Friday, September 30, 2011

Benchmarking for Mediocrity

The other day I ran across something that reminded me of a benchmarking exercise we once had to perform. It was a bona fide learning experience, though perhaps not in the way one might expect.
At First Blush – A Great Idea
The idea of benchmarking is honorable - in the business world there is a sense of motherhood and apple pie about it. Who could be against it? It does have a certain appeal. It’s like a World Cup match – somebody is going to end up on top - no ifs, ands, or buts. There is a satisfying clarity and finality.
As bosses it makes us feel good too. Being able to say “we are in the process of benchmarking our organization” gives the impression that we are in charge and in control. We can believe that we’re going to knock heads and get rid of all kinds of inefficiency. We get to view lots of reports with lots of numbers and charts (not too dissimilar from reading the sports pages, which in fact is quite fun!) that show where we stand. We are managing by the numbers. We are tough!
Real Life Has A Way of Interfering
Game theory has given the strategy person a great set of tools, and we look for situations where we can create decision trees and payoff matrices. In a benchmarking exercise, there are three possible outcomes – we come out on top, we come out in the middle, or we come out on the bottom.
Coming out at either extreme will cause extra scrutiny of the results.
If we come in on top there will be an exhaustive review of what was including and what might not have been but should have. The reaction is “this is too good to be true, let’s find out what is really going on”.
If we come out on bottom, there will be a lot of action plans and remediation efforts that will need to be undertaken.
So the payoff for this exercise is as follows:

Look good but fly in under the radar – that’s the goal.
Let’s Not Pretend We Are Special
Given the payoff diagram above, any company participating or going through the same type of exercise is targeting the exact same objective. And provided there is enough ways to slice and dice the data – geography, division, types of revenue, business line, organizational structure, regulatory environment, etc. – there will be some way that the objective can be achieved.
Ironically, the benchmarking effort winds up begetting the average rather than excellence!
This Will Help Us More Than Benchmarking
Keeping two points in mind can help us avoid getting sucked into the benchmark trap.
We are unique – benchmarking will not help us any more than it will help a parent decide that child X is better or worse than child Y. As a parent we love them both for who they are, not where they fit on a quartile graph. Eliminating sources of uniqueness may be an unintended consequence through the benchmarking process and may very well hurt us more than any benefits we receive.
We can achieve the results even without it – knowing we are far away from the goal or close to the goal doesn’t change how we would go about changing it, which would be one step at a time. Interestingly, if we adopt a continuous improvement mindset, then we are always improving one step at a time already! We don’t need a benchmark effort to begin a march to excellence.
The moral of the story is somewhat Confucian – “Those who benchmark will be average, and those who don’t may become excellent.”
I would love to hear your thoughts about benchmarking or your stories on this topic if you have them.
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