

Since benchmarking is performance management tool, not a philosophy properly or a strategy, it must be used properly. It will be helpful if not offer much opportunity for improvement.

The application of benchmarking as a tool of Total Quality Management  (TQM)  in  manufacturing  firms  may usher  in  the climate of change and continuous improvement in all the areas of operations. In other words, benchmarking may be a very good intervention technique for a positive change, and for manufacturing firms to survive in a competitive business environment, there is the need for the acquisition and exchange of practices among the firms (Agbaeze, 2007:158).

Through benchmarking, a firm can maintain high performance   over   a   long   period   of   time,   initiating   and implementing measures that will ensure that its performance that conforms with best practices in the industry in which it operates. This calls for effective performance management predicated on benchmarking.

Performance management incorporates the configuration and measurement of distinct output areas. Performance indicator provides the mechanism by which an organization measures critical  business  tool,  particularly  in  translating  a  strategy into result. Thus, in the manufacturing sector, performance management significantly drives organizational

performance, individual performance, career planning, succession planning,  training,  transfer  and  business  strategy  (Ewurum,

2006:1) amplifies this when he states that in performance management, effort is made to capture and coordinate all the issue that will make for the delivery of effective performance by organization members.

Manufacturing concerns are not performing optimally in Nigeria today. According to (Ifedi, 2010:9) there is little doubt that manufacturing firms in Nigeria have since the early 1980s been endangered. In order to manage the performance and achieve set goals in the highly competitive business environment, most manufacturing firms have been engaged in benchmarking. It is against this background that this study sets out to examine benchmarking as a performance management strategy in manufacturing industries.

1.2    STATEMENT OF PROBLEM

There are impediments to effectiveness of benchmarking as a strategy for performance management in manufacturing firms. Benchmarking entails comparison of performance. The

problem of how to measure performance and the indices to use often crops up. Data collection presents a very great challenge in seeking to measure performance in manufacturing firms. Competitors are not always within to disclose the necessary information that are required for benchmarking firms and this makes it difficult for benchmarkers to know the performance gap that should be filled to achieve best practices. Thus, a fundamental problem is how to collect large amounts of external data to set the benchmark.

Again there is the issue of measuring the performance of the manufacturing firms using defined criteria and those of its competitors in the industry. Lack of a single universally accepted appraisal system applied by every firm is a problem in itself as it results in had haphazardly implemented benchmarking exercise.

Moreover, a poorly implemented benchmarking exercise undermine  effective  performance  management  as  it  results in waste of time, financial and human resources. Finally, benchmarking is an expensive and length they process which many manufacturing firms can not embark upon as they afford

the cost. This can be associated with lack of management commitment and manager’s resistance to change. The question now is how manufacturing firms use benchmarking as a strategy for performance management?

1.3    OBJECTIVES OF THE STUDY

The main objectives of the study is to examine how benchmarking can be used as a strategy for performance management. Thus, the specific objectives of the study are;

1.To  examine  how  benchmarking  can  be  used  in  measuring performance.

2.To  find  out  how  benchmarking  can  be  used  to  identify performance gap.

3.To  examine  how  benchmarking  can  be  used  in  controlling performance.

4.To  examine  how  benchmarking  can  be  used  to  improve performance.

5.To  identify  the  factor  militating  against  benchmarking  as  a strategy for performance.

1.4    RESEARCH QUESTIONS

Answers  will  be  sought  in  this  study  for  the  following questions;

1.How can benchmarking be used in measuring performance?

2.How can benchmarking be used to identify performance gap?

3.How can benchmarking be used to control performance?

4.How can benchmarking be used to improve performance?

5.What  factor  militate against  benchmarking  as a strategy for performance management?

1.5    HYPOTHESES

The following hypothesis will guide the study;

1.Ho:Benchmarking does not measure performance by setting performance standard.

Hi:Benchmarking    measures    performance    by    setting

performances standard.

2.Ho:Benchmarking   does   not   identify   performance   gap   by comparing standard and actual performance.

Hi:Benchmarking identifies performance gap by comparing

standard and actual performance.

3.Ho:Benchmarking does not control performance by correcting deviation from the set performance standard.

Hi:Benchmarking   controls   performance   by   correcting

deviations from the set performance standard.

4.Ho:Benchmarking does not improve performance through total quality management.

Hi:Benchmarking   improves   performance   through   total

quality management.

1.6    SIGNIFICANCE OF THE STUDY

This study is significant in respects. Firstly, it will be of great importance to manufacturing firms especially these which do not understand what benchmarking entails and those with poor performance management practices. The study will provide information that will enable them access in

depth and thorough knowledge about the essence, methods and advantages of benchmarking and effective performance management.

Secondly, these firms will through this study see the need to improve their current practices of performance management as it will elicit higher productivity, profitability, growth and sustainability of the firms as well as customer and employee satisfaction.

Thirdly, manufacturing firms which engage in benchmarking and performance management practice but have not   achieved positive results in their performance will find this study very important. This is because it will highlight the militating factors. The recommendations of the study will enable them take remedial actions.

Finally, the study will be useful to those who will carry out studies in related areas in future. It will serve as a reference material to them. Even, the findings can provide the bases for further studies.

1.7    SCOPE AND LIMITATIONS OF THE STUDY

This study focuses on benchmarking as a strategy for performance management. But the scope is restricted to three manufacturing firm in Aba (Abia State).

The limitation of the study is as follows:

1.Uncooperative Attitude of Some Staff of the Firm:

Their refusal to provide information required from them affected the volume of data available for the study.

2.Financial Constraint

The study could have been very extensive if more manufacturing firms in other states were included. Hence, the restriction of the scope of three firms in Aba.

3.Pressure of other Academic Work

The researcher could not accomplish the study in a record time because of the pressure of other academic work on campus.

1.8    DEFINITION OF TERMS AND ACRONYM

!Benchmarking

This is a performance measurement tool used in improving performance indicators.

!Benchmark

This is the established standard against which performance is measured.

!Benchmarker

This is the firm carrying out benchmarking exercise.

!Benchmarkee

This is the firm whose performance is being used as a benchmark.

!Total Quality Management

This is a management philosophy which emphasises continuous improvement on the quality or process by which work is accomplished.

!Performance Management

This is the practice of optimizing production and service delivery for its stakeholders.

!Performance Appraisal This is the practice of assessing individual or organization’s output or service delivery.

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