Keys to Successful Benchmarking
WHAT IS IT GOING TO TAKE TO BE COMPETITIVE IN 2013 AND BEYOND?
By Darwin Hall, Hintzsche Pork
It’s a perfect time to reflect on the business side of things and plans to make an operation even more competitive. From a production standpoint, what is it going to take to be competitive in 2013 and beyond? What type of improvement did we make in 2012? How do we know if we’re moving forward or backward in the different segments of production? What method is used to get the information to employees, owners and decision-makers?
Benchmarking is one of the most valuable tools available to assist producers in answering those and many other questions. The Webster dictionary defines benchmarking as “a standardized test that serves as a basis for evaluation or comparison.” Why “standardized” is a logical question. The answer is, if we don’t do the best we can to gather and compare standardized information the variables involved will likely lead us to make decisions that can be very costly to our operations.
Determining what item(s) you want to benchmark is the first step to developing a solid program. Benchmarking within a system can take some of the variability of genetics, nutrition, building design, etc. out of the equation. As with many things in life, it is often better to start simple, develop a solid foundation and then add to it as you work towards your ideal benchmarking program.
At Hintzsche Pork, we benchmark rooms, barns, sites, stages of production, growers, employees, against each other, and among other things. The benchmarks are developed for monthly, year-to todate (YTD), and trailing twelve month (T12M) periods. Monthly data shows what happened recently. YTD data ties to budgets for the fiscal year and gives a running total look. T12M data contains all the information within the previous twelve month period. There is much less variability in the T12M data which means it’s a good indicator of trends. If the item being benchmarked is showing steady improvement the T12M number will be worse than the YTD number, and the monthly number will be the best of the three. (See example below)
We have found it extremely valuable to have employees involved in establishing the benchmarks for the coming year as part of the budgeting process. The Hintzsche Organization utilizes The Great Game of Business, developed by Jack Stack, which has become the most celebrated approach to Open-Book Management, a unique and well-proven approach to running a company, based on a simple, yet powerful belief; “When employees think, act and feel like owners…everybody wins.”
In its simplest form, The Great Game of Business is a way of running a company that gets everyone focused on helping the business be successful. Employee goals and accountabilities are tied directly to the success of the company. It teaches all employees the critical numbers of the company and how they can make a difference – both individually and as part of a team.
Utilizing PigCHAMP Mobile record keeping software, handheld devices, and radio-frequency identification (RFID tags) technology improves the accuracy, timeliness and cost of data collection. This system integrates nicely with the Managerial Accounting package Hintzsche Pork utilizes from Farm Business Systems (FBS). Managerial accounting is a proven practice widely used by systems to make reliable and timely marketing, purchasing and investment decisions. The importance of gathering accurate data for the benchmarking process cannot be overemphasized. Both PigCHAMP and FBS play a vital role in this area.
According to Dr. Stephanie Rutten, University of Minnesota, “Benchmarking is commonly used by corporations to improve productivity and efficiency and to gain a competitive edge”. This can only happen if a strategy is developed and implemented to improve the benchmark area identified as needing improvement. Once benchmark categories are identified, Hintzsche utilizes a “stop light” system to draw attention to each area when reviewing data. Green means that the area is at, or above expectations; yellow means that the area needs to be monitored; red means that the area has entered the intervention point and immediate action needs to take place.
Both the benchmark and intervention levels are established by the management team. Each member of the team is instrumental in the success of the benchmarking process. They feel committed to the program since they helped to develop it and monitor it on a regular basis.
So what happens if a benchmarking area drops into the intervention category?
- The key person responsible for the area develops the strategy to improve performance.
- There is a time table developed for implementation of the strategy.
- The leader and the members of the team are identified.
- The plan is laid out to everyone involved with questions asked, and answered, openly.
- Implementation of the strategy takes place.
- Results are monitored.
- Feedback is given to everyone involved.
It is important to remember to break things down into bite-size pieces. This allows everyone to understand what needs to be done and see progress being made each step of the way. If we’re not careful we can get caught looking at the forest and forgetting to take care of each individual tree. The same is true for our pork operations. The smallest denominator – system, phase of production, site, barn, pen, pig – for which we can get accurate information, will allow us to implement the best strategies to improve our benchmarking process.
KEYS TO A SUCCESSFUL BENCHMARKING SYSTEM
- Employ the right people.
- Provide proper training. You might have excellent production people who could improve their value to your team if they had training in budgeting, financial statements, computer skills, etc. Make it your goal to assist your employees in personal growth.
- Involve key personnel in the process of establishing benchmarks and intervention point. Each stage of production will likely have a different group of key people. These are the groups that know and understand the stage of production.
- Empower your employees to make changes. Set parameters so that everyone understands them and then allows employees to make changes to achieve and exceed the benchmark targets.
- Monitor the results regularly. Regular feedback is essential to the success of any program. Keep everyone involved in the program informed on a regular basis. Some results may be supplied on a daily basis while others may be provided weekly, monthly or even quarterly depending on the benchmark. Just remember, the more frequently feedback is given the quicker plans can be put in place if intervention points are triggered.
- Hold people accountable. With empowerment comes accountability. If employees are making decisions that are impacting the production and financial status of a system they need to be held accountable for those decisions. They need to understand that from the very beginning. Once people understand that they are going to be held accountable for the benchmark traits being targeted, communication seems to improve between all parties involved. Everyone wants to know how things are going and they are willing to ask questions to gain a thorough understanding of the situation and then develop a plan to garner buy-in from all necessary participants.
- Reward positive results. Make sure you acknowledge what is happening. This can range from simply showing gratitude verbally to financial rewards in the form of bonuses for improving production and the financial status of the pork enterprise. Show employees the impact their involvement has and share a percentage of the results with them.
Benchmarking is one of the most valuable tools available to assist producers, but it is how you utilize that tool that will determine its success. Utilizing benchmark traits, production and financial numbers within your own system, ask yourself, “What can we do to improve the bottom “x” percent to bring it up to average?’’ Also seek out comparative numbers from other producers and production systems that allow you to look for areas to improve in during the next year. How do your numbers compare to the PigCHAMP Benchmark numbers for 2012 on page 10 of this magazine?
DARWIN HALL Darwin Hall was raised on a grain and livestock farm approximately 60 miles west of Chicago, Illinois in the town of Sycamore. As a youth he participated in 4-H and FFA serving as the Illinois FFA Vice-President and winning the State FFA Public Speaking Contest. He was also a member of the State FFA and 4-H winning livestock judging teams and placed 7th in the National FFA Livestock Judging Contest.
Darwin received his Bachelor of Science Degree in Agriculture Education and taught high school and college Ag classes for 7 years before entering Ag business as a nutritional consultant for Walnut Grove Feeds in Atlantic, Iowa.
He joined the Hintzsche organization in 1992 and has been instrumental in growing their pork operations in Northern Illinois and Iowa.
Darwin and his wife Melody enjoy spending time with their two daughters, Tina and April along with their grandchildren, Abby and Logan. Darwin has judged numerous local, county and regional sheep shows throughout the Midwest. He and his wife enjoy travelling and spending any spare time he has with friends and neighbors.