Benchmarking - is it all it's cracked up to be?

March 2, 2018

I once heard a consultant mate of mine say (way back in the last century) that benchmarking was really a form of stealing ideas from the competition. I recently had a client of mine want to “understand” the benchmarks (ie metrics) of a similar type customer and apply those metrics to their portfolio, thinking that in identifying the delta between xyz and themselves they could figure out how to leapfrog the competition.

 

Benchmarking is more than just copying “ideas” from your competition. It is about adapting ideas, not adopting them, and making them work for your organisation. Process enablers are developed to meet a specific business requirement within the context of a particular business environment and corporate culture. What you “adopt” (or as my colleague stated, “steal”) will not work for you because no two businesses are exactly alike and no two business processes are directly transferrable to another organisation without a rigourous examination of areas that need to be translated to fit a different environment and culture. Thus, stealing shamelessly (or adoption) can cause no end of trouble because the business practices of one organisation don’t translate to those of another. Similarly, benchmarking the metrics or one company (or industry) against another in similar categories is fraught with danger.

 

Most companies that I deal with have fallen into the rut of “operational benchmarking”; how do we compare to organisation xzy in cost per square meter or cost per employee; even CFOs are focused on just the financial metrics of ROI or ROA comparative benchmarks. These “operational” benchmarks tend to drive a change behaviour internally within the organisation that usually leads to disappointment within the change team and also the workforce because a) the metrics being measured against were either unrealistic or b) the processes which enabled the metrics in the first place were not well understood and did not work within the organisation’s culture. Either way – disappointment, loss of face, angst and possibly a demoralised workforce.

 

Yet, management would have you believe the old benchmarking mantra “if you can’t measure it, you can’t manage it”. (This is misappropriation of a quote from W. Edwards Deming who actually said “It is wrong to suppose that if you can’t measure it, you can’t manage it – a costly myth.”). Metrics-driven leadership has become the default. Leaders set numerical goals to solve every problem (think struggling enrolments to failing sales).

 

But the problem with metric-driven leadership is that is doesn’t work. When you manage by the numbers, be they test scores, sales activity, professional service contribution rates, space ratios, etc, you drive performance towards mediocrity. Quantitative (numerical) measurements alone will never make an organisation great, because it is the qualitative (non-numerical) elements of performance that achieve greatness.

 

Did you watch the recent ice-skating events in the Winter Olympics at PyeongChang? Did you notice how they score Ice Skating? Part of the score is for technical merit (quantitative), and part of the score is for artistic impression (qualitative). If the scoring were simply based on technical merit, it would be a very boring event. It’s the combination of technical merit and artistic impression that make it interesting. The top performers excel in both!

 

Yet, we see in business, and even sadder in the education sector, we score performance solely on technical merit (Did you cover every element of the content? Did you check all the boxes of xyz sales process, etc?). Management defaults to the easy to understand quantitative element while completely ignoring the more human and nuanced qualitative elements. It is these very elements like emotional engagement, passion and purpose that are the critical drivers of success and satisfaction. I believe there are three reasons (you may know of more) why organisations focus on numerical (read benchmark) measures:

 

1. Lack of Trust

 

There is a general lack of trust in the world today - in managers, organisation themselves, the people who actually perform the work – lack of trust in judgement calls. Numbers just feel safer. Test scores and benchmarks are easier to measure and if a strategy fails, then at least you have the numbers to blame, don’t you………? Organisations default to numbers because they assume they evaluating something as nuanced as emotional engagement is too hard to measure. Or is it?

 

Go back to my Ice Skating example. How many of us are professional Ice Skaters? I’m not - and I doubt you are? My knowledge of the sport comes only from watching the Winter Olympics every 4 years. Yet, with minimal amount of “expert advice” from the TV commentators and a few nights of watching competitors, I usually end up picking the winners. I know how to judge artistic impression – and so do you!

 

Everyone knows a great performance when they see it. Leaders can really see when someone goes the extra mile about their work and cares about their team; students can tell when their lecturer is passionate about their subject. Managers just need to be trusted to make judgement calls sometimes and no be taken to task because they "didn't go be the numbers".

 

2 .Fear......about being Fair

 

When you open things up to interpretation, it’s never going to be perfect. There is always the odd judge with a bias (remember figure the figure skating example – you can’t deal with bias!). In an organisational setting, if a qualitative metric such as emotional engagement is used, and people can rate this with an 80% accuracy rate, that better that not having it. OK so people will whine that its subjective. Tough! When you Benchmark using numerical measurements, you are dumbing things down to the lowest level; you are also dumbing performance down to the lowest level. In my experience as an FM Leader and as a current Consultant to the FM Industry, I rarely hear top performers complain about fairness.

 

3. It’s Hard

 

Nuance is challenging; it takes discernment. That’s exactly why we should do it instead of avoiding it. As Deming said, “We have to bring back the individual. Management has smothered the individual.” Numbers matter, they tell a story, but when it comes to improving performance, true greatness is found in the nuance.

 

Take if from me; if a client asks you to "benchmark" their performance against a competitor(s) and find out how their standing in the market, make sure that you understand their intent before diving in head first. Developing a benchmarking program based on numbers only is fraught with danger and will come unstuck in the long run if you are only dealing in the quantitative and not looking qualitative factors.

 

 

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