CONTENTS

TOPICS PAGES

1. Introduction

1-2

2. IT SECTOR 8-13

Objective

14

Definitions

15-16

BENCHMARKING

3. Introduction

17-20

4. History of benchmarking

21-33

5. PURPOSE OF BENCHMARKING 34

6. NAVIGATING HR BENCHMARKING

35-44

- BENCHMARKING MODEL

1

-BENCHMARKING PROCESS

-STEPS OF A BENCHMARKING PROCESS

7. BENCHMARKING THE 5 HR FUNCTIONS 45

8. DIFFERENCE BETWEEN BENCHMARKING AND

BEST PRACTICES 46-47

9. COMPANY ANALYSIS

48-49

FACTORS ENHANCING THE SUCCESS OF

BENCHMARKING PROCESS

BENCHMARKING BEST PRACTICES, RECRUITMENT

STRATEGIES AVAILABLE ONLINE NOW

10. RETENTION

50-57

11. BENEFITS OF BENCHMARKING HR PRACTICES

58

12. RESEARCH METHODOLOGY

60

- DATA COLLECTION 61

- DATA ANALYSIS 62

- ARTICLES

63-68

2

- EXAMPLES OF TOP 10 BENCHMARKING FIRMS

69

- SUMMARY OF THE BENCHMARKING INTERVIEWS 70

13. FINDINGS 71-72

14. CONCLUSION 73-79

11. BIBLIOGRAPHY 81

15. SYNOPSIS

82-93

INTRODUCTION

3

The current scenario in the IT sector

India has the largest pool of manpower, second only to

the US.

According to a study conducted by the National

Association of Software and Services Companies (NASSCOM)-

quantity of skilled knowledge workers in India seems to

be a non-issue, and it would be so atleast for another

couple of years.

The arithmetic out of 1.22lakh engineering graduates

qualifying every year in India, about 73,000 are software

engineers from IITs and other RECs. Thus, around 73,000

fresh software engineers are expected to be available

annually. Total demand for software professionals during

the next couple of years is estimated at 1.40 lakh.

Against this, India is expected to have a pool of 1.46

lakh software engineers. Besides, quite a few Indian

universities have started courses leading to Masters in

computer Applications and there are private Training

Institutes which offer high level software engineering

courses.

According to an AIMA survey, 60% of the IT Companies have

a written job description of all levels of employees. The

rest 40% either have a partly written job description or

they donot have anything written at all making it

difficult for both the employee and the employer.

4

Most CEOs site lack of skilled professionals as one of

the major hindrances to growth in the Indian Software

Industry. Reputed software companies might get people at

the base level but getting somebody with an experience of

more than 4-6 yrs is a problem. The problem of retention

was more prevalent in the telecom, IT and the Services

sector than manufacturing and traditional sector.

When asked about employee retention, the majority among

HR professionals of IT felt that it was all about

retaining good people in the company and creating such

situations for the non-performing employees that they

quit on their own. It was felt that employee retention

was a collective responsibility of the HR department, top

management and individual departments in an ascending

order with the HR Department having the maximum and

individual department having minimum accountability.

Data shows that in companies with more than 1000

employees, the HR Department was strong whereas in mid-

sized companies, the individual department was

responsible along with the top management.

Large companies with growth rate higher than 10% did not

face serious retention problems, but large companies with

lower growth rates had acute problems in retaining their

employees. In all industry segments, the employee

attrition rates at the junior level were on the higher

side compared to that at the top management level.

5

Studied over the last two years, retention levels have

either increased or remained same due to better

compensation, healthy competitive environment, higher

profitability of the company, and good working

conditions. But the case is not so with the IT sector,

where the key motivator is the lure of U.S market. The IT

industry has so far witnessed three major changes. Each

changeover has been marked by emergence of technologies

that have dramatically increased the number of it users

and applications riding a new wave of growth. Elements of

the previous period remained, but new technology was the

driving force in the growth of it industry in the new

period.

The first period marked the beginning of mainframes and

ushered in computer technology but usage was limited. In

the second period mini computers led the IT growth and

helped automate several business processes. The third

period which began some 20 years ago, belonged to the pcs

and client server technologies. Of applications and it

industry revenues. This fueled an’ order-of- magnitude’

growth in the number of users, the number of applications

and it industry revenues. Much of this was achieved by

making it products available at cheaper rates, which

enabled manufacturers to widen and deepen the market.

The fourth period, which is in its early stages, is the

internet era or the wired market era. The wide and

6

instantaneous reach of internet, displays its potential

to fuel another order-of-magnitude growth in the IT

industry.

This would obviously require selling at still lower price

points and revamping current distribution strategies and

marketing approaches. The internet era provides another

opportunity to grab leadership positions- not only in the

IT sector but several other industries as well.

Companies, which are quick to react and take the initial

lead, will grow faster than those who fail to do so.

Already the corporate are using the internet to deliver

product information, establish corporate identity,

provide customer service, advertise etc. Internet also

provides a cost to effective communication medium. Apart

from e-mail, it can used to make inexpensive phone calls,

videoconferencing, real- time interaction etc

7

IT and the changing role of HR

In today's competitive business environment, company

workforces are in a continual state of flux – skill sets

and job requirements as well as the regulatory

environment change at such a rapid pace that the staff

needs of tomorrow are very different to those of today HR

has therefore become a huge investment for medium and

large companies across industries, with people-related

costs averaging over 60 percent of total corporate

8

expenditures. The leading firms have been taking steps to

ensure that they extract maximum value from their HR

investments, introducing models that go beyond basic HR

functionality to embrace new ways of improving the

quality, efficiency and productivity of their workforces.

These businesses recognize that, to be fully effective,

HR programs require new processes, supported by leading

technologies.

For these companies, the silted HR department, focusing

predominantly on basic administrative, record-keeping and

transactional duties, is a thing of the past. Businesses

now realize that a strong foundation of information about

individuals is a highly valuable organizational resource

that can be used to drive efficiencies throughout the

business. Of course, "People are our greatest asset" is a

mantra that companies have been chanting for years. Yet

it is only relatively recently that businesses have

started putting HR systems in place that support this

philosophy. As a result, the information that sits inside

the HR department is being made available for effective

use throughout the wider organization, helping companies

align their workforces with long-term business

objectives. The backdrop to the introduction of these new

systems is the uncertain business conditions that

followed the economic downturn. This situation has

resulted in a relentless drive for cost control, which

affects the HR department as much as any other. HR now

9

has to demonstrate that it can develop and deliver

programs as efficiently as possible, providing greater

value at a lower cost. The current economic environment

has also forced firms to become more nimble. The time to

evaluate before taking action has decreased dramatically;

organizations now have months or quarters instead of

years to modify and execute business plans to take

advantage of opportunities. As a result, increasing

workforce flexibility and responsiveness is a key

objective for HR departments in leading companies.

These competitive conditions have led stakeholders

throughout enterprises to demand an end to the siloed

nature of employee data and quicker, more frequent access

to information that can help all levels of leadership

make better business decisions. According to the

Chartered Management Institute, 80 percent of a company's

worth is tied to the value of its employees, yet there

has traditionally been limited access to such workforce

data outside the HR department. Managers have lacked

visibility into even the most basic characteristics of

their workforces, yet alone been able to answer more

detailed questions about areas such as staff

certification and training levels.

Yet with increased access to information on their

employees, organizations can incorporate processes for

leveraging worker skills across the enterprise, which in

10

turn allows them to be more flexible. Firms with an in-

depth view of employee competencies across regions or

markets can immediately locate "best-fit" candidates,

identify and resolve skill shortages, and re-allocate

resources in response to changing conditions. In doing

so, they often avoid expensive layoff/rehire cycles that

sap morale, productivity, and profits.Take Trintech, a

provider of transaction management and payment

infrastructure solutions to financial institutions,

payment processors, enterprise retailers and network

operators. The company found itself unable to optimize

its human assets as its rapid growth and business

acquisitions had resulted in a number of disparate human

resources packages being used across global sites.

From the central HR system at its headquarters in Dublin,

Ireland, Trintech had no direct access to personnel

information from its regional offices. Data had to be

transferred manually between the different systems, a

costly and time consuming operation.

A few years ago, the company decided to replace its

legacy HR systems with the Oracle Human Resources

Management System (HRMS), a single, Web-enabled solution

accessible by all its global human resources departments.

Oracle HRMS has provided Trintech with vastly enhanced

reporting capabilities and business intelligence, while

improving the accuracy of information and reducing

11

duplication.

The system has eliminated the silos of information that

existed across the group, thus enabling seamless

collaboration across business units. The company's

managers can view relevant data about teams from any

location and therefore make faster, more informed

decisions. As a result, HR staff have time for valuable

strategic activities such as ensuring the company has the

necessary skills to meet its future needs.

Once companies have this kind of in-depth, accurate view

of their workforce, they may find that they are less

dependent on "quick-fix" solutions to solve problems

relating to employee or skill shortages. In recent years,

businesses have become dependent on non-permanent staff

to cope with short term staffing short-falls. Yet

finding, hiring and managing temporary workers, who can

constitute up to 40 percent of a company's employees,

requires significant organizational resources.

A contingent workforce is the number one commodity spend

for many companies - as a result, the perceived cost

savings behind deploying temporary labor in the first

place are often cancelled out. With access to detailed,

timely information about their current workforce

capabilities, a company looking to fill a role might

discover that there is already someone with the necessary

skills within the organization, or an employee who

12

requires minimal training to fulfill the role.Access to

centralized workforce data through a core HRMS system not

only enables companies to measure and leverage their

workforce capabilities, it also allow them to manage risk

by monitoring and recording compliance with statutory,

regulatory, and industry requirements relating to their

employees. A myriad of government regulations must be

addressed by today's businesses, and many include severe

penalties for non-compliance. Statutes vary dramatically

by country; some examples include EEO/Affirmative Action

and Worker's Compensation in the US, Statutory Sick Pay

in the UK, Minimum Training Hours in France, and Working

Time Directives in the European Union.

While managing compliance has become an additional

responsibility of the modern HR department, technology

has ensured that the traditional administrative and

transactional elements of HR have been minimized.

Progressive organizations have introduced automated

workforce management processes to reduce the cost and

cycle time of HR processes, with the additional aim of

improving user satisfaction.

One example of this is Employee Self-Service (ESS), which

has been rapidly climbing up the corporate agenda over

the last few years. The concept of pushing access to HR

information and transactions out to workers has actually

been around since the mid-1980s with the deployment of

13

interactive voice response (IVR) systems. It progressed

to the delivery of initial Web-based ESS modules in 1996

and 1997, and ESS is now a mature product offering for

most core HRMS applications.

Automating HR transactions and giving employees online

access to central systems offers companies the

opportunity to achieve two often-conflicting goals -

improving HR service levels while cutting costs.

Previously, even something as straightforward as changing

an employee's home address was done through a paper form

or e-mail, requiring information to be re-entered into a

central system by an HR administrator. More complex

transactions, such as transferring an individual from one

office or region to another, would involve extensive

paperwork, management resource and support.

By automating these processes and allowing employees to

serve themselves, much of this overhead can be

eradicated. The efficiency benefits of ESS are well

documented; for example, The Cedar Group's "Workforce

Technologies Survey" indicates an average 43 percent

reduction in transaction cycle time in 2003 and 2004.

Adoption is steadily increasing, spreading from the

Global 2000 (e.g., $1 billion revenues and above) to mid-

sized companies. While ESS activity was initially focused

on providing access to HR policies and procedures,

sophisticated self-service transactions are now

14

commonplace. For example, according to META Group, the

most popular ESS application is benefits enrollment,

utilized by 65 percent of respondents.

Increasing the depth and breadth of ESS functionality

remains a primary goal for many firms. Participants in

the META Group study listed ESS as the area of strongest

interest for investment over the next three years,

particularly medium and large-sized organizations.

Another key area for workforce automation is Manager

Self-Service (MSS) described by the META study as the

"next frontier" for many organizations. MSS includes

multiple components, which are often deployed in phases.

Typical phase one deployments include access to reports

and the ability to view subordinate worker data and

organizational hierarchy information. Later MSS phases

may include online compensation planning and performance

reviews (sometimes including guidance on how to

accurately and consistently describe levels of

performance). Organizations are now using MSS to enable

the manager to perform work events online (e.g., signing

off holidays, transfers, promotions, hires,

terminations). According to The Cedar Group survey, use

of MSS is positively linked to business results.

One of the critical enabling technologies of this HR

process automation is workflow, which removes the need

15

for traditional paper-based approvals by replacing paper

forms with electronic notification, reminders, routing,

and approval. Robust workflow serves as the foundation

for HR process improvement, as it delivers substantial

cycle-time reduction and enables the linking together of

multiple applications into a cohesive set of

capabilities. Trintech, for example, receives automated

email alerts using Oracle Workflow technology when an

employee's contract is due for renewal or a probation

period expires. The automated notification typically

includes a direct link to the item requiring attention,

so the manager does not have to spend time locating the

application, signing in, or searching for the relevant

record.

As with any technology implementation, companies may

encounter cultural resistance in implementing employee

and manager self-service. Some industry commentators have

argued that the industry hasn't done itself any favors by

creating the term "employee self-service", since it

implies that employees are taking on work that was

previously someone else's responsibility. Additional

concerns include HR administrators fearing that self-

service will make their roles redundant, or managers

worrying about losing control over approval

processes.Winning buy-in by highlighting the benefits to

employees above corporate cost saving is therefore

crucial. Some employees are persuaded by speed - the

16

ability to book holiday time online, for example, or the

fact that expenses are paid more quickly because the

approval process is automated. Others will welcome the

convenience of being able to browse benefit information

from home. Self-service functionality also empowers

employees to take more control over their own career

paths, by providing them with the ability to enroll in

training courses or update performance goals online.

There are indications that employees' support for self-

service is largely positive; The Cedar Group survey

indicates 50 percent improvement in employee

satisfaction.

Better decision-making, significant employee benefits,

increased efficiencies and reduced costs all create a

compelling argument for implementing HRMS systems. For

the HR department, these technologies provide the

potential to break away from its administrative quagmire

to become a front-line function embracing more strategic

responsibilities that positively impact the success of

the enterprise. Once time-intensive processes are

streamlined, HR professionals are freed up to focus on

achieving full workforce optimization, a key source of

competitive advantage and, ultimately, profitability, as

it means resources can be aligned with the company's

business goals and used strategically.

17

OBJECTIVE

The boom in the information technology revolution has

been rising during the recent past and is expected to go

on for many years to come. Attracting the best

professionals is never easy, no matter what industry

segment we consider.

18

This is especially true in the case of the IT industry

where the attrition rate has been the highest.

Attracting and retaining talent has become a Herculean

task in this sector. The objective of this project has

been to find out the major causes of employee turnover in

the IT companies. It also looks at how this brain drain

can be reduced and what methods can be adopted to retain

the knowledge worker in the company.

The project focuses on:

1. The importance of retentior in the IT companies.

2. Most effective methods to find the cause of

turnover.

3. Factors favoring retention.

4. Innovative methods adopted by companies to retain

people.

5. Constraints faced by the organization in

implementation of retention strategies.

6. Effectiveness of the methods used to retain people.

19

DEFINITION

What is Benchmarking?

"Benchmarking is a process for identifying and importing

best practices to improve performance."  Benchmarking is

not a simple comparative study, simply copying practices

from other organizations, or simply assessing

performance.

The International Personnel Management Association and

the National Association of State Personnel Executives

jointly developed the following definition for

benchmarking: A comparison of similar processes across

public and private organizations to identify best

practices to improve organizational performance. The

characteristics and attributes of benchmarking include

measuring performance, systematically identifying best

practices, learning from leading organizations, and

adapting best practices as appropriate.

Benchmarking essentially involves learning, sharing

information and adopting best practices to bring about

changes in performance. To simplify this, it can be

stated as:

'Improving ourselves by learning from others'

20

In practice, benchmarking usually encompasses:

regularly comparing aspects of performance

(functions or processes) with best practitioners;

identifying gaps in performance;

seeking fresh approaches to bring about improvements

in performance;

following through with implementing improvements;

and

following up by monitoring progress and reviewing

the benefits.

Alan Flower (1997) lists 5 main stages in effective

benchmarking:

Selecting aspects of performance that can be

improved and defining them in a way that enables

relevant comparative data to be obtained - in

effect, producing performance indicators that will

make sense to other organizations;

21

Choosing relevant organizations from which to obtain

raw or headline data;

Studying the data to identify possible opportunities

for improvement;

Examining the procedures of the best-performing

organizations to pick up ideas that can be adopted

or adapted to achieve performance improvements; and

Implementing new processes.

Organizations usually benchmark performance indicators

(e.g. profit margins, return on investment (ROI), cycle

times, percentage defects, sales per employee, cost per

unit) or business processes (e.g. how it develops a

product or service, how it meets customer orders or

responds to enquiries, how it produces a product or

service). For human resources, three types of benchmarks

are particularly appropriate (Matters, 1993).

Broad measures of performance which take an

organization-level view of HR management, using

broad productivity measures like sales per employee,

profit per employee, volume per employee, number of

employees per HR specialists, and other relevant

"output-over-input" ratios;

HR practices focusing on how effectively HR programs

and practices are implemented, and making

comparisons with other organizations; and

HR competencies tracking the knowledge, skills and

abilities

22

Benchmarking: Introduction

The process of benchmarking was developed in the late

1970’s by Xerox Corporation as it needed to rapidly learn

how to combat the ongoing commercial attack by Japanese

industry and preserve its survival in the copier

business. In this process Xerox learned that evaluating

competitors and copying what others are doing, while this

may be a time-honored characteristic of human behavior

from the earliest of times, it is not a necessary and

sufficient condition to ensure that an organization

remains competitive. This fact raises an important

question: What has characterized the development in this

process of benchmarking and what have we learned over the

past thirty years it has been practiced? Perhaps even

more important is the question: What is the role that

benchmarking fulfills in a modern quality management

system whose foundation is built upon the principles and

methods that are characterized as "Six Sigma" methods for

quality management? This paper describes how the method

23

of benchmarking is being blended into the analysis

methods for process improvement approach using Six Sigma,

Lean Enterprise solutions, and Decision Workouts to

stimulate change management. Process benchmarking acts as

the critical methodology for generating a portfolio of

improvement projects which can systematically increase

organization performance effectiveness, efficiency, and

economy as it continues in its journey toward performance

excellence.

Introduction Ever since 1990 when Roger Milliken declared that

"benchmarking is the art of stealing shamelessly" the

definition benchmarking has evolved into a "quick fix"

for making quick business performance improvement.

Benchmarking is a systematic and scientific methodology

for comparing performance between organizations to

evaluate the relative excellence of their alternative

business practices based on the measured achievements of

analytical benchmarks. But, benchmarking is not a quick

fix, it is a rigorous process that requires both sweat

equity, learning about one's own processes and

coordinating logistics of study mission to other

organizations, and analytical integrity, measurement and

analysis of sustained work process performance through

the detailed mapping of processes and head-to-head

evaluation of performance differences.

In a typical benchmarking study the analytical

information contained in a benchmark or a comparative

24

measure of process or results performance is used to

establish which organization is candidate for a "best

practice" for a particular business process. Then the

business process must be specified in detail to

understand how the benchmark result was achieved and to

determine which specific activities enabled the

successful performance. Finally, learning must be

customized to apply new knowledge to organizations that

have not attained the level of "best of the best." A

benchmarking study must be analytically as well as

culturally successful. The methodology should heed the

warning of Dr. W. Edwards Deming who said (Deming, 1982):

"It is hazard to copy. One must understand the theory of

what one wishes to do." Cultural and business model

adaptation is necessary to assure that the lessons

observed in one organization can be successfully

transferred to another organization whichoperates in a

different cultural framework. As Dr. Deming further

cautioned (Deming, 1982): "Adapt, don't adopt. It is

error to copy."

In the development of Total Quality Management (TQM),

benchmarking has a unique place as both a tool to

stimulate improvement and a management technique that

aids in strategic positioning of an organization.

Benchmarking provides opportunities for full

organizational participation in business process

improvement by engaging the management team in the

architecture of change and choice of focus areas for

25

study; involving the middle managers in self-assessment

of the work processes that they own and in adapting the

lessons learned from other organizations; and relying on

the study of related processes by the organization's

front-line process experts who are charged with discovery

of the significant differences that lead to performance

gaps.

The objective of benchmarking is to accelerate the

strategic change leading to both breakthrough and

continuous improvement in products, services, and

processes, thereby resulting in enhanced customer

satisfaction, lower operating costs, and improved

competitive advantage by adapting best practices and

business process improvements of those organizations that

are recognized for superior performance. Benchmarking is

a method that forces organizations to look outside them

selves in order to avoid myopic illusions of grandeur

that come from reflecting on internal experience without

external validation.

Benchmarking is not just a checklist or set of numbers

that are used to make management feel better about their

current performance. Benchmarking really should make

management uncomfortable due to the identification of

gaps in business performance. Benchmarking should

challenge management due to the discovery of performance

enablers that could help them to improve. Perhaps the

following juxtapositions can help describe this situation

26

Benchmarking is: Benchmarking is not:A discovery process A fixed, rigorous cookbook An improvement methodology A panacea for developing all A source of breakthrough Supporting continuation of An opportunity to gain A management fad or "tool of An objective analysis of Based on a subjective "gut A process-based learning Just a measurement of A way to generate ideas for Merely a set of quantitative A way to capture tacit Limited to within

Table : Benchmarking Application Scope Analysis

It is important to observe that the logic of the

benchmarking process does not fail the test that was

issued by Dr. Deming in the early 1980s, when he cautioned

executives against deadly diseases in the management of

business that were derived from setting arbitrary goals

based solely on visible performance measures, without

understanding the depth of profound (process-related)

knowledge that lay underneath most high level performance

measures.

For instance, Deming would call "arbitrary" the use of

benchmarking using the logic that is described in the

first column of Table 2 where change is made based on

superficial observations or anecdotal evidence. The logic

of benchmarking is much more process-oriented and

requires the development of the type of profound

knowledge advocated by Dr. Deming - knowledge of how the

process achieves statistically significant results based

on the operational definition of work process activities

which have been meticulously specified in order to

27

understand those specific differences that could then be

properly called the "root cause" of the performance

distinctions that have been observed. This logic is based

on statistically sound observations of process

performance in order to discover the drivers of

exceptional results as shown in the second column of

Table

Traditional Logic: Benchmarking Logic:The price of our competitor's

product is 15% lower than our

costs; therefore, we must

reduce our costs by 15%.

The leading companies have

very similar operations that

are consistently 20% moreThe reasons that there

operations are more effective

and efficient is because theyThe specific practices used

to improve this work and

produce this outcome includeThe following enhancements in

our way of working would be

appropriate for our own

business model and cultureThe estimate of performance

improvement that could be

gained from implementing a

program of processTable : Comparison of Traditional Logic with Benchmarking

Logic

The ability to apply this logic to learn about and

understand the root cause of process improvement at the

28

benchmark organization thus encourages translation of

these lessons into appropriate change for the

investigating organizations. By this process of

conscientious learning and cautious adaptation, a company

can learn the lessons needed to transition it to a level

of World Class performance. Lee Raymond, CEO of

ExxonMobil, remarked in a meeting that I attended:

"Benchmarking has been the most important practice for

the continuous improvement of our corporation."

History of Benchmarking

Benchmarking is a management process developed in the 20th

century. It has transitioned through four generations of

development and now is in a fifth generation of maturity.

This chapter expands on previous writings and clarifies

the relationships in the transition of benchmarking that

has brought it to its current level of global

benchmarking through the ubiquitous access to data and

information that is offered through the Internet (Watson,

1992, 1993, and 2007). Tracing the historical context of

benchmarking allows an improved understanding of how it

can contribute to performance improvement today. Let's

begin this historical journey by gaining the perspective

from the close of the 19th century to understand how the

industrial revolution and its approach to interchangeable

parts fostered the idea of interchangeable business

29

processes and the application of the scientific method to

study business became extended into the use of business

measurements to define best practices.

The maturing of benchmarking could be viewed as a series

of generations or stages in development... This taxonomy

of benchmarking is messy as the stages overlap and some

have no clear beginning or ending. But, perhaps by

putting them in writing, along with the logic that

defines their boundary conditions, this will help

managers to clarify what exactly it is they are doing

when they seek information to improve their business.

However, in this paper we will observe that there have

been about five generations of development for this

methodology.

Moreover, we can observe, just like Sir Isaac Newton, that

benchmarking enables us to say: "If I have seen further,

it is because I have stood on the shoulders of giants."

We see more clearly and make better decisions because we

are not replicating the mistakes of the past, but using

the analysis of the past to sharpen our focus on the

future! Discovering profound knowledge from history can

help you to see the future with more perfect vision!

The Dawn before Benchmarking Science

30

In the late 1800's the management science work of

Frederick Taylor encouraged comparison of work processes

through the application of the scientific method.

Taylor's concept was that there was "one best way" to do

work and that it could be discovered through the

scientific study of the way that work was performed. When

the best way was discovered then this should be applied

as the standard for work performance until a better way

was discovered.

These technical studies of work practices were conducted

by industrial psychologists and industrial engineers.

During the Second World War, this practice of making

comparisons extended so that it became commonplace for

companies to 'check' with other companies in order to

develop standards for pay, working hours, safety

regulations and related business hygiene factors.

First Generation — Competitive Product Analysis and Reverse Engineering

This first generation of benchmarking could also be

labeled 'natural curiosity and its natural extension.'

Even when production was done by craftsmen forming

individual works with their own hands - artisans who saw

each piece for its uniqueness, there was a tendency to

compare your own work with that of others to determine

which was the 'best of the best' in your field. This

concept of 'best of the best' is described by the Japanese

word 'dantotsu' which was the term Fuji Xerox used to

31

describe the object of the search for best practice.

Today, this practice is observed through the engineering

teardown analysis used in reverse engineering to

understand how competitive products have been designed,

what materials have been used, and what technologies were

employed in their production. Another focus is the

competitive product analysis which can take one of two

forms: marketing-based comparing features or functional

performance to customer perception and technology-focused

comparing degree of performance that is delivered against

a standard (e.g., computer run speed for a benchmark

software program). This form of 'benchmarking' will

probably continue ad infmitum.

Perhaps the most interesting insight in this period

leading up to the development of benchmarking comes from

comments describing how comparative product analysis and

reverse engineering were applied in Japanese industry. In

his book describing the development of the Toyota

Production System, Taiichi Ohno, former vice president of

manufacturing and co-architect of this system with

industrial engineer colleague Shigeo Shingo, described

the visit that opened their eyes to the possibility of

'lean manufacturing' as he talks about the observation

of the stock replenishment system that allowed fruits and

vegetables to be sold while fresh and reducing waste from

spoilage. As he admits: "from the supermarket we got the

idea of viewing the earlier process in the production

32

process as a kind of a store." He further observed (Ohno,

1990) that the Japanese adopted many of these practices

because of their innate "curiosity and fondness for

imitation."

Indeed during the period of 1950-1975 many American

businessmen felt that Japan was merely a Sopycat' and

therefore it did not present a serious business threat

since it did not invent any new technologies. At the

macro-economic level this may be true, but what the

Japanese did invent was the ability to produce products

with minimum waste because they did not have a resource-

rich environment that could tolerate the loss to society

that came from indiscriminate use of its scarce materials

or poor productivity practices. Indeed, during this time

many Americans joked about the stereo-type Japanese

industrial tour where engineering visitors came gawking at

the magnitude of American industry taking many photographs

to illustrate its greatness. These pundits missed the

point of the tours - to identify ideas that could be

transitioned to Japanese industry and improved to assure

congruence with their developing manufacturing practices

that focused on lean operations. At the same time that

its engineers toured American plants, others stripped down

the products and looked for ways to deliver the same

functions at lower prices - effectively value

engineering the products by eliminating waste from the

design and its production process simultaneously.

33

Second Generation - Informal Visits and Process Touring

In a paradoxical way the second generation of

benchmarking is once again more art than science in

benchmarking. There is a syndrome among managers to seek

the popular, adopting what is new, and worshiping what is

popular without making a critical assessment of its

validity or applicability. These are weaknesses that are

inherent in many 'art-like' benchmarking processes.

Taking a walk in a factory does not constitute a

benchmarking site-visit - this is industrial tourism.

Brief conversations with colleagues at a conference are

not benchmarking - these are chats. Benchmarking must

include three elements: definition of an object of study,

performance measurement of the object and comparison to

other similar objects in order to determine which

alternative has achieved the best capability and why.

While these forms of 'benchmarking' will probably also

continue ad infinitum, they should be strongly

discouraged, as they cannot produce profound knowledge of

the process that allows your organization to drive

improvement.

During this same period, American industry tended to

internalize its efforts rather than look toward external

34

influences as if they would somehow poison the miracle of

the post-war industrial might that was transforming

American into the world's greatest economy. In its

arrogance, many leaders in American industry believed

that Yankee ingenuity' was the solution to everything and

that they had no need to look elsewhere for creative

ideas in either product or process technology. Given this

internal focus, it is not surprising that in the 1950's

business leaders like Hewlett-Packard's Bill Hewlett and

Dave Packard encouraged their engineers to develop "next

bench syndrome" - the practice of checking with

engineering colleagues to define those functions and

designs to be developed and implemented. This commercial

arrogance was prevalent in American products -engineering

push of features into the marketplace without consulting

customers about needs or desires. This lead to a systemic

vulnerability that could be exploited by Japanese

companies if they could discover what it was that

customers wanted and deliver it first. And they did

exploit this vulnerability.

Throughout this first seventy-five years of the last

century, methods related to benchmarking could be best

described as an art rather than a science. The

development of benchmarking into a science was the

contribution of the Xerox Corporation as it sought to

fight an onslaught of Japanese businesses that were

taking advantage of a court ruling that stripped Xerox of

its patent protection for its copier business due to its

35

monopolistic business practices. The largest beneficiary

of this ruling were the Japanese firms that developed

disruptive technology at the low-end of the copier

business and caused Xerox to lose market share

drastically in the period from 1976 to 1979 - with a

subsequent drop in return on net assets from 25% to under

5%. How did Xerox respond to this crisis?

Third Generation — Competitive Benchmarking (1976-present)

This phase of the benchmarking evolution was marked by

the use of a scientific approach to benchmarking

commenced by competitive benchmarking as an extension of

competitive intelligence and market research. Competitive

benchmarking seeks to discover the specific actions that

are being taken by competitors to gain advantage in the

market place through their strategic choices and capital

investments in products and processes. Since competition

is the defining ingredient in a free market, this type of

benchmarking is an essential ingredient in every informed

company's portfolio of tools in their strategic business

planning process.

After Xerox was forced to put its patents into the public

domain in 1975, a steady stream of foreignCompetitors

entered its markets - lead by Canon of Japan and Savin

from France. The manner in which they chose to enter into

competition caused little concern among Xerox managers

36

because the competitors were only producing personal

copiers - low throughput devices that fit onto a

manager's desktop or file cabinet and were only capable

of reproducing a single page at a time and very slowly,

compared to the large, big-speed copiers that Xerox sold

for use in central copying locations. However, it became

clear over a number of years that these small machines

were taking work away from the larger machines and the

Xerox business model leased the machines but sold

individual copies that they produced. Thus, Xerox was

losing its business one page at a time!

The Xerox benchmarking of mail-order giant L. L. Bean is

a classic tale in modern business history. However, one

lesson has been lost in this history - what was the

catalyst for doing this study and how did it get exposed?

The Xerox management team learned about their performance

gap to their new competitors in Japan from their Japanese

subsidiary - Fuji Xerox, a joint venture firm that had

been established between Xerox and Fuji Photo Film.

Yotoro "Tony" Kobyashi was the CEO of Fuji Xerox at the

time and it was his people who evaluated their Japanese

competitors to allow a three-way comparison to be

accomplished. By comparing scarce open source knowledge

of the Japanese competitors to the detailed knowledge of

a fierce, but captive competitor (Fuji Xerox), Xerox

Corporation was able to 'triangulate' (which means to

estimate performance of a third party using two known

variables) and determine their standing against the

37

competition. This is what Bob Camp would call 'Step Zero'

in a benchmarking study - a strategic discovery process

that I call strategic benchmarking (Camp, 1995 and

Watson, 1993). Without this step and discovery, Xerox

would not have the insight about what or where it must

focus its benchmarking lessons to learn about what must

change in its operations in order to make improvement

endure.

Xerox CEO David Kearns turned to his Fuji-Xerox Japanese

joint venture lead by Kobyashi to discover what could be

done to stem the tide of lost sales and profitability. The

Xerox benchmarking method was borne out of the business

requirement to estimate their competitor's strength by

triangulating from two known sets of performance results

(Xerox USA and Fuji Xerox) to learn about the unknown

capability of their Japanese competitors (Hillkirk,1986;

Camp, 1989, and Palermo and Watson, 1994). This created a

real wakeup call for the Xerox business leaders - not

only were Xerox new products twice as long in

development, but their manufacturing cost was equal to

the sales price of the competing products. Thus, there

was no way that Xerox could compete head-to-head on these

disruptive technologies.1 This provided the first

indication that there was real trouble at Xerox -

performance indicators that demonstrated that there was a

gap in performance, but it didn't tell what the gap was,

why it existed, or what to do about it! Competitive

benchmarking proved its value by delivering this wake-up

38

call, but it wasn't capable of providing a change agenda

that would return Xerox to profitability. For this, Xerox

had to learn from business leaders in each of the

performance areas where they suffered from shortfalls

against the competition, so they put together a team to

create a process for learning which they called

benchmarking.

While the lessons learned from competitive benchmarking

told what was wrong and estimated how far Xerox lagged

behind the competition, it was the benchmarking of

industry best practice that gave sparks to fuel the

creative imitation of leading processes that brought

Xerox out of its crisis. Xerox turned to companies with

successful practices in those areas where they had

observed their own

1 Harvard Professor Michael Porter in is early book

Competitive Strategy (New York: The Free Press, 1985)

describes the competitive dynamic for a market entrant

where the barrier to competition has been removed (patent

protection) and the entrant has cost-differentiated

itself from the market leader. Harvard Professor Clayton

M. Christenson in his insightful books, The Innovator's

Dilemma (New York: Harper Business, 2003) and The

Innovator's Solution (with Michael E. Raynor (Boston

Harvard Business School Pres, 2003)), calls this approach

to a competition 'disruptive innovation' in which new

market entrants fundamentally change the game of the

39

competition by seeking a lower-profit, vulnerable market

from which to attack the mainstream market. In this

environment, the new market entrant is given freedom to

operate in this market because it costs too much in terms

of lost gross profit margin for the entrenched leader to

defend a poor profit market. Over time the market entrant

earns the right to compete for the mainstream market.

This is precisely what Canon and its Japanese competitive

cohort did to Xerox.

shortcomings - the retailer Sears provided insights into

inventory management, while the mail order firm L. L.

Bean contributed learning of warehouse operations.

Learning was incorporated at a furious rate and Xerox

converted itself into a new company with the result that

by 1985 Xerox had increased its return on net assets to

over 10%. However, benchmarking was restricted at this

time to the few companies that Xerox studied and was

largely held as an internal practice within the Xerox

Benchmarking Network - about 100 middle managers who

conducted these studies. It was only after Xerox put

these methods into the public domain by opening sharing

the practice after they won the Malcolm Baldrige National

Quality Award in 1989 that the interest in benchmarking

expanded

40

Afterwards Corporate Partnerships and Sharing Flourished

In 1981, a second event stimulated interest in business

improvement. Dr. W. Edwards Deming was featured in the NBC

television White Paper titled "If Japan Can, Why Can't

We?" A challenge was issued to American management - they

could improve their business and survive or allow it to

grow stagnate in the face of the Japanese competition and

die! At this time many American industries were under

attack by Japanese firms - Xerox was not alone; however,

the influence of Deming was just to focus management on

the need to improve. Deming was not a big fan of

benchmarking (Deming, 1982): "I think that the people

here [in America] expect miracles. American management

thinks that they can just copy from Japan. But they don't

know what to copy."

However, Dr. Joseph M. Juran was the quality consultant

who most influenced Xerox and it is unclear if Dr. Deming

ever really understood how the Xerox benchmarking

methodology worked. Deming talked as if he felt that

benchmarking was more an art than the science it had

become under the coaching of Kobyashi at Xerox! But,

Deming always asked the question: "How do you know?" It

is this question that is central to any effort at

benchmarking and is the point where Deming's philosophy

and benchmarking merge.

The Diffusion of Benchmarking as a Practice

41

Another significant event that accelerated the spread of

benchmarking as a recognized business best practice was

the presentation of the Malcolm Baldrige National Quality

Award to Xerox which put a public spotlight on

benchmarking as a practice that made a difference at

Xerox. David Kearns, the Xerox CEO who lead the company

throughout its turnaround effort, decided to put all of

its quality practices into the public domain (these

included the benchmarking process, problem solving process

and quality improvement process) and Xerox also followed

the practice of Baldrige Award Winners of offering

seminars to explain what they did and how it was

accomplished. Bob Camp's successful book reported on the

work of "Team Xerox" to develop and deploy a common

method for benchmarking throughout the company. Following

these efforts, benchmarking gained more public attention

as a number of books that were published in the 1992-3

period that facilitated the diffusion of learning about

the benchmarking process.2

Fourth Generation — Process Benchmarking (1992-present):

Process benchmarking can be either strategic or

operational in its focus depending on where it is

focused. The importance of the subject and the breadth of

its application distinguish between these types of

studies. It is this type of benchmarking that forms the

core of scientific studies. Process benchmarking will be

the continuing focus of serious business investigations

42

and will provide insights into the way businesses achieve

flawless execution of their processes to achieve

excellence in the perspective of their customers.

Institutionalization of the Practice of Benchmarking

However, it wasn't until the Houston-based American

Productivity & Quality Center (APQC) established The

Benchmarking Clearinghouse (IBC) in 1992 that a common

methodology and approach for benchmarking was spread into

a consortium of companies who purposefully gather to share

and study their internal practices in common interest

groups. The IBC was the brainchild of Dr. C. Jackson Gray

son, the founder of the APQC and one of the drivers behind

establishment of the Malcolm Baldrige National Quality

Award. Grayson believed that benchmarking was not just a

fad but it was an essential business practice. Grayson

had been a dean of two graduate schools of business and

administrator of the wage and price controls process put

in place to control runaway inflation in the early 1970s

under the Nixon administration. An endorsement about the

business value of benchmarking coming from him was indeed

high praise, but to have him actively engage in a process

to broaden the scope of benchmarking through developing a

forum that facilitated cross-company learning was truly

indicative that benchmarking had transitioned from a

company-specific quality improvement tool to an essential

ingredient of management best practice.3

43

Mainstreaming Benchmarking into Business

By 1994 the IBC had directly reached over 1,000 companies

in promulgating benchmarking; the Malcolm Baldrige Award

criteria had been ordered by over 100,000 companies and

the combined sales of benchmarking books had surpassed

200,000 copies. Over the past ten years (1994-2004), a

number of channels have come available for diffusing the

practice of benchmarking even further. Two channels for

benchmarking are worthy of particular attention: the

Internet and the Global Benchmarking Network (GBN).

It is clear that the advent of the Internet has changed

many aspects of life by creating 'instant access' to both

information and people. These are critical enablers of

benchmarking and thus allowing a much broader search for

information and contact possibility than was previously

obtainable through personal contacts and cross-

organizational affiliations. The advent of the World-

Wide Web as a global communication resource strengths the

ability to gain access to data, but it also complicates

the interpretation of information because there are no

standards for analysis and thus the web is inundated with

a plethora of "Theory Opinion" that must be sorted and

sifted to discover truth. In my opinion, the full impact

of the Internet on benchmarking practices has yet to be

felt.

44

So, what is benchmarking? In order to understand this

methodology we must first define some key terms. There

are three sets of definitions which will be presented.

The first terms that must be defined are those that

identify the different ways to apply benchmarking studies:

Process Benchmarking

Process benchmarking is a method for comparing performance

between two unique or distinct implementations of the

same fundamental process. The method includes internal

inspection of an organization's own performance as well as

the external study of organizations recognized for

achieving superior performance as evidenced by objective

standards by comparative analysis (the performance level

is observed is called a benchmark). The objective of a

study for process benchmarking is not to calculate the

quantitative gaps in performance, but to identify best

practices that may be adapted for improvement of

organizational performance. There are four types of

process benchmarking studies: strategic, operational,

performance and perceptual benchmarking.

Strategic Benchmarking

The process benchmarking of organizational strategy or key

business process performance in order to determine

breakthrough opportunities for profitability and

productivity improvement is called strategic benchmarking.

This type of study focuses on those critical business

areas that must change to attain or maintain the

45

competitive advantage of a business. Strategic

benchmarking studies focus on critical business

assumptions, primary competence areas, core business

processes, technology inflection points, or business

fundamentals that define organizational purpose. The

purpose of strategic benchmarking studies is to challenge

the management to move from a current state to a desired

state of the whole business. Examples of strategic

benchmarking studies include: evaluation of options for

the design of an organization's governance structure;

assessment of approaches used to implement advanced

technology (e.g., enterprise management software or

paperless document handling); or strategic business issues

that are faced by the organization (e.g., creating a web-

based business capability; managing the technology

transition across generations of advancement; or managing

the routine work of the organization through management

methods such as balanced scorecard, performance

management and business excellence assessments).

Operational Benchmarking

The process benchmarking of work processes or practices in

order to discover opportunities that will provide

productivity improvement in the areas of effectiveness,

efficiency, or economy of the routine business operations

is called operational benchmarking. This type of study

focuses on specific work activities that need to be

improved and seeks to identify the work procedures,

production equipment, skills or competence training, or

46

analytical methods that result in sustained performance

improvement as indicated by objective measures of process

productivity

(Process throughput, cost per unit, defect

opportunities, cycle time, etc.)- Examples of

operational benchmarking studies include: analysis of

invoicing procedures to determine the most productive

process; evaluation of production methods to determine the

highest throughput methods that deliver lowest cost and

least defects; and study of logistics distribution

methods that result in both high delivery service

performance and low levels of finished goods inventory.

Performance benchmarking

The process benchmarking of product or service results

using a standard comparison or test under known operating

conditions is called performance benchmarking. This type

of study seeks to answer the question: which product or

service is better based upon rigorous assessment using

objective performance criteria. Examples of performance

benchmarking studies include: consumer product analysis

that evaluates products on a "head-to-head" basis using a

fixed set of criteria for performance; evaluate of

product performance using a standard test, such as

operating time to run a specific application; or

endurance tests that identify the ability of product to

perform over a fixed period of time under comparable

operating conditions.

47

Perceptual Benchmarking

The process benchmarking feelings or attitudes about

process, product, or service performance by the recipient

of the process output is called perceptual benchmarking.

This type of study seeks to answer questions like: how do

you perceive the delivery of service, performance of

product, or execution of process by the people who are

recipients of these outputs? Perceptual benchmarking uses

attribute or categorical data to quantify subjective

feelings and establish relative ranking of performance

based on such criteria as timeliness of performance,

goodness of knowledge transfer, soundness of information,

courtesy of delivery agents, etc. Examples of perceptual

benchmarking include: surveys of training satisfaction at

the completion of a course; employee satisfaction surveys

to assess work climate or structural issues about

compensation and benefits; or customer satisfaction with

the product or service delivery to the market.A second set

of definitions identify sources of data used in conducting

a specific benchmarking study. These terms categorize

benchmarking practices according to the relative utility

of information from the information sources.

Competitive Benchmarking

48

An approach to benchmarking that targets specific product

designs, process capabilities, or administrative methods

used by one's direct competitors. For example, in order to

stimulate business model change Compaq made a detailed

study of the study of the performance in the laptop

computer industry to determine business model features

that should consider as it initially determined how to

enter into this market. Here they studied the performance

of the business models of those companies that would

become its competitors.

Industry Benchmarking

An approach to benchmarking that seeks information from

the same functional area in a particular application or

industry (e.g., benchmarking the purchasing function to

determine the most successful approach for managing a

supplier base).

Internal Benchmarking

An approach to benchmarking where organizations learn from

"sister" companies, divisions, or operating units that are

part of the same operating group or company (e.g., the

study of internal research and development groups to

determine best practices that reduce time-to-market for

the new product introduction process).

Generic Benchmarking

An approach to benchmarking that seeks process performance

information that is from outside one's own industry.

49

Enablers are translated from one organization to another

through the interpretation of their analogous

relationship (e.g., learning about reducing cycle time in

production operations by the study of inventory management

methods used in stocking fresh vegetable in grocery

stores).

PURPOSE OF BENCHMARKING

Have an experienced HR Consultant 24/7- just a phone

call away.

Establish solid HR Systems.

Ensure compliance with Federal and State Employment

laws.

Get difficult, focused HR projects done accurately

and quickly.

Maintain HR Systems on an ongoing basis.

Recommend systems and establish a timeline for

project.

Establish workers compensation reporting, drug

testing procedures, and establish working

relationship with company doctor or clinic.

50

Assist with staffing the company as needed.

Provide assistance with interviewing, reference

checking, and benefits sign-up and initial

orientation of new employees.

Provide ongoing Human Resource support as needed and

requested either on-site or off-site.

Train an on-site administrative person to handle day

to day Human Resource tasks such as monthly benefits

administration, etc.

Set up personnel files and recordkeeping systems

such as Personnel Action Request Forms, Performance

Review systems, job descriptions, etc.

NAVIGATING HR BENCHMARKING

51

Benchmarking Model

Benchmarking is the search for industry best practice

which leads to superior performance. The pioneer of

competitive benchmarking was the American company, Xerox

Corporation. The company demonstrated the usefulness of

observing and learning from superior performers by

benchmarking their competitor. Through the knowledge they

gained they managed to dramatically improve their

productivity and significantly reduce their cost of

production.

Based upon the Xerox experience, Robert Camp has

developed a model which can be modified and adapted to

suit any functional area, including HR management.

The Benchmarking Process

52

Phase One: Planning

Camp has broken the process of benchmarking into 10 steps

which progress through 4 phases:

Step 1: Identify what functions, products or outputs are

essential practices and should be benchmarked.

Step 2: Identify external organizations or functions

within own organization with superior work practices for

comparison.

Phase Two: Analysis

Step 3: Determine what data sources are to be used. If an

organization has up to date personnel/payroll systems it

should be able to measure a range of HR practices and

outputs relatively easily. Valuable information may also

be available through personnel records, surveys or even

interviews.

Step 4: Determine the current level of performance. This

will enable the gap in performance to be identified. Camp

emphasizes the importance of a "full understanding of

internal business processes before attempting comparison

with external organizations." Baseline measurement also

provides an objective basis upon which to plan and act.

53

Phase Three: Integration

Step 5: Develop a vision for future operation based on

the benchmarking findings. Focus should be directed on

the quality of best practice procedures/practices and how

these can be not just emulated, but improved upon by the

organization.

Step 6: Report progress to all employees on an ongoing

basis. Communication and feedback are crucial components

of benchmarking.

Phase Four: Action

Step 7: Establish functional goals linked to the overall

vision for the organization.

Step 8 & 9: Develop action plans and implement the best

practice findings. This should be the responsibility of

the people who actually perform the work. Periodic

measurement and assessment of achievements should be put

into place.

Step 10: Update knowledge on current work practices. This

is, in essence, the crux of continuous quality

improvement.

The remainder of this paper will focus on how to

begin step one, the planning phase, of an HR benchmarking

process, i.e. Identifying what to benchmark.

The discussion will primarily deal with the quantitative

measurement of human resource management. Although

54

qualitative assessment can be a valuable and informative

benchmarking tool, the ease with which agencies can

define, and in many cases obtain, quantitative

information makes it a practical starting point from

which to develop a benchmarking process.

55

The Benchmarking Process

The generic four-phases that these steps cover roughly

follow a Plan-Do-Check-Act (PDCA) process that is called

the Deming Cycle and which is generic in all process

improvement models for process management and improvement.

The PDCA approach to process benchmarking .

Plan - Do - Check - Act: Deming Cycle of ProcessBenchmarking

However, the process that I favor has seven steps which

highlight the work that must be done in a benchmarking

study and which follow the four-phase. The seven

activities in a benchmarking process include:

• Identify Subject - choose what to benchmark

• Plan Study - identify your partners and plan your datacollection

• Collect Information - actively collect the data andvisit partners

• Analyze Data - analyze the data for performance trendsand consistency over time

• Compare Performance - compare results and testdifferences for statistical

significance

• Adapt Applications - prepare the lessons learned fortransition to your own culture

56

• Improve Performance - implement projects to improveyour processes

Each phase of the PDCA benchmarking process can be

described using a set of questions that identify items to

address in these four phases of a study. Please note that

many of these questions are the same as the basic

questions that one asks during any TQM improvement

project.

Benchmarking Step 1: Choosing the Benchmarking Topic and Planning the Study

Questions that must be answered in order to plan abenchmarking study include:

• What process should we benchmark?

• What is our process and how does it work?

• How do we measure it?

• How well is it performing today?

• Who are the customers of our process?

• What products and services do we deliver to our

customers?

• What do our customers expect from our process?

• What are the critical success factors for this process?

• What is our process performance goal?

57

• How did we establish that goal?• What data should we collect for comparisons?

Benchmarking Step 2: Identifying Partners, Collecting Data, and Answering Questions

Questions that must be answered during this during the

data collection phase of a benchmarking study include:

• What companies perform this process better?

• Which company is best at performing this process?

• What can we learn from that company?

• Who should we contact to participate as our partners?

• What is their process?

• How representative is the process across different

areas of their organization?

• How do they measure process performance?

• What is their performance goal and how was it set?

• How well does their process perform over time?

• Is there any difference in performance at different

locations or based on seasonal

change?• What business practices, methods, or tasks contributeto the process performance?

Benchmarking Step 3: Analyzing Performance and Comparing Processes

Questions to be answered during this analyze phase of a

benchmarking study include

• What is the basis for comparing our process

58

measurements?

• How does their process performance compare with our

process performance?

• What is the magnitude of the performance gap?

• What is the nature or root cause of the performance

gap?

• How much will their process continue to improve?

• What characteristics distinguish their process as

superior?• What activities within our process are candidates forimprovement?

Benchmarking Step 4: Implementing Recommended Change to Improve the Process Questions to be answered during this improve phase of abenchmarking study include:• How does our knowledge of their process help us to

improve our process?

• How should we forecast the future effectiveness of

their process performance?

• Should we redesign our process or reset our performance

goal based on this

benchmark?

• What activities in their process need to be modified to

adapt it into our business

model?

59

• What have we learned during this study that will allow

us to improve on "best"

practice?

• What goals should we set for our own process

improvement?

• How can we implement the changes in our process?• How will other companies continue to improve thisprocess?

Note that many of the questions addressed above are the

same as would be addressed in managing implementation in

any project improvement process.

Method Definition When to Use Advantages DisadvantagExisting Data Analysis Before A large Measurement

data that conducting of sources may lackalready original be and not allin-house in order information importantthe public the Systems. will beDomain. Baseline. to conduct

CauseMailed Written When you Permits Response

provided to gather data are low;benchmarki informatio over time, may beOrganizati from a analyzed andIt may number of computer rarelyany type different software there is noquestion: Or data is and it isand false, Compile. to use amultiple form toforced intoscaled "how to"Or open- Questions.

Telephone A written If Can cover a Locatingof needed group of person toused to or you respondents logisticsdata over screen quickly and getting thetelephone sources people are on-line,anticipati in-depth to be more is only a

60

engaging Up later. candid over opportunitySpecific Telephone. Exchange

Method Definition When to Use Advantages DisadvantagFace-to-Face A meeting When you Encourages The

a one-on-one interaction processpartner interactio depth time toquestions probe and and open- and executeare data questions - intervieweeand to a using a beIn objective style discuss

Level of information issues,Be Or

Focus Group An open- When you Direct Logisticspanel or to gather data and Carefullydiscussion informatio best Managed. Ifa third- from more among is nofacilitato one source as a "lowestcoordinati same time group that denominatorThe when there discuss may be

diverse a mutually opposed toor ways to Agenda. Besttoward anOr

Site Visit An on- When you Can observe Requiresmeeting at to observe actual advancedfacility specific verify Andfollow-up Practices. performance Forinterview, interperso its asks whatgroup or observatio characteris question ofand necessary well as Whom?

61

data evaluate enablerswith aspects" measurementwork process Systems.Observatio Performanc

Table Comparison of Alternative Data Collection Methods Used

in Benchmarking

Methods of Data Collection

In conducting a benchmarking study, there are several

different approaches to data collection that can be

pursued by a benchmarking team. Table describes the

approach, as well as the advantages and disadvantages,

associated with each of the most popular methods used in

benchmarking studies.

Presenting Benchmarking Study Results

Some final points should be made about the process of

benchmarking relative to the analysis and presentation of

benchmarking data. Care must be taken in the data

analysis efforts to assure that benchmarks are

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representative of real-world performance. Specific

cautions include the following statistical problems in

benchmarking:

• Single data point measurements or observations that are

passed off as a "benchmark"

• Measurement systems not validated for sensitivity of

observation or calibration

• Averages used to represent performance benchmarks

• Missing variation data in process characterization

• Components of variance not identified according to

their source

• Comparative charts not indicating both mean and

variance

• Process changes not correlated with performance shifts

• Interactions not identified among the different processvariables

Clearly, there can be many issues that create problems in

the measurement and analysis of results from benchmarking

studies. Careful planning and solid data collection and

analysis efforts can achieve the elimination of these

opportunities for error introduction into a benchmarking

study. Whenever possible, analysts conducting

benchmarking projects should have the same education as

Six Sigma Black Belts in statistical analysis to assure

the analytical soundness of study results.

Perhaps it will help to consider some examples in order to

understand benchmarking studies a little better. Consider

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the following four examples of benchmarking studies and

the factors that caused management to initiate each study.

Triangulation Warning: Benefits and Pitfalls of

Benchmarking

Benchmarking is a business process that encourages

managed change. It encourages an organization to take an

objective, external perspective in evaluating its

performance. The benefit of benchmarking comes from three

specific actions:

• The gap between internal and external practices creates

the need for change.

• Understanding the benchmarked best practices identifies

what must change.

• Externally benchmarked practices provide a picture of

the potential result from

change.

However, no business improvement methodology is a stand-

alone solution to all problems. Lest process benchmarking

appear to be a panacea for problem-resolution, the

following set of potential pitfalls in conducting

benchmarking studies must also be disclosed:

• Selecting benchmarking partners that do not convince

management (not-respected)

• Choosing benchmarking partners to meet popularity tests

with no performance

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substance

• Accepting public relations claims as process

performance benchmarks.

• Assuming that measurements are the same in different

organizations (without

checking)

• Identifying process measures that are not traceable

from strategic to operational

levels

• Conducting statistical analyses that represent surface

observations not root

causality

• Failure to validate performance with on-site inspection

to verify benchmark claims

• Enforcing implementation of a benchmarking lesson

across a cultural barrier• Use of "benchmarks" for management decisions withoutrecalibration over time

These pitfalls in benchmarking applications can be avoided

by taking a professional approach to the conduct of a

study and using trained employees to facilitate

improvement projects that will use this methodology to

seek ideas for improvement. The improvement through

"creative imitation" as the study team seeks innovative

ways to apply the lessons it has learned through the

study.

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Comparative Analysis and Competitive Advantage

What does an organization gain in the way of competitive

advantage from benchmarking? In the long run competitive

advantage comes from out-thinking and out-performing

competition. When an organization uses benchmarking

effectively, they are able to think ahead of their

industry and to act efficiently by adapting lessons

learned from cross-industry studies to permit them to

creatively imitate the best performing processes in the

world. Over the long-haul this can establish them as the

thought-leader within their own industry. In the final

analysis, it is not out-thinking or prior knowledge that

results in competitive advantage, it is in the excellence

of execution of such new knowledge and the creative

application of breakthrough insights that wins in the

long-term. To achieve a dominant position in a market, a

company must both know and do better than its most

aggressive competitors. Benchmarking can help develop the

competence to achieve this position, but it must be

supplemented by management will and knowledge in order to

make success happen.

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BENCHMARKING THE HUMAN RESOURCES FUNCTIONS

The Global best practices HR tool examines 44 performance

measures in 5 key areas:

1. Cost and Staffing: Compare a series of cost measures,

including the total cost of the human resources

department, in addition to a series of staffing

measures, including the number of HR staff to total

employees.

2. Recruitment: Assess turnover rates. Determine the

timeliness and efficiency of the recruitment process.

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3. Training and Recognition: Review types of training

offered and use of incentive plans.

4. Benefits: Understand methods used to communicate

benefits information and the extent to which

contributions are made to retirement plans.

5. Technology and Organization: Examine the types of

human resource information systems used, as well as

methods of effective communication and employee feedback.

DIFFERENCE BETWEEN BENCHMARKING AND

BEST PRACTICES

Are benchmarking and best practices the same?

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No, they are not the same.  Benchmarking is the process

that allows one to identify potential best practices,

i.e. by identifying the best performers; one knows where

to look for practices that might improve their own

performance.  However, there are different types of

benchmarking and some organizations engage in

benchmarking in order to identify performance targets for

their own organizations rather than to look for practices

that make other organizations so successful.

What distinguishes a best practice from a better practice

or a good idea?

A best practice is not simply a new idea, but rather a

Best Practice is one that meets the following seven

criteria:

1. Successful over Time:  A best practice must have a

proven track record.

2. Quantifiable results:  The success of a best practice

must be quantifiable.

3. Innovative: A program or practice should be recognized

by its peers as being creative or innovative.

4. Recognized positive outcome: If quantifiable results

are limited, a best practice may be recognized through

other positive indicators.

5. Repeatable:  A best practice should be replicable with

modifications.  it should establish a clear road map,

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describing how the practice evolved and what benefits are

likely to accrue to others who adopt the practice.

6. Has local importance:  Best practices are salient to

the organization searching for improvement.  The topic,

program, process, or issue does not need to be identical

to the importing organization, however.

7. Not linked to unique demographics:  A best practice may

have evolved as a result of unique demographics, but it

should be transferable, with modifications, to

organizations where those demographics do not necessarily

exist

FACTORS ENHANCING THE CHANCES OF SUCCESS FOR

A BENCHMARKING EFFORT

A well-designed benchmarking process is essential. 

However, there are some other critical success factors,

including:

Senior Management Support;

Benchmarking training for the project team;

Useful information technology systems;

Cultural practices that encourage learning; and

Resources, especially in the form of time, funding,

and useful equipment.

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COMPANY ANALYSIS

ONWARD TECHNOLOGIES LTD

Onward, provides system integration services mainly in

the area of banking, CAD/CAM services and customized

software development for both domestic and international

markets.

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The company was traditionally involved in hardware,

software development, system integration, networking etc.

mainly aimed at the domestic market. However, during the

FY 98, the company closed down it’s underperforming

businesses, which were typically labour-intensive and

carries low margins. The company downsized its its

employee strength and has written off its bad debts.

Onward, which made a loss during FY 99, has turned around

its operations to register a PAT of Rs. 9.3Mn for the

current year.

The company has now restructured its operations to

concentrate more on the export markets which was ignored

by the company so far. Onward is well placed to

capitalize on the domain knowledge acquired over the

years. The company’s days of low growth and mounting

losses are over and it is now entering the growth

trajectory.

Revenues are expected to grow more or less in line with

the industry. Growth in revenues will be driven mainly by

exports division. Operations of the company’s US

subsidiary have stabilized and has been able to market

itself well. Profits and margins, on the other hand, are

expected to witness exponential growth rates.

MASTEK LTD.

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Mastek, is one of the oldest Indian software companies

with exposure to software services as well as products.

The company’s ERP product MAMIS failed to create any

impact on the market and has been largely unsuccessful.

Despite being one of the oldest players in the country,

the company has not been able to establish itself amongst

the top players. The company’s poor performance in the

past can be attributed to its loss making domestic and

South East Asian operations.

The company has increased its focus from products to

software services and the move has paid rich dividends.

Mastek is one of the leaders in Customer Relationship

Management (CRM)an extended ERP application. CRM is

expected to account for 25% of the total income. The

company is one of the pioneers in the CRM area, which is

one of the fastest growing segments in ERP today. Also,

margins are relatively higher.

ATOS ORIGIN

Formerly known as Origin Information Technology Ltd. Atos

Origin’s core business is to provide value to its clients

by helping solve their business problems with enabling

technologies.

With over 27000 internationally experienced business

technologists to serve clients in over 30 countries, Atos

Origin helps transform enterprises into communities. It

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has world-class experience in e-business, Consulting and

Systems Integration, Outsourcing and Online Services.

Atos Origin is a proven end-to-end front to back office

business solutions enabler. It’s leading B2B, B2C e-

Solutions portfolio is backed by an innovative

relationship model which drives value creation for its

clients.

The company’s excellent industry sector expertise-

Manufacturing & Process, Retail & CPG, Banking & Finance,

Hi-Tech & Telcos, and Automotive-gives the company a deep

understanding of client’s business. This understanding

allows it to focus on tuning clients vision into value

driven results, quickly and effectively.

RETENTION STRATEGIES

Retaining skilled manpower is a major challenge before

Indian software companies. Quite often, software

companies end up poaching professionals from each other

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as they compete to attract the same pool of talent. The

retention can be improved if the company focuses on

career counseling, sharing of vision, providing training

for skill-building, opening up new positions within,

building a coheasive orgainstion culture, leadership

workshops, joint decision making and others.

1) TRAININGCompanies are now spending a huge amount of money in

training to keep the employee morale high so that they

donot change loyalties. Some of the factors responsible

for influencing the employee retention are the mergence

of new competing industries and increase in competition

from various multinationals. In the telecom and IT

Industry, the IT department had the maximum attrition

rate.

Today, companies are outlining special training budgets

to prevent employee attrition. The companies with less

than 5% growth rate keep a training budget of upto 0.5%

of its turnover. The companies having growth rate between

25-50% earmark between 3-5% and companies within growth

rate higher than 50% spend as much as 7.5% on training.

Upgrading skills-It is not only the quantity, but quality of

software professionals is also important “human capital

is definitely a growing concern”.

In a bid to tide over the problem, companies such as

Silverline Technologies are hiring software professionals

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from overseas. Such requirements are primarily to ring in

project management skills in segment and technology. Both

technology and segment expertise are needed in good

combination. In India, there is a shortage of people with

a combination of both these skills. At lower levels,

technical skills are more needed and business skills are

necessary at higher levels. University courses do provide

some exposure to these technical and business skills, but

in most cases, they fall short of requirement. That is

why, candidates invariably undergo further training and

acquire hands-on experience before being assigned to live

projects.

That is why, companies such as Sonata Software, have in-

house institutes where freshers are trained for six

months to an year. As business skills are also important,

many Indian software companies are opting for non-

computer professionalsand offering them three to six

months training.

2) COMPENSATIONIn a dot com world, the blink of an eye matters more than

anything else and today, speed counts for business like

never before. In such a scenario, pay is becoming the

accelerator paddle for change initiatives worldwide. But

bnot without some strings attatched. Salaries are

hitting the roof but so are organizational demands from

employees.

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Performance based pay- Nobody can deny the role of rewards

and recognition in attracting and retaining talent.

Naturally then, benchmarking for compensation is a sure

shot topper on the to-do list for most HR professionals.

But while window shopping for best practices in reward

system, we miss the point that there is more to

benchmarking than coping interesting practices.

Specially, when we fail to reap the same success that our

competitors seem to enjoy.

The secret of attaining best practices in a reward system

lies in aligning it with business goal, performance

criteria and company culture. So, stir up your own

recipe, but keep it within the norms. Professional

appraisal systems and performance-linked awards are also

important.

These are important ingredients for employee

satisfaction. The compensation package has increased by

10-25% for the telecom and IT Industry whereas the

industry average stands at 5-10%. The links of pay and

performance are becoming more pronounced. Most companies

have some element of compensation, linked to performance.

But some organizations step further by relying solely on

performance delivery to structure executive compensation.

At IBM, performance incentives have been implemented

worldwide for all employees. At GE, performance is a

major factor in pay management.

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Many smart employers are moving towards an annual

incentive system. This works for middle and upper

management positions and even for teams and individuals

lower down the hierarchy. The popular technique is to use

annual incentive bonuses linked directly to goal

achievement. Substantial increases like this truly perk

up energy level of employees.

Study competitors trends- Making waves in the field of

compensation is the variable-pay module. Most variable

pay awards are paid in cash on an annual or semi-annual

or quarterly basis. The award is determined by company

and individual performance gaianst pre-established

targets. Variable pay works best when the company

performance is equal to or better than the industry

average. You will find a wide assortment, slaes

commission plane, individual incentive/bonus plans, team

awards, gain-sharing and even performance sharing plans.

Bonus and incentive plans-Earlier restricted to the small

pockets of employees, are now spreading to other levels

as well.

Profit sharing plans-Are funded by the organizations profits

based on a specified formula. The profit sharing pool is

then allocated to employee’s by some means, usually as a

percentage of their base salary.

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Spot bonuses- Provides recognition for an individual’s work

accomplishments. These are paid immediately after a

significant job performance event.

Gain-sharing plans-Allow employees to share in productivity

gains in accordance ith a pre-determined formula.

Normally the plans are established with participant

involvement and are typically designed for specific

workgroups, but company-wide programs also exist. Fair

and competitive pay is a starting point but don’t let be

the end of the road. A workplace should be created where

employees feel important, where they belong, where their

ideas are valued, where their work is appreciated, where

they can trust each other, enjoy working late sometimes,

look forward to Monday mornings, build a living, human

organization, don’t just pay for performance.

ESOPs-Very much popular with the IT sector. The most

common type of plan is the Stock option plan, where the

employee is offered shares which he can buy in the

future. The price at which employee can buy the stock is

equal to the market price at the time the stock option

was granted. The employee’s gain is equal to market value

of the stock at the time it is exercised, less the grant

price. The assumption is that the recipient of stock

options are motivated to help the company perform well,

so, in turn stocks will appreciate in value.

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3) COMPANY AS A PROVIDER-Employee satisfaction is the

bottom line. Tomorrow, (for it is not today), one can

safely expect most companies to accord a high priority to

work-life issues. A beginning has been made. A few

companies like Hughes Software, GE and Hewlett Packard

making an arrangement with a third party Concierge

Services Co. to help employees core management.

Companies are encouraging non-monetary packages like LIC

Policy, foreign trips, credit cards, stock options,

career development Plans, etc. to keep their staff happy.

Companies need to give their employees salary

compensation with the needed infrastructure, technology,

stock options and other perks. Whatever the company does

should be shared and transparent.

There are considerate touches. One of the companies,

everytime it sends its employees abroad for work, it

distributes free telephone coupons to the family members,

thereby helping them keeping in touch.

The softer events are driven around the company

organising leisure for its employees. The idea is hardly

a new one (office picnics span various work ages and will

continue to do so) but has been given a make-over in

order to promote the idea of having fun. Some companies

have initiated the concept of an evening at a Pub once a

month.

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Flexi-time-Often part-timing or Flexi-timing is put forward

as a solution for women and men who will increasingly

share the challenge of managing family and work time. A

solution which helped individuals work at a pace and

place decided by them. At the same time, this helps

companies save money by reducing fixed employee cost.

More and more companies are spending time and thought on

the idea of adopting the role of a leisure-provider. This

is an issue full of potential and one that is still

under-developed.

As Indian software companies discover the role of

recreation and stress relief in employee development and

retention, more companies are beginning to offer

recreational facilities to their employees.

4) ORGANISATION CULTURE-An open and friendly organization

culture is important for employee retention. Companies

must realize that during recession, it is more crucial to

retain good employees as they can chart a sharper

strategy for the company growth. Open communication,

transparency, level of delegation commensurate with

accountability and responsibility, increase in level of

professionalism and competitive compensation packages.

5) CAREER GROWTH-Organisations sometimes neglect

individual aspirations and goals. This might lead to an

employee looking out for greener pastures. So it is very

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crucial for any organization to take interest in

individual development also.

Some of the methods used by the Onward Technologies to

retain Human Resource are :-

Industry standard compensation

ESOPs

Training on new Technologies

Proper career planning

Performance-based compensation and rewards

Good work environment

Open communication and transparency.

Mastek, apart from being one of the first companies in

India to provide ESOPs has been a pioneer in offering a

stimulating and broad employee growth plan. Methods used

by Mastek Ltd:

Congenial atmosphere

Excellent emoluments and employee benefits

Pioneer in Technology

Wide range of career streams

Global opportunities

As a company, Mastek is one of the few that have a

Corporate Objective of Employee Satisfaction on equal

footing with the objectives of profitability and

revenues. Mastek has some stated values, which they

practice more than preach.

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The first and most revered value being “Open

Atmosphere”-Openness extends beyond calling everyone by

first names and not having cabins in the office. What

they mean by openness is the fact that they encourage,

and even demand that, Mastekeers question what they do;

they push their assumed boundries, and they raise their

disagreements and hold differing views on everything.

That is where, creativity is derived in the organistaion.

Freedom at work is the freedom to change the way things

are, but never at the cost of the result. Mastek

encourages people to “Just Go Do It”-which means an

excuse-free approach, to deliver results at all costs and

nothing is more challenging and motivating to a software

professional than seeing himself achieve results, in

spite of different schedules, day after day.

Excellent emoluments and Employee benefits

Mastek is an employee-driven company with a human-face

and approach, and its emolument packages are already best

in the industry, besides offering a string of Fringe

Benefits to the employee. Mastek is the first IT Company

to introduce ESOPs for its employees and is the only

Company that has the concept of ‘Runtime’, where the

entire staff of Mastek, from the CMD to the peon,

alongwith their families, board a train and head for a

three-day holiday. All employees and their families are

booked in 5-Star hotels with all expenses borne by the

company. This is just one of the many ways in which they

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demonstrate that ‘Mastekeers’are a part of one-big family

where everyone is respected for their contributions.

Many other small gestures by the company which go a long

way in retaining people are:

Sending home bouquets on Anniversaries and Birthdays

Taking care of few expenses during marriage

Different types of allowances

Global opportunitiesMastek’s network is spread throughout the Globe, with

operations in the USA, UK, Germany, Malaysia, Singapore,

Japan, Switzerland and Belgium. Most of Mastek’s projects

are for Fortune 500 Companies worldwide.

Rave technologies provided its employees with:

A higher compensation as compared to the industry

ESOPs

Rewards and Recognition

Other individual as well as team-based rewards spread

across the year (Monthly, Quarterly, Half yearly,

Yearly):

Movie tickets to employees every two months

Valentine Day Allowance etc.

Various other recognition programs

To minimize attrition, companies are focusing on employee

benefits where employee welfare is given extra

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importance. In Telecom and IT industries, a number of

measures are adopted to create an internal environment

which leads to higher employee retention. Companies are

also promoting from within, thereby, opening growth

opportunities in inter as well as intra division within

the Company.

All too often, a resignation is accepted not with regret

but with a bit of spice. This is especially true with the

IT industry. An employee resigns from an organization for

better prospects or fulfillment of his career

aspirations. The lure could be increased technical work

opportunities, higher responsibilities, a more attractive

compensation package or a chance to venture out on one’s

own.

Today IT companies are facing a shortage of knowledge

workers because the rate at which they loose employees is

almost double the rate at which they hire employees. HR

efforts can play an important role to reverse this

dangerous trend in the IT industry. There are times when

an employee resigns to join another company but after

some time, he decides to return to his previous job. The

reasons may be many. The new job may not be upto his

expectations or he may be more comfortable with his

previous team.

But employees who leave donot always come back. They take

with them some positive and some negative experiences and

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an image of the company, which they share with the

outside world. Employees whether working with a company

or separated are ambassadors, who spread the word around.

And while neglecting the process of employee exit, many

of us discount this fact completely.

So the Indian software industry should formulate a

result-oriented manpower framework to get over the labour

pains faster.

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BENEFITS OF BENCHMARKING HR PRACTICES

Affirmative Action Plans.

HR Policy and Procedures Manuals.

Employee Handbooks.

Interviewing Guides and Training.

Human Resource Department Audits.

General on-site and off-site Human Resource Support.

Organizational development.

Teambuilding.

Performance Review Systems.

Attitude Surveys.

Wage & Salary Surveys.

Supervisory Training.

It provides the means to review both the

effectiveness and efficiency of the HR team and its

processes.

It supports the monitoring and review of HRobjectives.

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It highlights the relative strengths and weaknesses

of current HR practices, in relation to perceived

'good practice'

RESEARCH METHODOLOGY

STUDY

This research project is a descriptive type of study on

the topic-

“BENCHMARKING OF HR PRACTICES”.

Research Design:

Research Design is simply the framework or plan for a

study, which is used as a guide in collecting and

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analyzing the data. It is the blueprint that is followed

in completing a study. As the objective of the research

is descriptive in form, the research design must be made

accordingly:

Formulating objective of the study.

Designing the method of data collection.

Selecting the sample size.

Collection of data.

Analysis.

Conclusion.

Descriptive research includes websites, books, magazines,

observations and fact-finding enquiry of different kind.

DATA COLLECTION

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PRIMARY DATA: Primary data helps in validation of the

knowledge gathered from secondary data. Primary Data are

those, which are collected afresh and for the first time.

The methods adopted for it are as under:

Observation Method

SECONDARY DATA: Secondary data provides the knowledge

about the topic of the research and the company in terms

of facts and figures. Secondary data are those, which are

collected through someone else, and users can obtain from

websites, books, magazines, and articles in newspapers.

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DATA ANALYSIS

OBJECTIVE OF THE STUDY:

The objectives of the study are as under:

To study the purpose of benchmarking the HR

practices.

To study the process and steps of benchmarking.

Defining the factors enhancing the success of

benchmarking efforts.

To know the benefits of benchmarking.

To analyze the trends and best practices for using

HR for competitive advantage.

METHOD OF DATA COLLECTION: The study is based on the

secondary data. The research tools are the magazines,

journals and websites.

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LIMITATIONS OF STUDY

Considering the fact that nothing is perfect in this

world. Every individual is bound to make mistake at

some point or the other.

The information is collected only from Institutes

and by questionnaire form.

Information collection took 25 days.

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The respondent may be based or influence by some

other factor.

The minor concept and technique at the marketing

management are used significant in the project

concern.

Some time respondents were not in reply with full

confidence and sometime they reply without thinking

over the matter.

ARTICLES

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1. USING HR FOR COMPETITIVE ADVANTAGE- TRENDS AND BEST

PRACTICES

Dr Keith Good all, Senior Associate at the Judge Business

School, Cambridge University 

Programme description:

This three-day programme focuses on the relationship

between Human Resource Management and the leadership and

management of successful businesses.  The development of

the Human Resource function from its early role in

‘Personnel Management’ to the current emphasis on Human

Resource as a ‘strategic partner’ will be examined.

The course is organised around case studies which detail

Human Resource practices in a variety of industries.  The

teaching methodology includes short lectures, practical

readings, group discussions and DVD presentations.

Key focus areas

Analyzing the roles of HR Frameworks developed by

Harvard and Michigan to think systematically about

how HR connects with business needs, with strategy,

and with the environment will be deployed. 

Aligning HR with Strategy what is it exactly that

makes HR ‘strategic’?  An understanding of strategy

will be clarified and then the programme examines

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how HR can be aligned with strategic

objectives. Each of the case studies used will give

practical examples of the different ways in which HR

can support the senior management team and the line.

Winning the ‘war for talent’ and retaining key

staff. Starting with the McKinsey guidelines for

winning the war to attract and retain key talent,

the programmed then looks at a detailed case from

the pharmaceutical industry.  The assumption is that

poor HR practices will always retain staff, but the

ones that stay will be the ones you don’t want.

Building commitment. A framework for understanding

commitment in a high-performance organization, as

opposed to having simple compliance, will be

developed.  The cases will also illustrate the

different ways modern organizations build commitment

in the workforce.

Systems thinking. It is important for HR and senior

managers to take an overview of the interactions

between ‘people’ and the ‘hard’ aspects of the

business in a dynamic business environment.  The

McKinsey/Harvard 7-S model will be used as an

example of how systems thinking can be applied to

the analysis of organizational effectiveness.

Change management and HR. One of the constant themes

of modern management is the need for change.  The

case of a French cement company in China will be

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used to examine the relationship between HR and

change management.

Who should attend?

The course is suitable for practicing HR managers

interested in benchmarking their current practices

against international trends.  It is also suitable for

senior managers who want to use their HR function as a

source of competitive advantage.

 

By the end of the course participants will:

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have practical frameworks for analyzing the roles of

the HR function

understand the relationship between HR and strategy

in a high performance organization

have analyzed the use of HR in different types of

businesses (high-tech; service; manufacturing …)

understand HR as part of a ‘systems’ view of

business effectiveness

be aware of trends and best practice in obtaining,

retaining, motivating and developing staff

Understand the relationship between HR and change

management.

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2. HR PRACTICES FOR HIGH PERFORMANCE ORGANIZATIONS

ABSTRACT:

If Australian organizations are to be competitive, more

productive and economically sustainable, they will

require highly skilled knowledgeable, innovative workers

and a relatively stable workforce. An increasing number

of companies in the United States and Europe are

implementing management systems and HR practices with

greater employee involvement to increase productivity and

quality, and to gain the competitive advantage of a

workforce strategically aligned with the organization’s

goals and objectives.

Critical organizational processes such as information

sharing, training, decision-making and rewards are now

being moved down to the lowest levels in the

organization. This approach to HR puts knowledge, power,

rewards, and a communication network in place at every

level in an organization. If organizations are to be

sustainable in the medium to long-term, employees must be

motivated to care about the work they do, to acquire

knowledge-related skills, and to perform.

Greater employee involvement can only be achieved through

a carefully managed process that strives for

participation by integrating the individual with the

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organization to achieve high productivity and competitive

advantage. This process involves restructuring the work

so that it is challenging, interesting, and motivating as

possible. Employees at all levels are given power to

influence decision-making.

However, high quality employees do not assure an

organization of having a sustainable competitive

advantage or even a short-term advantage. If employees

are poorly motivated or if the correct organizational

systems are not in place, the employees’ talent may be

wasted or lost to competitors.

THE FORCES OF CHANGE:

The organizational events of the last ten years – out-

sourcing, downsizing, re-engineering, reduced

organizational levels, acquisitions and joint ventures,

high management turnover, broadened spans of managerial

control, rapid technological change and globalization –

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are challenging traditional HR and executive development

practices established since the mid-1970s.

The impact can be seen in many ways:

There are fewer levels and broadened spans of

organizational control which means that

organizations are finding it harder to retain

talented people;

Radically changing organizational structures have

effectively abolished career paths and middle

management in both the private and public sectors;

External recruitment of talent has risen

dramatically as many HR departments and their

organizations have opted for this soft option rather

than developing talent from within;

Reduced budgets and more demanding shareholders and

other investors have forced companies to focus

developmental resources for optimum return in the

short-term and invest less.

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WHY HR IS NOW BECOMING INCREASINGLY IMPORTANT

Organizations in Australia have changed significant

aspects of their employment policies during the

1990s.

The role of trade unions has declined, bargaining

about employment conditions and wages has shifted to

the enterprise level and increasing numbers of

organizations are introducing techniques to

communicate directly with their employees.

There has been a growth in pay for performance

schemes, flexible employment practices, training,

performance appraisals and broader job structures.

The bureaucratic and hierarchical organizational

structures have given way to broader and flatter

structures where self-managed work teams have become

more prevalent and workers.

MAJOR CHALLENGES FACING AUSTRALIAN ORGANIZATIONS.

Although there has been a marked decline in the

Australian dollar, the ability of Australian

organizations to compete with goods and services from

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overseas competitors may have been impaired due to the

poor economic health of many Asia-Pacific economies.

Consequently, overseas competitors are able to provide

products and services at a lower price to the detriment

of the local industry Australian organizations now need

to concentrate more on highly value-added products and

services produced by a skilled and motivated workforce.

This requires that Australian organizations need to take

a more "strategic" approach to HR that will enable them

to cope with the challenges resulting from rapid changes

in technology and globalization.

HR PRACTICES WHICH ARE CRITICAL TO ECONOMIC

SUSTAINABILITY

Employment security

Selective hiring of new personnel

Self-managed teams and decentralization of decision-

making

High compensation contingent on organizational

performance

Extensive training and development

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Continuous improvement HR programs

Reduced status distinctions and barriers

Trust between management and employees at all

organizational levels

Efficient and effective use of new information

technologies

WHAT IS "BEST PRACTICE" IN HR?

There is no single best practice to which all

organizations should aspire. Rather, the literature shows

that each firm has a distinctive HR system that

represents a core competencies required for the survival

and sustainability for that particular organization.

“Best practices" in HR are subjective and transitory.

What is best for one company may not be best for another.

What was best last month may not be best for today. The

concept of "best" is highly subjective and non-specific.

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FACTORS WHICH CONSTITUTE BEST PRACTICES IN HR ARE

Communications

Continuous Improvement

Culture Consciousness

Customer Focus & Partnering

Interdependence.

Risk Taking

Strategy and commitment.

.

IMPLEMENTING HR PRACTICES AND POLICIES

When implementing HR practices and policies, managers

should note that HR practices:

Cannot be "copied" from one organization to another.

Must be implemented with regard to the

organizational context of a particular firm.

Are more effective, and can produce a synergistic

effect, if they are complementary to each other.

Require significant planning, resources and effort.

Necessitate that people who are expected to assist

with the implementation of the new HR practices must

be consulted and be a part of the planning,

development and implementation processes right from

the start.

There must be an effective management system to support

long-term productivity improvements. Policies and

training have to be aligned with HR practices.

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Must be broadly complementary to HR policies linked to

"high-involvement work practices" and are thus relevant

to explaining the variation in the diffusion of such

practices.

KEY FINDINGS AND LESSONS LEARNED

The literature refers to some key findings from research

and lessons learned. These include:

The most striking increases in high-involvement work

practices are in the use of on-line work teams and

off-line problem-solving groups.

Higher levels of managerial tenure had a positive

and statistically significant association with

greater increases in the use of high-involvement

work practices.

In newly industrialized countries, investments such

as increased training, performance-based pay, the

elimination of status barriers, and more selective

recruitment and hiring practices were assessed by

the corporate parent.

High-involvement work practices may represent

"competence-destroying" change, which is difficult

to implement, and may lead to worsened performance

in the short-term.

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Plants that undergo a major disruption in their

operations – creating opportunity for various

organizational changes - were more likely to adopt

high-involvement work practices.

Manufacturing technology is necessary but insufficient,

without work force commitment to performance. Any

competitive advantage will not be sustained without a

skilled, motivated, and committed management team and

work force. Organizations must enhance work force ability

to improve productivity. Technology without a talented

work force is an opportunity that has not been utilized

enough.

NEW ROLE FOR HR PROFESSIONALS

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The role of HR departments is being transformed as line

managers assume greater responsibility for a number of

people management activities and as HR specialists focus

more closely on integrating HR and corporate strategy. It

will become increasingly important for HR specialists to

demonstrate that they can contribute to organizational

efficiency and effectiveness in both the short and long

term.

HR professionals can now play a more proactive role by:

Demonstrating that they understand these employment

changes has an impact on employees and that

employee’s experience organizational change in

different ways.

Realigning the expectations of managers and other

employees within their organizations. HR

practitioners are responsible for communicating the

need to understand the changing nature of work and

the impact of such changes on the organization.

Monitoring how well employees are coping with

employment changes where many employees do not feel

that they are effectively making the transitions

when organizational changes and flexible work

practices are introduced.

Providing advice to executive management to adopt a

long-term strategic approach to HRM that is more

conducive to the development of employment

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relationships based on mutuality of organizational

and individual goals and expectations.

CONCLUSION

There is significant evidence in the literature to

indicate that a strategic approach to HR policies and

practices in Australia has been largely pre-occupied with

strategy in its narrowest form. An explanation of this

may be that strategic HR practices have been used

opportunistically rather than strategically, and the

approach by HR specialists and their CEOs has been

overridden by the need to survive and grow in an

increasingly complex and volatile economic environment.

Unlike their financial counterparts, HR specialists are

often ignored when strategic business decisions are made.

This supports the belief that the material considerations

for long-run strategic decisions placing HR as the

critical function in corporate strategy do not exist.

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Organizations that continue to seek solutions to their

competitive challenges by downsizing, outsourcing and

weakening their organizational culture are now "on

borrowed time" and will not be sustainable. Organizations

need to match HR policies and practices with long-term

business strategies required to compete in the global

market place, and generate employee commitment and

retention over the long-term. HR practices are required

that are incremental and collaborative and provide the

opportunity to employees to make decisions affecting

their work and to share in the rewards of their creative

efforts.

EXAMPLES OF TOP 10 BENCHMARKING FIRMS

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THE TOP 10 BENCHMARK FIRMS IN RECRUITING AND TALENT

MANAGEMENT

The very best companies in recruiting are constantly

striving to improve everything they do through continuous

learning. One of the best learning tools at their

disposal is benchmarking, which often provides learning

that can be applied immediately.

Unfortunately, unlike many other professions, there is no

standard measure as to what makes a recruiting function

world class, which might provide a list of which firms

are benchmark worthy (for benchmarking to be truly

beneficial, all parties involved must be able to learn

from each other).

The Top Ten

1. First Merit Bank. Some may find it hard to believe

that the most strategic and innovative approach to

recruiting isn't found inside one of America's most

recognized companies, but rather from this bank

headquartered in Ohio. In addition to a great referral

program, they are the best in understanding how

recruiting can adopt successful approaches such as data

mining, customer relationship management, competitive

intelligence, and assessment metrics from other business

functions.

2. General Electric. Long recognized as "the" benchmark

firm when it comes to building a performance culture, GE

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wins hands down as having the best overall talent

management strategy. They prioritize jobs and focus on

"game changers." Their employer-of-choice brand is second

to none and they are among the leaders (along with Home

Depot) in recruiting from the military.

3. Microsoft. Giving GE a run for their money as best in

talent management is Microsoft. They excel at workforce

planning, redeployment, utilizing analytics, and

leveraging the internet. They are also truly world class

when it comes to the effective use of contingent workers.

Microsoft was also ranked #57 on Fortune Magazine's 2005

100 Best Companies to Work for in America.

4. Wachovia Corporation. This hands-down leader in

diversity recruiting is also well versed in utilizing

metrics and running a fee-for-service recruiting model

capable of actually generating revenue by selling excess

recruiting capacity to other organizations. Their

recruiting strategy is world-class in a relatively

conservative industry.

5. Starbucks. Given the "less than glamorous" nature of

the retail industry, the approach taken by this coffee

giant to employment branding and becoming an employer of

choice is phenomenal. They also excel at high-volume

hiring. Starbucks was ranked #11 on Fortune Magazine's

2005 100 Best Companies to Work for in America.

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6. Marriott International. This hotel giant was one of

the earliest adopters of employment branding, and one of

the few companies to maintain a dedicated focus on the

art. While they still excel in employment branding, their

diversity recruiting and work with the disadvantaged are

world class by any standard. Marriott was ranked #63 on

Fortune Magazine's 2005 100 Best Companies to Work for in

America.

7. Southwest Airlines. The clear winner for innovation in

recruiting, this company not only excels in selection but

also scores huge in branding with the launch of its own

TV show (Airline). Every employee periodically receives

productivity and financial reports so they can act more

like owners.

8. Booz Allen Hamilton. The things that set this

professional services firm apart from the competition

comprise a laundry list of "must have" programs for

professional-level talent. In addition to these

programs, they also excel at employment branding. BAH was

ranked #75 on Fortune Magazine's 2005 100 Best Companies

to Work for in America.

9. Valero Energy. Managing in a place "run by CPAs"

requires extraordinary metrics, and Valero comes through

with the best metrics in recruiting, bar none. Their use

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of regression analysis for workforce forecasting is truly

best in class. In addition, they have development metrics

that demonstrate the relationship between recruiting

effectiveness and stock price per share, and they have

created a sourcing channel report that demonstrates the

ROI in the effectiveness of their best sourcing channels.

Valero was ranked #23 on Fortune Magazine's 2005 100 Best

Companies to Work for in America.

10. T-Mobile. Excellent work in nearly every aspect of

recruiting, T-Mobile is a stand out in both the usage of

metrics and online candidate assessment. In 2004, T-

Mobile set out to demonstrate the business impact of

recruiting and succeeded beyond expectations. With a

largely tech-savvy target audience, they also excel at

innovation in Internet recruiting.

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A SUMMARY OF THE BENCHMARKING INTERVIEWS

The overall trend in the delivery of modern human

resource practices is to refocus the traditional

orientation of the Personnel Office from conducting

transactions alone to combining service delivery and

strategic planning. For example, at Genzyme, Human

Resources (HR) is 70% a business partner and 30% a

service provider. Johnson& Johnson has organized HR into

three segments: Thinkco, Touchco and Serveco. Thinkco is

a strategic unit providing direction to individual areas;

Touchco exists within the business unit to deliver

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specific human resource practices; Serveco handles human

resource transactions across the organization.

In the aggregate, three key factors are necessary for

high level human resource practices: strong leadership,

clear organizational values, and ongoing measurement.

Success requires faith in administrative processes, use

of technology, and high-level involvement of HR in the

overall strategic planning for the organization. Every

organization the team interviewed cited the critical

importance of high-level leadership to advocate for

change and to clarify the focus of future human resource

practices.

To better define and clarify the values of the

institution or corporation, several organizations have

specified human resource principles that provide a basis

for the development and implementation of new practices.

For example, one multi-national organization developed a

process to review practices world-wide, after which it

issued a statement defining seven principles of

leadership and appointed people to guide the subsequent

implementation of new human resource practices.

These organizations used employee surveys, exit

interviews and cross-functional meetings initiated by HR

to measure the success of changes in human resource

practices.

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Common Themes

Certain approaches to human resource practices were

fairly common across many of the organizations

interviewed.

1. Planning and Appraisal

In general, planning and appraisal processes focus on

developing the individual; letter grades are not used.

Several organizations use a "360" evaluation tool in

which subordinates, colleagues, and supervisors

contribute to an individual's evaluation. An important

outcome of this process is a training plan that links

both the needs of the individual and the goals of the

organization. Positive, honest feedback is critical.

2. Individual and Team Development

The key to individual and team development is training.

Characteristics of successful organizations include:

budgeting training expenses and releasing individuals to

attend training sessions; providing centralized core

training appropriate for the job; training managers,

coaches, and supervisors in work and family issues; and

providing training specifically tailored to the needs of

teams.

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3. Career Planning

Consistently, career planning is described as being the

responsibility of individual employees. Several

organizations said, "the job belongs to the company; the

career path belongs to the individual."

4. Hiring

Technology is widely used by central HR for recruiting,

hiring, retaining and

assessing performance and competencies. Nevertheless,

screening, interviewing and final decisions remain the

responsibility of the business units. The documentation

supporting these transactions is processed and stored

electronically. The organizations believe this

technologically enhanced hiring process is valuable to

both the internal and external candidates.

5. Succession Planning

Succession planning is of growing importance to

organizations as they come to realize that professionals

who have achieved a high level of success within a

particular discipline have not necessarily developed all

the competencies for leadership. Several organizations

have taken specific steps to develop new leadership. For

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example, Johns Hopkins has established a Leadership

Institute that may contribute to succession planning.

6. Job Design

Successful job designs offer flexibility; are guided by

what needs to be done; and meet the demands of the

marketplace.

7. Classification

Job classification remains the responsibility of central

HR. Problems occur when standards for classification are

not applied.

8. Compensation/Recognition/Other Rewards

Total compensation and rewards are being desegregated

into base salary, discretionary bonuses, and non-

financial recognition. For example, AT&T provides cash

awards for ideas which lead to cost saving. At Lucent

Technologies, bonuses are based on a combination of

individual merit, the performance of the business unit,

and the performance of the corporation.

Together, the experiences of these organizations offer

guidance to MIT as it works to expand its human resource

practices, to deliver base line services more efficiently

and to develop the workforce to meet the strategic needs

of the Institute.

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FINDINGS

There were many findings which were made from the studywhich are as follows:

Benchmarking establishes HR systems.

It ensures compliance with Federal and State

Employment Laws.

It maintains HR systems on an ongoing basis.

Steps of benchmarking process are very effective.

Areas which are benefited by the benchmarking

practices.

The Top 10 benchmarking and their strategies for

success.

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BIBLIOGRAPHY

www.benchmarkoutsourcing.com

www.gibs.co.za.com

www.globalbestpractices.com

www.osp.state.nc.us

www.dpc.wa.gov.au

www.qut.edu.au

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Article Reviews:

www.ere.net

The Top 25 Benchmarking firms in Recruiting and

Talent Management.

www.fsed.org

HR Practices for High Performance Organizations.

Flower, Alan. 1997. How to: Benchmarking? Personnel

Management. 12 June.

SYNOPSIS FOR DESSERTATION

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OnBENCHMARKING THE HR PRACTICES

Submitted To:

Submitted By:

Snigdha Malhotra

Divya Bajpai

Faculty Guide

G-19 A1802008173

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INTRODUCTION

The current scenario in the IT sector India has the

largest pool of manpower, second only to the US.

According to a study conducted by the National

Association of Software and Services Companies (NASSCOM)-

quantity of skilled knowledge workers in India seems to

be a non-issue, and it would be so at least for another

couple of years.

The arithmetic out of 1.22lakh engineering graduates

qualifying every year in India, about 73,000 are software

engineers from IITs and other RECs. Thus, around 73,000

fresh software engineers are expected to be available

annually. Total demand for software professionals during

the next couple of years is estimated at 1.40 lakh.

Against this, India is expected to have a pool of 1.46

lakh software engineers. Besides, quite a few Indian

universities have started courses leading to Masters in

computer Applications and there are private Training

Institutes which offer high level software engineering

courses.

According to an AIMA survey, 60% of the IT Companies have

a written job description of all levels of employees. The

rest 40% either have a partly written job description or

they donot have anything written at all making it

difficult for both the employee and the employer.

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Most CEOs site lack of skilled professionals as one of

the major hindrances to growth in the Indian Software

Industry. Reputed software companies might get people at

the base level but getting somebody with an experience of

more than 4-6 yrs is a problem. The problem of retention

was more prevalent in the telecom, IT and the Services

sector than manufacturing and traditional sector.

When asked about employee retention, the majority among

HR professionals of IT felt that it was all about

retaining good people in the company and creating such

situations for the non-performing employees that they

quit on their own. It was felt that employee retention

was a collective responsibility of the HR department, top

management and individual departments in an ascending

order with the HR Department having the maximum and

individual department having minimum accountability.

Data shows that in companies with more than 1000

employees, the HR Department was strong whereas in mid-

sized companies, the individual department was

responsible along with the top management.

Large companies with growth rate higher than 10% did not

face serious retention problems, but large companies with

lower growth rates had acute problems in retaining their

employees. In all industry segments, the employee

attrition rates at the junior level were on the higher

side compared to that at the top management level.

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Studied over the last two years, retention levels have

either increased or remained same due to better

compensation, healthy competitive environment, higher

profitability of the company, and good working

conditions. But the case is not so with the IT sector,

where the key motivator is the lure of U.S market.

OBJECTIVE OF STUDY

The project focuses on

The importance of retention in the IT companies.

Most effective methods to find the cause of

turnover.

Factors favoring retention.

Innovative methods adopted by companies to retain

people.

Constraints faced by the organization in

implementation of retention strategies.

Effectiveness of the methods used to retain people.

To make continual improvements towards best.

To determine the taste and preferences of customers

of various places.

To get a larger share in this rapidly increasingmarket.

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SCOPE OF STUDY

It includes: what should be research method to be

followed to know about desired results. What is to be

sample size and design that represents whole data of

research which depicts real picture of study.

RESEARCH METHODOLOGY

STUDY

This research project is a descriptive type of study on

the topic-

“BENCHMARKING OF HR PRACTICES”.

Research Design:

Research Design is simply the framework or plan for a

study, which is used as a guide in collecting and

analyzing the data. It is the blueprint that is followed

in completing a study. As the objective of the research

is descriptive in form, the research design must be made

accordingly:

Formulating objective of the study.

Designing the method of data collection.

Selecting the sample size.

Collection of data.

Analysis.

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Conclusion.

Descriptive research includes websites, books, magazines,

observations and fact-finding enquiry of different kind.

REVIEW OF LITERATUREIndia's skilled, high-quality and low-cost IT-ITES

manpower has continued to be a major edge for the sector

in the global markets. Recognizing the importance of this

pool of talent to the country's continued dominance and

leadership of the global IT-BPO segments, the industry,

the Indian central and State Governments and academia

have been working together to ensure that IT manpower

resources are rightly skilled and geared up to cater to

the dynamic and fast changing needs of the technology

sectors.

Both the IT services and ITES-BPO industries have been

scaling their operations over the past couple of years

and adding to their employee rosters. According to the

annual ICT industry survey conducted by NASSCOM, during

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2005-06, the overall employee base of the IT-ITES sector

rose to an estimated 1.3 million professionals. The

NASSCOM study also indicated the following:

the number of people employed by the export segment

within the IT-ITES industry touched around 930,000,

a year-on-year increase of 32 percent

the IT software and services industry added over

120,000 professionals during 2005-06

the ITES-BPO sector added 100,000 professionals on

its rolls

the IT-ITES industry together created indirect

employment for an estimated three million people

during 2005-06

Future IT-ITES Manpower Requirements

Current HR trends within the IT-ITES industry point to

the following scenario in the future:

the Indian industry will require 850,000 IT

professionals and 1.4 ITES-BPO

professionals by 2010

the Indian IT industry has taken adequate steps to

develop talent, particularly among college students

assuming that current trends in graduate turnout and

employment are maintained, the demand for IT

software and services professionals will be met

the BPO industry is unlikely to face talent

shortages in the short term

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current accessibility to talent is very high (at

around 80-90 percent of total graduates), but only

10-15 percent of these students have the skills for

direct employment without prior training NASSCOM HR

Handbook : Invited Articles 7

only about 50 percent of this suitable pool is

willing to join the industry

ITES-BPO sector, at the current page, is likely to experience a shortfall of around 500,000 employees

Indian Human Resources minister to reform technology sectorKapil Sibal, India's Minister of Human Resource

Development (HRD) held a meeting Monday to present his

reform plans for the Indian Institutes of

Technology (IIT) sector by increasing the entrance

percentage to 80% and above in the class XII (final year)

board exams. A three-member committee was set up to

review the proposal.

Sibal said, "The present criteria is that students needto secure 60% in class XII for appearing in IIT-JEE. Thisis not acceptable", pointing out that the currentcriteria where students getting more than 60% in theboard exam of the twelfth class are eligible for IIT-JEEis not good enough and that it has to be raised to 80-85%.

He also stated that students undervalue final year boardexams, preparing instead for the Indian Institute ofTechnology Joint Entrance Examination (IIT-JEE); they

129

enrol in coaching institutes and concentrate on theirstudy material in order to enter IIT. He wants to abolishthese "teaching shops."

The meeting decided that they would set up twocommittees, one headed by Anil Kakodkar, Atomic EnergyCommission (Chairman) and other by T.Ramasamy, Department of Science andTechnology (Secretary). The first committee is scheduledto decide final year board percentage and the second oneis scheduled to set the curriculum.

The Kakodkar committee also plans to decide how toabolish coaching institutes and how to move IIT fieldforward with a greater emphasis on research. Thecommittee is expected to submit its report in the nextsix months. The minister also clarified that some ofthese will be implemented from the 2010 academic year andsome from 2011.

The meeting was also expected to reduce the feefor African and South Asian Association for RegionalCooperation (SAARC) countries as their fees are higherthan those of Indians. The review committee says thatpeople of other countries are tempted to study in Indiabut they refrain due to high fees. The Ramasamy committeeis expected to submit its report in the next threemonths.

Lastly, the meeting said that it will appoint boardmembers and directors on the basis of nominations andindependent rank and power to ensure IIT's activity

IT SECTOR PROFILE

130

The IT industry has so far witnessed three major changes.

Each changeover has been marked by emergence of

technologies that have dramatically increased the number

of it users and applications riding a new wave of growth.

Elements of the previous period remained, but new

technology was the driving force in the growth of it

industry in the new period.

The first period marked the beginning of mainframes and

ushered in computer technology but usage was limited. In

the second period mini computers led the IT growth and

helped automate several business processes. The third

period which began some 20 years ago, belonged to the pcs

and client server technologies. Of applications and it

industry revenues. This fueled an’ order-of- magnitude’

growth in the number of users, the number of applications

and it industry revenues. Much of this was achieved by

making it products available at cheaper rates, which

enabled manufacturers to widen and deepen the market.

The fourth period, which is in its early stages, is the

internet era or the wired market era. The wide and

instantaneous reach of internet, displays its potential

to fuel another order-of-magnitude growth in the IT

industry.

This would obviously require selling at still lower price

points and revamping current distribution strategies and

marketing approaches. The internet era provides another

131

opportunity to grab leadership positions- not only in the

IT sector but several other industries as well.

Companies, which are quick to react and take the initial

lead, will grow faster than those who fail to do so.

Already the corporate are using the internet to deliver

product information, establish corporate identity,

provide customer service, advertise etc. Internet also

provides a cost to effective communication medium. Apart

from e-mail, it can used to make inexpensive phone calls,

videoconferencing, real- time interaction etc.

Players

Indian software industry has a mix of a few large

companies and several small to medium sized companies.

Currently 42 Indian companies have exports of more than

Rs 1 billion. First generation entrepreneurs, who had

limited access to finance and low risk taking

capabilities, operate most of these large companies.

Smaller companies which are also typically entrepreneur

run companies, have a similar potential to strike it

reach. Some of the key players in this industry are

infosys, wipro, mahindra british tele., mastek etc.

Geographical distribution

132

Most of the software companies are concentrated in

western and southern part of India. These are further

concentrated in a few cities. Choice of location has been

driven by availability of infrastructure facilities, cost

of space and manpower availability. In terms of business

size, mumbai, pune, hyderabad, banglore and chennai have

the highest concentration.

Procedure for software export

Export of software may be categorized in the following

ways:

-on-site services: in this category the unit provides the

services at the clients site abroad by deputing their

professionals. The declaration form for getting

remittances in their rbi account is form "a" and form

"b".

-of-shore service: in this case software development and

services will be done in india and exports are done

either in physical form i.e. On magnetic media, paper,

etc. Or in non physical form i.e. Via telecommunication/

data communication links. In the case of physical form

the declaration form used is gr form and softex form for

non-physical form. For exporting the software by the stp

unit "software declaration form" in triplicate need to be

attested by. The jurisdictional director of stp. The

attested copies of the declaration form need to be

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submitted to RBI after effecting the exports for

necessary remittances in this regard from the client.

Government initiatives

Government has provided several policies to hold and

improve prosepects for domestic software companies.

These include

Setting up of stps : stps (software technology parks) are

autonomous organizations set up the department of

electronics (doe). Under the stp scheme, member software

units are provided various incentives. Currently the

government has set up stps at various cities like

bangalore, pune, bhubaneshwar, thiruvanthanapuram,

hyderabad, noida, gandhinagar, etc.

To provide further incentives to units in the stp

government relaxed the 100% export requirement. Software

companies are also exempted from applicability of minimum

alternate tax (mat).

Export processing zones (epz) : the government has set up

various epzs. Units setup inside the zone can have 100%

foreign equity. The firms are expected to export 75% of

their production and can sell the balance in te domestic

market. Additional incentives exemption from income tax

on export profits.

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Telecom policy : in may 1994, the government released the

telecom policy to improve the telecom municationinfra

structure in India. The policy sought to encourage

privatization of infrastructure, which was a radical step

at that time.

Curbing piracy : to protect rights (ipr) of software

companies, apart from cracking down on piracy, the

government has also made several policies to actively

discourage piracy, the government has also made several

policies to actively discourage piracy. Authorized

sellers of imported software are allowed to reproduce

software in India and sell it without import duty. Local

software manufacturers are exempt from excise taxes.

Other incentives include :

Depreciation on it products allowed at 60% pa,

taking into cognizance the high rate of

obsolescence of such products.

Exemption of with holding tax on interest on ecb

is proposed to be extended to the IT sector as

well. This will reduce cost of borrowings for it

companies through the ecb route.

100% customs duty exemption on all software usedin the sector.

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Extension of 80hhe to the supporting developers.

This will enable supporting developers to enjoy tax

concessions, similar to the supporting

manufacturer’s concept in manufacturing sect.

The new information technology bill

The much-awaited information technology (it) bill was

passed by the Lok Sabha in the month of May 2000. Even

though there has been some criticism about the provision

of the bill, the fact TAT the e-commerce transactions /

cyber-crimes are still very nascent areas in the Indian

context means that it would have been quite impossible

for any bill to have been fully comprehensive. As the

market matures and the users get a hang of the existing

regulations, new amendments can be brought about as and

when required. Trying to make the first bill

comprehensive would have only delayed the implementation.

It would be useful to have a look at the major provisions

within the bill and their impact.

Should boost e-commerce

The bill is expected to give a major thrust to e-commerce

activities in the country. Though e-commerce activities

have started of with most e-commerce sites offering

payment through credit cards (where the user keys in his

credit card number), there were many apprehensions

regarding this given the absence of clear-cut laws and

the lack of legal recourse available to any consumer.

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With the new set of laws, it is expected that buyers on

the net would have the required confidence to transact

without fear.

Digital signatures would come into play.

A good part of the new act is the fact that it recognizes

digital signatures. The creation of digital signatures,

their certification and verification is an absolutely new

area which opens up large areas for software companies

with an expertise in the areas of encryption.

CONCLUSION

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"Benchmarking is a process for identifying and importing

best practices to improve performance."  Benchmarking is

not a simple comparative study, simply copying practices

from other organizations, or simply assessing

performance. Benchmarking helps in establishing solid HR

systems and maintaining HR Systems on an ongoing basis.

It also helps in recommending systems and establishing a

timeline for project. It also helps in assisting with

staffing the company as needed. There are various

benefits of benchmarking. It helps in making affirmative

action plans and thereby makes HR policies and procedures

manuals. It helps in enhancing Teambuilding. The

Performance Review Systems are made effective by

practicing benchmarking. Wage & Salary Surveys are done

to make the existing policies more effective.

Hence, Organizations usually benchmark performance

indicators (e.g. profit margins, return on investment

(ROI), cycle times, percentage defects, sales per

employee, cost per unit) or business processes (e.g. how

it develops a product or service, how it meets customer

orders or responds to enquiries, how it produces a

product or service).

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