The Human Capital Scan
A study about implementation and effectiveness of The Human Capital Scan
UNIVERSITEIT TWENTE.
&
Master thesis
By Fabian Breukers
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UNIVERSITEIT TWENTE.
Faculty School of Management & Governance.
Master Business Administration, track ‘Human Resource Management’
The Human Capital Scan
A study about implementation and effectiveness of The Human Capital Scan
Hengelo, June 6, 2014.
Author: F. Breukers
Student number: 0210463
Address: Van Ostadestraat 10
7556 EZ Hengelo (o)
f.breukers@student.utwente.nl
Telephone: +31652071968
In cooperation with: VNO-NCW Midden Supervisors VNO-NCW Midden: A.F.A. Oostermeijer (Rob)
M.L. Schuijer (Martine)
Supervisors Universiteit Twente: 1st: J.C. Looise (Jan Kees)
2nd: A.A.M. Wognum (IDA)
Period: March 2013 – June 2014
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Preface
This master thesis is written to complete the master Business Administration at the University of Twente. In cooperation with VNO-NCW Midden I got a unique opportunity to write my master thesis about a topic that is actual and important. This master thesis gave me the opportunity to combine practical problems with literature. A master thesis where practice and theory go hand in hand made it a real challenge. I am thankful that I had the opportunity to pursue this challenge.
The development of the Human Capital Scan started before this master thesis. Paul Franken finished his master thesis about the development of the Human Capital Scan in February 2013. I would like to thank him for his views and insight in the early stages of my start of the master thesis.
I would like to thank Jan Kees Looise as my supervisor of the University of Twente who guided me throughout the period with useful feedback on the content of this master thesis. I would like to thank Ida Wognum as well, as my second supervisor of the University of Twente. As second supervisor, a new fresh pair of eyes gave structural feedback about the outline of the master thesis. The fresh new look on the master thesis improved the structure of the master thesis in general.
At VNO-NCW Midden, I would like to thank Rob Oostermeijer and Martine Schuijer for the opportunity to write my master thesis for VNO-NCW Midden. The support from start till end on all practical aspects has made it possible for the Human Capital Scan to be in the current state it is in now.
Last but not least, I would like to thank all the companies who participated in the case study. I hope in the end, the invested time will be little compared to the results the Human Capital Scan will achieve.
Fabian Breukers Hengelo, June 6, 2014.
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Abstract
VNO-NCW Midden and Universiteit Twente believe that the shortage of (technological) personnel will be more and more problematic in the future. The Human Capital Scan (HCS) is developed to address this problem, by developing a business scan to make businesses and (local) governments aware of this problem. The HCS was developed by P. Franken from the Universiteit Twente in cooperation with VNO-NCW Midden. Different indicators were formed to measure the human capital of a business. The indicators of the content of human capital are: education, training, experience and innovativeness. The indicators related to the flow of human capital are: turnover, internal flow, recruitment, size flexible workforce and age of employees. These indicators map the human capital at businesses to get an overview of the different aspects of human capital. Before the HCS can be applied, theoretical foundations need to be analysed. The theory will discuss business scans in general to get a better understanding followed by applying it to the HCS. A research question is formed and three sub questions are formed answer to research question:
How can business scans be effectively implemented and applied?
I. What is the theoretical foundation of business scans and which criteria does it have to meet?
II. Case study: Does the HCS meet the criteria formulated in the theory?
III. What can be recommended to effectively implement the HCS?
To answer that question, business scans in general are analysed. The action research cycle is one of the main theoretical foundations. Step 0 creating a felt need, step 1 collect data, step 2 share data, step 3 work on data, step 4 plan and step 5 act. After the cycle, the action gets revised and the cycle starts over. But this cycle on itself needs criteria in topic of business scans to make sure the cycle can successfully be applied. These criteria which are formed are based on literature.
1. Motivation, awareness and commitment 2. Environment
3. Role of the facilitator 4. Internal design aspects 5. Feedback and Follow up
Before the first criterion, the goal of the particular business scan should always be clear, to shape the procedure for that business scan in particular. The first criterion lines up with creating a felt need at businesses to participate in a business scan, motivation, awareness and commitment need to be created. The environment criterion takes external aspects into account such as labour market, economic situation and survey climate. The role of the facilitator goes in depth in how the person who conducts the business scan (the facilitator) has to execute the whole process. Internal design aspects look into the practical side of launching and applying a business scan, such as platform, length and order of the business scan and distribution channels. The last criterion, feedback and follow up, goes in depth in the process after collecting the data, how is feedback organised and how benchmarking can be implemented in the best way. A matrix is developed to overview the different relationships between the criteria and the action research steps.
V Not only general business scans are analysed on how they can be effectively be implemented and applied but a case study is also formed to put the different criteria and the action research cycle in practice. The HCS, formed by Franken (2013) at VNO-NCW Midden and the University of Twente is tested as a case study. The HCS is developed as web based tool in this case study. The purpose of the case study is to apply the action research cycle and the accompanied criteria (the procedure) in practice. The results of the case study and the answering of the research question are to be used to apply and implement the HCS at VNO-NCW Midden for the businesses of The Netherlands. The main goal is to create awareness and to hand solutions to businesses. Creating metadata and to have a stable product for commercial ends are other goals. Together with Universiteit Twente and VNO- NCW Midden we strive towards achieving these goals.
The case study shows that the ‘felt need’ that needs to be established before businesses participate is a critical point. At the case study various potential respondents did not have the ‘felt need’ to participate and did not recognize the problem. The nature of the case study, which is a pilot, might be demotivating. Another demotivating factor to participate in the pilot is the lack of benchmarking in the pilot. Creating the ‘felt need’ is the most important aspect to initiate the process. When the HCS is launched, the nature of the business scan changes with more opportunities. Promoting the HCS on platforms such as magazines and websites and benchmarking different businesses. Simple word to mouth of different respondents who participated about their experiences is an important aspect as well. The results show the non-response of respondents and shows especially that respondents do not want to invest time yet. Different explanations such as, position of the respondent in the organisation, lack of information at businesses, length and duration of participation regarding the lack of ‘felt need’ will be discussed. Different recommendations will be given regarding the launch of the HCS, in topics such as, benchmarking, subjective and objective questions, the facilitator and the constant change the HCS will be going through.
What can be concluded is that business scans can be effectively applied and implemented if following the action research cycle and correct criteria. Different recommendations have to be taken into consideration, because of the struggles of creating the awareness in the case study. The case study gives insight in applying the process and criteria in practice, however the case study does not have the magnitude of launched business scan (HCS in this case) yet. Possible explanations towards this are the lack of benchmarking and different choices that have to be made regarding the length and order of the HCS and the position of the respondent within the company.
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Tables and contents
Preface ...III Abstract ... IV Tables and contents ... VI
1. Introduction ...1
1.1 The human capital scan ...1
1.2 Thoughtful application and follow up ...2
1.3 Aspects of the research question ...2
1.4 Practical and theoretical relevance ...3
1.5 Outline of the master thesis ...3
2. Theoretical background ...4
2.1 Theoretical foundation of business scans ...4
2.1.1 Introduction in action research ...4
2.1.2 Action research and experiential learning ...5
2.1.3 How does the process of action research work? ...6
2.1.4 Action research and Business scans ...7
2.2 Benchmarking ...8
2.2.1 Benchmarking in general ...8
2.2.2 Pitfalls and limitations of benchmarking ... 11
2.3 Developing criteria’s for implementing business scans ... 12
2.3.1 Motivation, awareness and commitment... 12
2.3.2 Environment ... 14
2.3.3 What is the role of the facilitator ... 15
2.3.4 The design of the business scan ... 15
2.3.4.1 Length and order ... 15
2.3.4.2 Business scans on the web ... 16
2.3.5 Feedback and Follow up ... 18
2.4 Conclusion and criteria recapitulation ... 19
3. Methodology ... 22
3.1 The case study... 22
3.2 Human Capital Scan as case study ... 22
3.3 The respondents ... 24
3.4 Validity and reliability ... 24
VII
3.5 Business scan criteria and the Human Capital Scan ... 25
3.5.1 Motivation awareness and commitment ... 25
3.5.2 Labour market and environment ... 26
3.5.3 The role of the facilitator ... 27
3.5.4 Internal design aspects ... 28
3.5.5 Feedback and follow up ... 28
3.6 Methodology Recapitulation ... 29
4. Results ... 30
4.1 Step 0: Felt need ... 30
4.2 Step 1: Collect data ... 34
4.3 Step 2: Share data ... 36
4.4 Step 3: Work on data ... 36
4.5 Step 4 and 5: Plan and Act ... 37
4.6 Concluding the results ... 37
5. Discussion ... 38
5.1 Interpretation of results ... 38
5.2 Limitations ... 40
6. Recommendations ... 43
7. Conclusion ... 46
8. References ... 49
9. Appendix... 52
Appendix I ... 52
Appendix II ... 59
Apendix III ... 65
Appendix IV ... 67
Appendix V ... 95
Respondent 1 ... 95
Respondent 2 ... 95
Respondent 3 ... 96
Respondent 4 ... 97
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1. Introduction
This chapter discusses the motive of the human capital scan (HCS) and this master thesis. A research question is formulated and sub questions to support the research question, practical and theoretical relevance will be discussed. The last paragraph consists of an outline for this master thesis.
1.1 The human capital scan
In the current time of economic crisis businesses do not invest in new projects or technology and are focused on surviving on the short term (Syntens, 2012)(Novum, 2012). The economic crisis has impact on every sector or region. A pitfall for these companies is however that they have short term mentality and habits. Problems will be handled in the future and they will come up in a later stage rather than to take care of the problems in the present. The human capital of a company will experience problems in a later stage regarding shortage of technological personnel. The main goal is to create awareness and to hand solutions to businesses. Creating metadata and to have a stable product for commercial ends are other goals. Universiteit Twente and VNO-NCW Midden are working together to achieve this goal.
In a previous master thesis by Paul Franken, a Human Capital Scan (HCS) was developed (Franken, 2013). A literature review was executed and different indicators were identified. The indicators of the content of human capital are: education, training, experience and innovativeness. The indicators related to the flow of human capital are: turnover, internal flow, recruitment, size flexible workforce and age of employees. The HCS was formed with these indicators as core points of the scan and the scan maps the future of the human capital at the companies too. Objective and subjective questions are asked with respect to the different indicators, as well for questions about the future review (except for the innovation category which was only covered with subjective questions). The last part of the HCS is focussed on the strategic aspect of human capital.
This thesis focuses on the effective application of business scans in general, and the application of the HCS developed by Franken in particular. Business scans are tools, like checklists or surveys, offered to businesses by external parties (consultancy bureaus, science or branch organisations) to evaluate their approach in a specific matter or to compare it with other organisations (benchmarks).
Business scans can take different forms depending on the goal. A short survey can be used to find out what a business opinion is about a matter, but it can also be a broad benchmark program with follow up programs.
Business scans consist of a valid instrument and a thoughtful application and follow up. Creating a valid instrument is the aspect Franken based his master thesis on, this master thesis will focus on the thoughtful application and follow up.
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1.2 Thoughtful application and follow up
The practical side contains the execution of a web-based survey regarding the company’s human capital. The literature is based on formulating different criteria that make business scans in general effective. Questions of the survey are based on the HCS as developed by Franken (2013).
To give respondents of the survey a reason to participate, an incentive in form of a standardized advice will be given. The standard advice is the first of three steps of the feedback and follow up procedure that ultimately will be offered to organisations. The two other steps are ‘advanced advice’
and ‘workshops’. These last two steps will be part of a more commercial aspect and advice will be given how to realize these two steps. This research will focus on business scans and its origins in action research, the process of distributing and implementing a (web-based) survey, and the feedback in a later stage. In the outline of the master thesis, paragraph 1.5, the instrument and procedure will be further explained.
This concludes to the research question:
How can business scans be effectively implemented and applied?
1.3 Aspects of the research question
Implementation and effectiveness are keywords in this research question and can both be seen in three different aspects. The implementation can be seen as pre-implementation, the tool/scan itself and post-implementation. The pre-implementation focuses on the motivation of potential respondents, the implementation of the tool/scan itself will be checked for viability and compared with other tools/scans and the post-implementation focuses on feedback to the respondents. These two implementation phases are part of the whole procedure, while the HCS itself is the instrument in this procedure. Paragraph 1.5, the outline of the master thesis, will explain this in depth. Criteria will be developed to reinforce effective implementation. Effective implementation is the extent, to which a goal is reached. In case of the HCS, the goal is to create awareness for upcoming shortage of (technical) personnel and hand solutions.
Three different sub questions are formulated, the first sub question is based on the theory of business scans, the second sub question is regarding to a case study and the third sub question is based on the evaluation of the case study.
I. What is the theoretical foundation of business scans and which criteria does it have to meet?
II. Case study: Does the HCS meet the criteria formulated in the theory?
III. What can be recommended to effectively implement the HCS?
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1.4 Practical and theoretical relevance
The practical relevance of this master thesis is to create awareness within companies regarding their personnel strategies and the corresponding (future) lack of technical employees. This master thesis tries to map the effects this phenomenon can have for individual firms but also for the (region) economy. The collection of data in general can be of critical impact for VNO-NCW Midden to influence government decisions regarding education and the labour market needs. The theoretical relevance of this master thesis is to look in depth into the part of initiating business scans and its feedback. A business scan is a tool that has a consultancy angle and scientifically there is not much theory about the execution. Scientific phenomena such as action research and benchmarking will map the different aspects of business scans from a scientific angle. The different criteria of business scans are based on literature and will together be the underlying theory for business scans.
1.5 Outline of the master thesis
The next chapter will gather theoretical background about business scans. The roots of business scans in action research and benchmarking will be discussed in depth. The HCS is an instrument in a procedure, chapter two will explain how the instrument itself (the HCS) is placed in the procedure or process of implementing it. After the theoretical foundation of business scans is discussed, different criteria are formed to support an effective implementation of the business scan. The first sub research question is: What is the theoretical foundation of business scans and which criteria does it have to meet? This sub research question is answered at the end of chapter two.
Chapter three discusses the methodology in depth. A case study (pilot) has been conducted to review the implementation. The chapter discusses different choices in the implementation and reviews validity and reliability of the (case study of the) HCS. The different criteria formed in the theory will be mirrored to the case study.
Chapter four discusses the results of the case study. Results of the procedure and including instrument of the case study (HCS) will be given. The results will be analysed and the non-response results will be placed in perspective of the instrument and the whole implementation procedure. The steps from the action research procedure will be discussed and previous formed criteria as they are discussed in chapter three will be concluded in this chapter. The sub question is: Case study: Does the HCS meet the criteria formulated in the theory? This sub question will be answered at the end of this chapter.
Chapter five is the discussion and it will continue the discussion ended at chapter three about reliability and validity of the HCS after the initial case study. The results of chapter four will be discussed here and different limitations of the instrument and procedure will be given.
Chapter six includes the recommendations and will include information to answer sub question three: What can be recommended to effectively implement the HCS? These recommendations are based on the results and the experiences of the case study of the HCS.
Chapter seven is the conclusion. The conclusion will answer the main research question: How can business scans be effectively implemented and applied? The three sub questions will be answered shortly, the HCS will be discussed as case study and the procedure and instrument will be outlined.
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2. Theoretical background
This chapter discusses the theoretical foundation of business scans. Aspects of different research methods will be discussed and various criteria for business scans will be formed. This theoretical background will support the case study of the HCS for its implementation. The sub questions that will be answered is: What is the theoretical foundation of business scans and which criteria does it have to meet?
2.1 Theoretical foundation of business scans
The foundation of business scans lies in the field of research in action research. This paragraph discusses the action research and discusses best practices for the process of action research.
2.1.1 Introduction in action research
Action research is a practice that is fundamental for this research. Reason and Bradbury (2001, p 2.) describe action research as:
A participatory, democratic process concerned with developing practical knowing in the pursuit of worthwhile human purposes, grounded in a participatory worldview which we believe is emerging at this historical moment. It seeks to bring together action and reflection, theory and practice, in participation with others, in the pursuit of practical solutions to issues of pressing concern to people, and more generally the flourishing of individual persons and their communities.
Action research is part of an implementation process, the basic model underpins most organisational change interventions (Hayes, 2010). Acting and researching at the same time, we do something, we verify if it worked as expected. If it did not, we analyse what happened and what we might do differently. If necessary we repeat the process of act review act review etcetera. The name action research is an outcome of its natural cycle, action (act, change) and research (review, understanding) (Dick, 2002). Action research perspectives can be found in the early labour-organising traditions both in the US and Europe starting in 1940 (Hayes, 2010). Lewin developed the action research model in the 1940s when he identified the need for social scientists to base their theory building on research into practical problems (Hayes, 2010).
Lewin’s assertion (1951) that ‘there is nothing so practical as a good theory’ is argued by Brydon- Miller, Greenwood, and Maguire (2003)
Brydon-Miller et al. (2003) claim that action research goes beyond the notion that theory can inform practice. They discuss that it goes to a recognition that theory can and should be generated through practice, and that theory is really only useful insofar as it is put in the service of a practice focused on achieving positive social change (Brydon-Miller et al, 2003).
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2.1.2 Action research and experiential learning
Kolb (1984) elaborated the previously mentioned three-stage model of Lewin. The original model by Lewin consists of unfreeze, change and refreeze where Kolb translates that model into a four stage experiential learning model (Figure 1). Kolb (1984) articulated a theory of experiential learning that conceptualises learning as a four-stage cycle, which translates experience into concepts that are used to guide the choice of new experiences (Hayes, 2010).
The first stage involves the basis, engaging in immediate concrete experience to move on to the second stage where this will be observed and reflected to. Stage three, the interpretation of the observations, is a process of theorising so new implications for action can be deduced. The hypotheses and implications then serve as guide when planning for the last stage, which tests the interpretation and acts to create new experiences (Hayes, 2010).
The following figure and note are each adapted from the ‘The Theory and Practice of Change Management’ (Hayes, 2010, p. 326).
Figure 1. The experiential learning model.
This whole process can be facilitated by a change agent. A facilitator who works as a ‘whistleblower’
or ‘awareness creator’. Shepard (1960) was advocating a collaborative relationship between consultant and client. He had a view that a consultant has a role to ‘help’ the clients to design their fact-finding procedures and plan their actions in such a way so they can learn from them and in the end, serving to discover better ways of organising (Hayes, 2010). The role as facilitator rather than prescriber of solutions makes action research a lot more flexible. Mumford (1965) claims that the role of the facilitator is to help learners to formulate their own plans for action and test them through implementation. The experiential learning model can be expanded to a bigger cycle, the action research cycle. This cycle has more concrete steps but is based on the same foundation as the experiential learning model. The biggest difference is adding a ‘step 0’ which is called the ‘felt need’, the next paragraph will describe the action research cycle in depth.
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2.1.3 How does the process of action research work?
The classic model of action research consists of collecting and analysing data about the nature of the problem, taking action to change and afterwards observing the effects of the action. This is a cycle, since after the observing the effects of the action, a new action might be required to start the process again. Lewin (1946) argued that before data is collected or analysed, there must be a ‘felt need’ that a change is necessary. This ‘felt need’ does not always have to come from people inside an organisation, a facilitator, as discussed in the previous paragraph, can be an ‘awareness creator’ to transfer the felt need to people in the organisation. When the ‘felt need’ is established, the five-step cycle starts. Figure 2 shows the action research process.
Step one is data gathering for diagnosis. Collecting data about the problem can be done in several ways, such as interviews, questionnaires, observations and reference to performance data and other records (Hayes, 2010). Step two is feedback of the data to the client group. Often members of the problem-solving group are delegated to investigate particular aspects of the problem or an external facilitator collects data on behalf of the group (Hayes, 2010). The feedback needs to reach the whole problem-solving group. Step three is the discussion of the data and diagnosis of the problem. One of the defining features of action research is that the problem solving members collaborate with each other and with an external facilitator to review the data and clarify issues (Hayes, 2010). Step four is the action planning, identifying possible interventions to improve the situation and selecting a preferred way forward (Hayes, 2010). The fifth and last step of the process is the implementation of the action plan, this involves taking action to improve the situation (Hayes, 2010). The evaluation might suggest ways to refine the original implementation. The process continues based on new information which leads to alternative actions (Hayes, 2010).
The following figure and note are each adapted from the ‘The Theory and Practice of Change Management’ (Hayes, 2010, p. 329).
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Figure 2. The action research process.
2.1.4 Action research and Business scans
In this paragraph the process of business scans will be discussed with action research and experiential learning as basis.
As discussed in the previous paragraph, action research always starts with a ‘felt need’. The planning and collection of data stages of action research can be executed in different ways. Business scans are more than collecting data, it is a process to gain participants and to guide them after collecting the data with solutions. A business scan is an instrument that has its roots in the action research.
As discussed in the previous paragraph, the target group of a particular business scan will create a
‘felt need’ because of themselves or because of the facilitator of the business scan. This step of creating awareness is vital for the interest in a business scan. Therefore, a business scan is a lot broader than just a questionnaire or survey in the early stages of action research.
Business scans can take different forms depending on the goal. Regarding data collection, a short survey can be used to find out what a business opinion is about a matter, but it can also be a broad benchmark program with follow up programs. A lot of Business scans have the form of a survey to collect data. A questionnaire or survey collects data but from an action research perspective this is already a step too far. The felt need needs to be established before the collection of data can start.
Business scans are much more than just a questionnaire or survey in this matter.
Further in the action research cycle, sharing and working on data are the aspects that give action research its name. The data previously collected will be evaluated and appropriate actions will be executed to reach specific goals. There can be various goals of a business scan such as, recognise
8 patterns, benchmark your business or foresee upcoming problems. Depending on the goal, the data will be shared and worked with. Theoretical foundation can be used to explain and recognise particular patterns within a business and benchmarking the data with other respondents can give different insights in the performance of a business. The last stages of action research describe to plan and act. A business scan could reach its end here but not necessarily. A business scan and its facilitator can help formulate their plans for action and test them through implementation (Mumford, 1965). The business scan and the person or group who carries it out takes on the role of a facilitator rather than prescriber of solutions. This concludes that business scans in general can be much more than just a survey or just a benchmarking method. It can be a much broader process following its theoretical foundation in the action research and experiential learning.
2.2 Benchmarking
This paragraph discusses the benchmarking phenomenon as feedback for respondents. It discusses its origin, its rising popularity, pitfalls and limitations.
2.2.1 Benchmarking in general
The phenomenon ‘benchmarking’ was written about first in 1989 by Dr Robert Camp. It was change in course in how to look at competitors. In Dr. Camp’s research at the company Xerox they changed direction in the approach of benchmarking. ‘Competitive benchmarking’ was already in practice at most companies, to examine manufacturing costs through product comparisons. The ‘non- competitive benchmarking’ however was a new and fresh approach (Mann, 2011). In practice, Xerox recognised that in order to survive and grow, they needed to do more than compare against competitors. What they needed to do was to develop superior practices from learning from best practices wherever they exist (Mann, 2011). In Camp’s benchmarking methodology there are four different stages described, planning, analysis, integration and action. The last additional stage is maturity where a leadership position is attained. Within these stages there are ten steps with practices which are fully integrated into processes in the maturity stage. Figure 3 shows this first benchmarking methodology. Xerox learned from the best over eight years and their view of benchmarking became recognised as world-class. Due to Xerox’s success, benchmarking became known worldwide and publications about the phenomenon benchmarking rose from a few in 1990 to over 350 in 1993 (Figure 4). The growing attention for the benchmarking phenomenon showed the success and potential benchmarking has.
9 The following figure is adapted from the Centre for Organizational Excellence Research (Mann, 2011, p. 1).
Figure 3. The first benchmarking methodology at Xerox by Camp, 1989.
The following figure and note are adapted from the Centre for Organizational Excellence Research (Mann, 2011, p. 2).
Figure 4. Number of published articles in ProQuest (1990-2004) on tools and techniques (Thawesaengskulthai, N and J. Tannock, 2008).
The definition of benchmarking is debatable, Blythe (2006, p. 367) describes benchmarking as “the process of comparing each element of the value chain, including company departments, with the most successful equivalent element in equivalent value chains.” Johnson, Scholes, and Whittington (2008, p. 116) consider benchmarking “as a way of understanding how an organization’s strategic capability, in terms of internal processes, compare with those of other organizations.” Mann (n.d., p.
1) says in that benchmarking simply is “learning from the experience of others”. While Mann’s definition is rather simple, it is quite comprehensive. Blythe’s definition of benchmarking only focuses on the comparing of elements. Johnson et al. (2008) seem to focus a lot on the comparison as well, while according to Mann (n.d.) benchmarking is much more than a comparison of
10 performance. Mann’s core definition added with the three steps of the process make a comprehensive definition: “Benchmarking focuses on learning from the experience of others and can be defined as identifying, adapting, and implementing the practices that produce the best performance results.” The definition from Camp (1989) himself describes benchmarking as: “the search for industry best practices that will lead to superior performance” Camp (1989, p. 1). Camp’s own definition does not contain the application or implementation of the benchmarking and focuses as well on the search and comparison. This makes the definition of Mann (n.d.) most comprehensive.
Camp does however distinguish four different types of benchmarking in his definition, internal, competitive, functional and generic. Internal benchmarking compares operations among functional parts within the same organisation. Competitive benchmarking compares with a direct competitor, functional benchmarking obtains information about industry leaders in certain functional aspects of management or service, regardless of what industry they are in. Generic benchmarking is looking for the ‘best of the best’ by extending functional benchmarking to any function, regardless of whether your organisation has it or not (Sharp, n.d.).
Mann (2011) has a different view and distinguishes two forms of benchmarking, formal and informal benchmarking. Informal benchmarking can be used by everyone, it does not follow a process or procedure. It refers to the type of benchmarking everyone does at work, often unconsciously, involving comparing and learning from behaviours and practices of others (Mann, 2011). The internet, networking, talking with colleagues and consulting experts are all examples of learning from
informal benchmarking.
Formal benchmarking consists of two types according to Mann (2011), performance benchmarking and best practice benchmarking. Performance benchmarking describes the comparison of performance data obtained from studying similar processes or activities (Mann, 2011). Best practice benchmarking describes the comparison of performance data obtained from studying similar processes or activities. Identifying, adapting and implementing the practices that produced the best performance results (Mann, 2011).
Johnson et al. (2008) claim there are three different approaches regarding formal benchmarking. The first approach is historical benchmarking. An organisation can consider their performance in relation to previous years in order to identify any significant changes (Johnson, Scholes, and Whittington, 2008). The second benchmark approach is the industry/sector benchmarking, this benchmark approach will be used in the advice reports based on the results of the HCS (Johnson et al., 2008).
The third and last benchmarking approach is called the best-in-class benchmarking. This approach compares an organisation’s performance against ‘best-in-class’ performance, wherever that is found, and therefore overcome the limitations of other approaches (Johnson et al., 2008). Johnson et al.
(2008) describe an additional approach in the performance benchmarking described by Mann (2011).
Mann (2011) only describes performance benchmarking as one approach, whereas Johnson et al.
(2008) split performance benchmarking in historical benchmarking and industry/sector benchmarking. Mann (2011) explains that the benchmarking approaches can be used internally or externally. This shift in orientation describes the split of performance benchmarking by Johnson et al.
(2008), where industry/sector benchmarking is external orientated and historical benchmarking internally orientated.
11 According to Johnson et al. (2008) the importance of benchmarking is, not so much in the detailed
‘mechanics’ of comparison but in the impact that these comparisons might have on behaviours.
In other research of Camp years later (2004), a survey was conducted to get insight into emerging benchmarking developments. The purpose of this study was to get an overview of the importance of different developments such as, capture, sharing, and dissemination of best practices and the influence of technology, including computers, databases and networks (Camp, Andersen, 2004). One of the most significant findings in the survey is regarding transferring of best practices. The respondents show high concern in developing a process and mechanisms for transferring best practices after identifying them (Camp, Andersen 2004). With the benchmark methodology from Camp (1989) (Figure 3.) he concludes 15 years later that the transferring and implementation are of high concern. Mann (2011) claims that a disciplined approach is needed while using benchmark methodology and does not go into depth into the implementation concerns.
2.2.2 Pitfalls and limitations of benchmarking
Using benchmarking adequately, and matching the type(s) of benchmarking that suits the company, with a well thought methodology should lead to superior performance. However, there are some pitfalls and limitations of benchmarking. Johnson et al. (2008) discuss two major dangers, measurement distortion and surface comparisons. Measurement distortion implies that benchmarking can lead to a situation where ‘you get what you measure’. This may not be what is intended strategically, it can therefore result in changes in behaviour that are unintended or dysfunctional. Surface comparisons imply that benchmarking compares inputs, outputs or outcomes, it does not identify any reasoning for good or poor performance. Underlying reasoning is not shown but if well directed, benchmarking could encourage managers to seek out these reasons and hence understand how competences could be improved (Johnson et al., 2008).
Blythe (2006) describes five difficulties regarding benchmarking as well. First, it is often very difficult to obtain truly accurate data on the functioning of other companies. Second, even when data is available, it may be difficult to decide which the critical factors in the competitors’ success are. Third, at a conceptual level it would seem strange to allow the firm’s quality control to be dictated by other companies. Fourth, if benchmarking is adopted by everybody, it will stifle innovation. And finally, the costs incurred in bringing all departments up to the best standards of all other companies are likely to be high, which will inevitably have an effect on prices.
Sharp (n.d.) focuses his article on the public sector but focuses on the tool benchmarking as a commercial tool being used in the public sector and non-profit sector. Nevertheless his conclusion claims that the success of benchmarking will probably rest upon careful and selective application of the method in those areas its being used in. Whereas Sharp keeps conclusion quite on the surface, there is more than that.
Mann (2011) looks forward to the future, where technology will play an increasing part in benchmarking. Organisations can share benchmarks and best practices more quickly and all over the world. Individuals and organisations have to cope with the further development of communication technology, which will result in an increase of data and information. According to Mann (2011), some commenters have indicated that our attention span will become shorter because there will be not enough time to review each piece of data. Video data is one of the aspects that will develop more in
12 the future, video content about best practices can be more quickly understood and assessed for relevance compared to written data (Mann, 2011).
The development of benchmarking works both sides, organisations expect more as well from benchmarking in the future. The expectations of the solutions and best practices exchange process will increase, expectations about the acceleration of the process are inevitable. Organisations and economies will improve at a much faster rate because of the developments in communication technology (development in benchmarking as well). The speed of exchanging information will rapidly increase which means that decisions have to be made faster as well. Hasted decisions might be problematic in the future but Mann (2011) concludes in this aspect the same as Sharp (n.d.) concludes, earlier in this paragraph: “I am convinced that a disciplined approach using benchmark methodology will always have its place alongside an informal approach to benchmarking.” (Mann, 2011, p. 7) The challenge for organisations is to decide which type of benchmarking fits the situation.
A disciplined and slower approach will be required for the largest opportunities for improvements.
Speed is in that case less relevant where breakthrough improvements could have a huge impact on the bottom-line (Mann, 2011). Where speed is essential, a more informal and faster approach of benchmarking will be used. Issues or opportunities that need to be tackled in a shorter period of time, with the understanding that faster approaches are riskier and less likely to produce as large a gain (Mann, 2011).
2.3 Developing criteria’s for implementing business scans
This paragraph will describe different criteria for business scans to make the implementation of the scan effective. These criteria will be applied in chapter four, the case study.
2.3.1 Motivation, awareness and commitment
Before a business scan will be used, a few factors will influence the choice of potential businesses to participate. The business scan needs to reach the appropriate group of respondents and the facilitator needs to put effort in the response rate. The companies need to have certain motivation and commitment to participate and stay participating during the course of the business scan.
Awareness must be created that the business scan has a positive influence on their business. A ‘felt need’ must be created at the businesses.
Business scans have an effect on businesses participating. The awareness can be interpreted in two ways. The awareness to participate in the first place, which needs to be created beforehand as discussed with the ‘felt need’ phenomenon in action research. The other interpretation of awareness is the awareness that results are different than other participating companies. Businesses need to evaluate the business scan and see differences or similarities with other participants (benchmarking).
The challenge is finding participants who are willing to participate in the survey. Sometimes the problem is that the target population is not clearly defined but merely labelled (Shadish, Cook, and Campbell, 2002). Shadish et al. 2002 identifies this problem in an experiment but a survey is for the respondent the same experience as an experiment. An experiment only differs in manipulating one variable whereas a survey draws correlational conclusions (Shadish et al. 2002).
13 Shadish et al (2002) describes six possibilities which help locating the target population of the research:
- Preexperimental surveys to locate and characterise potential participants;
- Pipeline studies to follow what happens to them over time;
- Pilot tests of the solicitation procedures to see who will learn about the experiment and who will attend if eligible;
- Intake specialists who aggressively recruit potential participants;
- Efforts to learn what features of the intervention cause people to decline to enrol.
When the number of eligible participants is lower than anticipated, a researcher has four different efforts in his or hers toolbox that can result in a higher response rate of survey:
- Extend the time frame for the research;
- Divert additional resources to intensify outreach efforts;
- Alter eligibility requirements so that more participants are eligible;
- Terminate the research.
These efforts from Shadish et al. (2002) will result in a (chance on a) higher response rate. The termination is a last resort if the costs do not outweigh the risks.
Groves, Cialdini, and Couper (1992) formulated different factors that influence respondent motivation and commitment. These factors are based on the survey participation part of business scans. The ‘felt need’ phenomenon from action research is not included here and will influence respondent motivation and commitment positively.
Societal-level factors
A society has a set of global characteristics that has an impact on survey participation. Both the respondent and interviewer operate in this context formed by the societal-level factors (Groves et al.
1992). For example, the degree of social responsibility felt by a respondent may be affected by such factors as the legitimacy of social institutions and the degree of social cohesion (Goyder, 1987).
Expectations get influenced by both the interviewer and the respondent because of these factors, but also determine what persuasion strategies the interviewer uses and what decision-making strategies the respondent uses (Groves, et al. 1992). Another aspect is the ‘oversurveying’
phenomenon described by Schleifer in 1986. The amount of surveys and its legitimacy have an influence on the respondent’s perception. Especially since the internet makes it easier to distribute a survey. This has a negative impact on the survey-taking climate in a society.
Attributes of the survey design
According to Groves et al. (1992) design choices may have an impact on survey participation in various ways. For example, the mode of initial contact affects the number of channels of
14 communication between the interviewer and respondent, as well as the selection of persuasion strategies (Groves, 1978). The respondent rule can permit multiple householders (or organizations) to be alternative respondents or restrict the choice to just one. The length of the survey being requested is a basic indicator of the burden of participation. Finally, the topic of the survey helps determine the respondent’s level of knowledge and interest in the interview (Steeh, 1981). The topic of the survey or business scan is a reason for companies to get interested and start developing a ‘felt need’.
Characteristics of the sample person
The characteristics described by Groves et al. (1992) are based upon households rather than organisations. The factors such as age, gender, income and health status etc. are not causal to the participation decision in households. The factors might influence the respondent that can produce a set of psychological predispositions that affects the survey. For organisations, these factors will be even less relevant due to the split perception of work and personal life.
Attributes of the interviewer
An interviewer’s prior experience affects the skill and confidence the interviewer approaches the potential respondents. Experienced interviewers tend to achieve higher level of cooperation due to behaviours proven to be effective (Groves et al. 1992). Interviewers report as well that the current state of mind has a big impact on the outcome on point of contact and is crucial for their success (Groves et al. 1992). The characteristics of the sample person described above can be reflected on the interviewer’s psychological state as well, motivation tiredness etcetera (Groves et al. 1992).
Finally, Groves et al. (1992) describe the next phenomenon:
"Observable sociodemographic characteristics of the interviewer (race, age, gender, etc.) are believed to affect the 'script' evoked in the householder’s mind at the first contact with the interviewer. At that moment, the householder is making judgments about the purposes of the visit."
Respondent-interviewer interaction
It is when a respondent and interviewer interact that all above factors start counting. The interviewers own ability, expectations, features of the design, characteristics of the immediate environment and society determines the strategies to persuade the sample person (Groves et al.
1992). When full participation fails to obtain, the inferential value of the method is threatened (Groves et al. 1992).
2.3.2 Environment
Businesses and organisations get a lot of requests to participate in various forms of surveys. The increasing amount of surveys has a negative impact on the response rate (Porter, Whitcomb and Weitzer, 2004). According to Porter et al. (2004) survey fatigue has the biggest impact on individuals confronted with multiple surveys in one semester or period of time. After a certain amount of time it will have less impact on the individual. At organisations this phenomenon will most likely have the same negative impact as well. At this point business scans need to distinguish themselves from surveys. The ´felt need´ established from action research will deny the survey fatigue phenomenon because the respondent participates for his or hers own benefit, rather than participating in a survey
15 for information gathering for the researcher. However, information gathering from the surveyor or facilitator can still be valuable in addition to the business scan’s purpose, which is analysing a business. The metadata can be used for other purposes, such as analysing whole business sectors or regions. Data collected from all participants can give insight in for example different patterns in business sectors or regions. This information can be analysed for organizations or governments who are interested in a particular environment. They can use the data as an environment scan to gain information.
2.3.3 What is the role of the facilitator
As described before, the person or group who carries out the business scan needs to take on the role of facilitator rather than prescriber of solutions. The facilitator helps the businesses/respondents to manage the business scan. Mumford (2001) describes the role of the facilitator and the following descriptions are based on his research.
Requirements of the facilitator are to familiarise the respondents/businesses with methods that are to be used and help them to mould these to their own requirements. The facilitator also assists to resolve conflicts of interest and to make sure that important aspects of the business scan are not forgotten. The facilitator makes in no circumstances any decisions for the respondents or businesses, they are the decision takers and the researcher will always place the interest of the businesses first.
The role of the facilitator is to encourage the respondents and businesses to systematically analyse their own problems and to help them moving forward towards completion of the task. There needs to be a ‘felt need’ created by the facilitator when there is contact between the facilitator and the business. The communication role of the facilitator is important for the follow-up. A key factor for successful action research is to ensure that all interested parties in a change are always informed of what is taking place. Individual meetings, group meetings, electronic mail and information providing documents can be ways to communicate change. The facilitator can often take the place of a central source to be responsible of the communication.
2.3.4 The design of the business scan
2.3.4.1 Length and order
The design of the business scan itself is another important criterion. While compiling a list of questions, the length of the business scan is an important factor. Herzog and Bachman (1981) discussed that the length of a survey influences the quality of the data. If a survey reaches a certain optimal point, respondents will have lower motivation resulting in easier ways to respond, like short answering or prematurely terminating (Herzog and Bachman, 1981). Nevertheless the effect of this stereotypical answering after this optimal point is less pervasive than expected (Herzog and Bachman, 1981). The topic of the business scan is often enough motivation for the business to keep commitment and motivation in the business scan. The length of the survey being requested is a basic indicator of the burden of participation (Groves et al., 1992). Potential respondent’s first look at the business scan will concern the length of the scan. ‘The felt need’ established in an earlier stage should create enough awareness, motivation and commitment to overthrow the burden of the amount of invested time. The criticism from Herzog and Bachman (1981) is dated from 1981.The
16 research itself will never get outdated but the technological developments open up new opportunities and threats. In the next paragraph these different technological advantages and disadvantages will be discussed.
Another aspect concerning an attribute of the survey design is the order of the questions. The order of the questions has little effect on the initial willingness to participate, but they are likely to affect the likelihood of seeing the survey through completion (Crawford, Couper, and Lamias (2001). In the research of Crawford et al. (2001) it was clear that the open-ended items in the survey played a key role in the relatively high abandonment. The fact that a respondent has to put more effort in formulating a response is enough demotivation to continue beyond this point of the survey. Open- ended items then might be better positioned in the end of the survey. The respondent is far progressed in the survey and has motivation to not let the already invested time go to waste. The respondent has an easier time answering the first questions whereas he or she will feel more comfortable continuing. High abandonment should be more contained that way.
2.3.4.2 Business scans on the web
There is a lot of potential in a survey based on the web (Cobanoglu, Warde, and Moreo, 2000).
According to Dillman (1999), the most significant advances in the survey methodology during the twentieth century were the introduction of random sampling in the 1940s and telephone interviewing in the 1970s. Researchers today are witnessed similar advances in the field of survey methodology with the introduction of technology-based surveys such as the internet in 2000 (Cobanoglu et al, 2000).
A benefit of a survey on the web is that it is less time consuming than to meet the respondents in person. If the respondents are high level individuals in the organisations such as CEO’s and senior management, it saves the businesses time and there for money. More practical forms of saving money by executing a survey on the web are publishing costs, distribution costs, and survey collection costs (Schmidt, 1997). All These costs are obsolete since there is no tangible product.
Time consuming data entry errors can be eliminated through automated data checking at the time of data collection, and administrators have immediate access to data as it is received, allowing them to track the data collection process (Schmidt, 1997).
Making a web based survey not only cheaper and less time consuming but also resulting in higher validity.
Another benefit is the access to a large population of individuals. The Netherlands has (together with Switzerland) the highest fixed broadband internet connections per 100 habitants in the world (around 60, in June 2012)(OECD, n.d.). The potential reach of respondents is there for high whenever a web survey is being used.
As discussed in the previous paragraphs one of the potential pitfalls recognised by Franken (2013) is the motivation to participate beforehand. Potential respondents sacrifice a lot of time in completing the survey and should not only give information but also receive information in return for their efforts (Schmidt, 1997). These dynamic surveys should motivate the potential respondent beforehand to increase the amount of respondents and the value of their given information.
