Benchmarking Essay

This essay has a total of 3034 words and 15 pages.


A Quantitative and Qualitative Look at
Southwest Airlines

In today's competitive marketplace, all firms are seeking ways to improve their overall
performance. One such method of improvement, recently adopted by many firms, is
benchmarking. Benchmarking is a technique used to evaluate internal business processes.
"In this analysis, managers determine the firm's critical processes and outputs, baseline
those processes, then compare the performance of each process against a standard outside
the industry" (Bounds, Yorks, Adams, & Ranney 1994). To effectively improve a business
process to world-class quality, managers must find a firm that is recognized as a global
leader, not just the industry standard. Successful benchmarking requires tailor-made
solutions, not just blind copying of another organization. Measurement and interpretation
of data collected is the key to creating business process solutions.

"Benchmarking's real role has to be seen in the context of the organization that is
continuously implementing improvement" (Bendell, Boulter, & Goodstadt 1998).
Organizations implementing the benchmarking process are continuously looking to improve,
and planning improvement. Improvements can be made by looking at the firm both internally
and externally. Internal improvements are implemented by analyzing processes and setting
targets for performance. However, output performance measures are not able to help
management understand why a practice is effective. This understanding is a result of
personal interpretation of the process. Organizations must look to other firms for ideas
to borrow from global leaders, regardless of the scope of the necessary improvement.
Equally important as data collection is the actual implementation of the newly acquired
business practice.

The most important aspect of benchmarking is to enable companies to employ the best
business practices. This fundamental theory cannot be overstated. Global competition is
growing due to the technological boom. The expansion of the Internet and digital
communication has forced once domestic firms to consider foreign competitors. To remain
ahead, companies are realizing they must match or exceed the business practices of the
best in the world. "The only way that we can drive our organizations to excellence is to
ensure that we keep our eyes on our competitors and world best practice in all aspects of
business" (Bendell, Boulter, & Goodstadt 1998).

Benchmarking should not be considered simply a tool of management, but rather an integral
part of the business strategy of a firm. When implementing benchmarking, management must
consider the overall issues of performance and process re-engineering. It should be seen
as part of the management practice with an organization pursuing excellence. In addition
to influencing management's practices, benchmarking should become part of the
organizational strategy. Essentially, benchmarking effects all aspects of management, as
well as the business. The goal is to establish benchmarking as a dynamic process with
full integration into the organizational structure. Commitment to the best practices
eventually will become the natural way of doing things.

There are five keys to successful benchmarking: emphasis on quality, business processes,
limitations of Total Quality Management, external benchmarking, and benchmarking for
survival. Benchmarking emphasizes quality in all areas and functions of the organization.
It is not limited to the major services or products used by the external end consumer.
Organizations should approach their processes with a preventative mentality, rather than a
reactionary approach. This will ensure quality in all steps of the process.

The second key to successful benchmarking is understanding the importance of business
processes. An organization can be seen as a series of major and minor business processes.
Major processes contribute to the delivery of products or services to the end consumer,
while minor processes make more subtle contributions. These processes are not performed
in isolation. The end result relies heavily on the satisfactory completion of all
processes and the communication of all functional areas involved. By viewing these
processes as a whole, management can identify process inefficiencies. These
inefficiencies may include delays or queuing at process bottlenecks, lack of control or
checking, or places responsibility for process activities is not clear.

The Total Quality Management model is limited in its scope of improvement. Total Quality
Management establishes targets for performance rather than focusing on continuous
improvement. This perspective is to narrow because it fails to consider the overall
improvement process. To be effective, management must incorporate all aspects of the
business into a dynamic improvement process.

The fourth key to benchmarking is systematic external benchmarking. Once management has
realized the importance of internal business processes and world-best practices, it is
their responsibility to combine these two themes. Management must systematically examine
its internal practices and performance in comparison to external benchmarks. The last key
is benchmarking as a survival technique. It may effectively save a business from
declaring bankruptcy. However, benchmarking should be used in organizations regardless of
financial or economic status.

Internal benchmarking is one of the most important aspects of benchmarking. This involves
making comparisons with other parts of the same organization. Comparisons can be made
between departments, satellite locations, and subsidiaries. This will ensure familiarity
with internal business processes. A major part of this is understanding the companies
critical success factors. If management does not know which processes are most critical,
it will not know which processes to benchmark. This form of benchmarking is fairly common
and easy to perform. However, this type of benchmarking is unlikely to produce world-best
practices. The ability to critique oneself is the first step in being able to realize
organizational shortcomings.

External benchmarking is complimentary to internal benchmarking. Despite the difficulty
in admitting deficiencies, it is critical that companies look to fellow organizations for
necessary assistance. Competition has reached a global level and the only sensible goals
are world-best practices. The ability to use the practices of others to a firm's own
competitive advantage is key in realizing a firm's full potential. Information obtained
from competitors is likely to be very relevant, but it will be impossible to get a picture
of how a direct competitor operates due to corporate confidentiality. To effectively use
this data, management must interpret the information and formulate their own conclusions.

The remainder of this paper will look at two companies who can use benchmarking to gain
competitive advantage. We will look at Southwest Airlines and their practices. We will
also consider potential areas of improvement, and how each company can benchmark the other
to gain their own advantage in the industry.

Southwest Airlines:
Southwest Airlines is a Dallas, Texas based, low-fare carrier serving destinations in more
than fifty cities in twenty-eight states. Southwest currently offers more than
twenty-four hundred daily flights, and is expanding eastward. The company has devised a
strategy that has produced profits for twenty-six consecutive years. Short-haul flights
compose eighty percent of the company's entire flight load. However, Southwest is
offering more long-haul flights and expanding its fleet to compete with larger domestic

Southwest Airlines was founded in 1967 by two Texas businessman, Rollin King and Herb
Kelleher. It was founded as an intrastate airline serving Dallas, Houston, and San
Antonio. In 1971, the company made its first scheduled flight from its home airfield,
Love Field in Dallas, Texas. In accordance with the Wright Amendment of 1979, Southwest's
market was restricted to Arkansas, Louisiana, New Mexico, and Oklahoma. Passengers were
not permitted to travel to any other destinations from Love Field. This was an effort by
Congress to protect Dallas/Fort Worth Airport.

In 1986, Kelleher introduced advance-purchase Fun Fares. He also introduced a new type of
frequent flyer program a year later. Frequent flyer credits were based on number of
flights taken, rather than mileage.

Southwest first expanded to the East Coast in 1993, with service to Baltimore-Washington
International Airport. In 1994, the company acquired Morris Air, a Salt Lake City, Utah
based airline. That same year, Southwest launched several programs to cut costs. A
ticketless system reduced travel agents' commissions, and Southwest began to use an
in-house reservation system.

By 1997, Southwest Airlines served cities in all parts of the continental United States.
This same year, Southwest formed an alliance with Icelandair. This agreement enabled
Southwest passengers to connect from several United States' cities to Europe through
Icelandair's Baltimore hub. The company completed its first non-stop transcontinental
flight in 1998, thus establishing Southwest as a formidable domestic competitor.

Areas to be Benchmarked:
"Southwest ranked number one in on-time performance for the last seven consecutive years
according to [The Department of Transportation's Air Travel Consumer Report]" (Southwest
Fact Sheet, 1999). This punctuality can be attributed the company's ticketless system and
no-frills approach to air travel. The ticketless system reduces costs for both consumers
and Southwest. Travel agents and ticket brokers are eliminated from the ticketing
process. This also minimizes the lengthy check-in processes by eliminating physical
transactions between customer service representatives and the consumer. All that is a
reservation number and a form of identification to receive a reusable boarding pass, which
enables the customer to board quickly.
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