Gap between World-Class, Median Companies Continues to Widen, Research Suggests

Laggards risk losing competitiveness; Hackett's benchmarking study highlights best practices of top performers

  • Overall Focus on Operational Excellence - Across a broad range of metrics, world-class companies focus on operational excellence and generate superior results. For example, world-class finance organizations close their books more quickly, and world-class IT organizations complete significantly more projects on time and under budget. Finally, they see significantly lower rates of voluntary turnover, in part due to allocating more staff to address employee life cycle issues.

  • Effective Business Process Sourcing Strategies - Most world-class companies move to hybrid sourcing strategies that combine shared services and outsourcing. Across many common finance operations such as credit, accounts receivable, and accounts payable, for example, world-class companies leverage shared services anywhere from 25 to 140 percent more often than median companies. World-class companies also use outsourcing, often to drive down costs. World-class companies spend 23 percent less than their median peers on IT infrastructure and 27 percent less on HR processes per employee, and increased use of outsourcing is a significant factor in both cases.

  • Enhanced Quality and Access to Information - World-class companies dramatically improve data access both by creating a common data repository and, perhaps more importantly, giving management the tools and training to leverage this information and guide strategic planning, budgeting, and forecasting They also drive to dramatically lower error rates across the board. World-class companies are 105 percent more likely than median companies to generate business performance reports from a centralized data repository. In procurement, world-class companies see significantly lower error rates across a range ofareas, including pricing, quantity, wrong items ordered, and late payments to suppliers.

  • Standardization and Simplification - World-class companies understand that complexity drives up costs and increases cycle time. Executives at the companies challenge their organizations to evaluate the true business benefit when they want to deviate from standards. World-class companies also more fully leverage technology to successfully execute on corporate strategy, in the process often consolidating ERP vendors, increasing application integration, and driving greater standards adherence. For example, they rely on 67 percent fewer database platforms per 1000 end-users than their median peers, and have 46 percent fewer compensation plans.

  • Business Alignment - World-class companies closely align strategic and tactical plans, enabling functional areas to contribute more effectively to overall business goals. Finally, world-class companies abandon traditional functional processes in favor of process-driven cross-functional teams. More importantly, they are more effective at aligning operational areas with strategic business goals, and provide greater value to their companies. For example, world-class companies are 45 percent more likely to have IT participation at the senior management level, and HR organizations are 67 percent more likely to link people strategies to business strategies.