There's a huge difference between world-class companies and the merely-average, and that gap is widening across a number of critical performance measures, including cost management and staffing, according to the 2004 Book of Numbers, a study compiled by research company The Hackett Group (www.thehackettgroup.com). This gap should be seen as a potential danger sign for companies that allow themselves to lag behind, according to Richard Roth, Hackett's chief research officer.
Hackett's research highlights five of the most common traits and techniques shared by world-class companies:
Overall focus on operational excellence Across a broad range of metrics, world-class companies focus on operational excellence and generate superior results. They see significantly lower rates of voluntary turnover, in part due to allocating more staff to address employee lifecycle issues.
Effective business process sourcing strategies Most world-class companies move to hybrid sourcing strategies that combine shared services and outsourcing. World-class companies spend 23% less than their median peers on IT infrastructure and 27% 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 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. In procurement, world-class companies see significantly lower error rates across a range of areas, 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.
Business alignment World-class companies closely align strategic and tactical plans, enabling functional areas to contribute more effectively to overall business goals. They abandon traditional functional processes in favor of processdriven cross-functional teams, and are more effective at aligning operational areas with strategic business goals, and provide greater value to their companies. "Excellence is no accident. Worldclass companies simply look, feel and operate very differently than their median peers," says Roth.
