The way to find out “how well we are doing” is mostly solved with comparative measures.
If I walk into most companies they can refer to some guideline benchmark values to highlight their relative performance.
Sometimes these measures highlight a significant performance over the industry standards. Some companies use the measure as a “must have” measure to gain and improve towards. A business leader should understand where their efforts and time is best placed within all these benchmark figures.
80% of companies have implemented some form of internal or external benchmarking
A company or department that chases small metric improvements just because they are below an industry standard of best practice is in danger of losing its unique competitive edge.
We recognize that improvement in all areas provides a sense of achievement, encourages competition and yet it can be a distraction.
Why bother to be better all the time in every last detail and area? A leader who displays narcissistic tendencies is most likely to chase and try to improve every area of the business, in part to make themselves look good and in control.
Indeed we understand with the concepts of LEAN that anything short of effective and efficient action is simply waste and should be removed. The pursuit of any quality standard and system often highlights a philosophy that we will never finish in our quest for perfection.
There are many managers who use the rating tables and benchmarks as tools to “motivate” or worst, as a stick to raise productivity and performance. The reality however could be so much different.
You can create great value and critical sense from performance tables and benchmark figures.
However they will only ever tell part of the story. Instead of looking over to see the companies and departments you should be more like, take a step back and ask yourself why.
The challenge with statistics and benchmarks is they offer only a numerical version of reality. These figures cannot tell you the back story behind their performance levels. If you are in pursuit just of straight numbers then you can reduce the medium and long term motivation of staff through numbers only decision making. Large companies suffer the most in this conundrum. They often have stock holding shareholders that seek 90 day performance updates.
However this mentality is then cascaded throughout the whole organization in every area. Swiftly the impact to management style leads to reduced empathy, emotional intelligence considerations and ultimately a high staff churn rate.
Some ONE has to be at the top.
How many hours a day does Usain Bolt train?
How many hours does it take to manufacture the front grill of a Bentley?
These extreme high standards and extra effort leads these fore runners to their overall performance standard.
However, if you went to Usain Bolt or Bentley you will find other areas in their business, training and lives that are not high at all. If they pursued excellence in every area then their overall performance would not be so high. They would not be able to focus on the most important parts that matter the most.
For a business, it is important to understand WHERE in the market it wishes to be placed. This positioning is equally important for departments and managers.
If you want to be the very best but are in a business and market that will not match your desires, then you need to seek a new job and not drive employees and your business into issues and challenges that do not benefit the shareholders and customers the most.
Some business leaders and owners find it surprising when they discover JAMSO does not push a specific dashboard or software upgrade for their metrics and business intelligence.
We explain simply that although the very best leaders in the market make full use of many of these sophisticated tools, not everyone in the market should invest in them.
If your small business improvements can be made through the improved use of better data quality and improved excel skills to bring about the changes needed for your business, then simply do that.
You should remain confident if you have limited resources due to skill shortages, budget levels, and equipment limitations.
Accept these as the start points for improvement and gain the maximum performance out of them first, before stretching into new investments and expectations.
If you are 12th in a league table of patent submissions for your industry, do not just chase after the number one title. Maybe small improvements to raise the quality and the quantity of your patents will deliver more value and interest to the market and staff.
Excellence Is Everywhere
Never before in human history have we been exposed to so many hacks, tips, tricks, and must do lists, of the highest performers. If you take 20 minutes to run through these lists then quickly you will find that some names appear often but fail to dominate every list. The reason is simple. Everyone and every business are unique.
Steve Jobs is known as one of the best recent inventors of the technology user interface and yet was a terrible person to work for.
Facebook generates around a billion dollars of profit each quarter and yet their customer support for business is quite frankly, disgraceful.
So, you and your business do not need to have the best killer website or the highest productivity levels. You do not have to have the leading return on investment on every project. Accept the limitations and reality of your business and operational flaws. Then concentrate on the highest return improvement areas first with the talents and resources you have.
On-Going Improvements and Step Changes
The winds of new management and leadership in a department or business are frequently cyclical.
These leaders often have specific short term step change impact goals to deliver and therefore embark on a campaign of new metrics.
Understanding this flow and rhythm is important for employee reactions to change.
A business and respectful leader will create a culture to develop meaningful high impact on going improvements. From time to time new threats or opportunities arise to provide the need and implementation of step changes. These step changes should be managed to avoid a reputation of “headless chickens” and “numbers chasing” cultures seen in many large corporations.
The daily, weekly and ongoing temptations to follow benchmark figures and industry standards are understandable.
Indeed sometimes the market will force you to chase low impactful areas of your business.
This is seen in regulation and standards audit checks that the law or market requires.
A discipline should be created to avoid too many distractions and temptations to pursue every improvement opportunity. Instead use the effort and time toward low cost high impact changes to satisfy your clients and shareholders. So, stop looking up and start looking forward.
A Leaders Benchmark and League Table Check List
Before you create and operate change within your business to align expectations and action to meet benchmark and league table performance use the below check list to validate your actions.
Is the current leader and performance level a chance statistic or persistent top performer? (Check a 3 year period to identify trends and high performers)
What will this performance level mean to our shareholders?
What will this performance level mean to our customers?
What will this performance level mean to our staff?
Whilst we focus on this metric what else may suffer?
What is the minimal acceptable level of performance for this metric?
Explain in one sentence why this is not a vanity metric.
What is the true cost of this change?
Why is our current performance at its current level?
How does this metric align with the priority of the business and its medium/long term strategic goals?
What are the actions I expect to generate from this benchmark exercise?
What face to face fact finding have you conducted for the metric beyond desk research?
Every business started somewhere. Apple and HP started in garages; only over time did they become the giants we see today. Both companies still make mistakes have product recalls, forced to adjust strategy and deal with endless commercial and regulatory head winds.
This has taken many years to reach their position and indeed what works for them is not directly transferable to many other industries.
Understand your business and current market very well.
Many of the highest performers come and go, however the long term performers understand that not every metric needs to be chased and pursued with equal zest.
Common Pitfalls From Benchmarking
The most common errors in benchmarking either performance or a process include having too vague a purpose.
Where public information is available at little or no cost these figures are used as a sudden guiding light for expected performance.
This has the danger of distracting your actions away from your core vision and mission. This is especially seen if a business vision and mission is unclear to the staff working at the business.
Mediocracy in benchmarking is a hidden danger for many companies and managers.
Just because a bank measures the customer satisfaction of its customer facing staff does not mean that it should be doing something extra special to make a mark in the market.
This is especially true for industries facing new trends, such as online banking and alternative payment systems. The danger of measuring established old data sets may not offer the true insights to the future direction of your market.
The selection of your method of measurement, frequency of measurement and quality of data measured must be robust enough to allow a respectable correlation between your metrics and the ones constructed in the benchmark numbers.
Too often a misunderstanding of the structure of the data metrics and tolerance bands results in unnecessary anxiety for companies chasing a performance level that is not measured in the same methodology.
This case occurs far more often than many managers and companies believe. Common causes of error can be sample sizes, rounding value rules and use of mean or average values.
The last but most important pitfall is the lack of action.
Simply by measuring relative performances does nothing if these are not translated into actions, process steps and clear objectives.
The action should be supported in time and available resources to be effective. This can be seen in many of the older quality system standards. They demonstrated the need for proof of measures, plans and processes but never reached the requirement for definitive action. So, just because you understand that your business is number 4 or 12 in a league table or under-performing by 8% on an industry metric, this is meaningless unless followed with clear action steps.
To benchmark or not to benchmark – That is the question
So far we have explored many areas of the benefits and challenges within benchmarking.
You now also have a new check list tool to validate and question the purpose of your benchmark activities.
For companies that do not benchmark there is the risk of losing out on competitive advantage and stimulating needed change within a business.
For the companies that operate an ongoing benchmark there is a risk of complacency when an established record of high performance is established. A business should seek benchmarking as a stimulus for positive change linked to market expectations, new emerging trends and the companies own vision and mission.
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JAMSO helps people and business improve performance. Our clients engage with us in areas from metrics, key performance indicators and analytics to strategy. We help connect the dots from vision and values through smarter goal setting techniques to deliver unique solutions that raise performance for the short and long term benefits.
Special focus to help manufacturing and Fintech companies has been the back bone of JAMSO although our services have been applied across many industries and to personal leaders.
Further Reading and Reference
Written by James Doyle, founder of JAMSO. We have over 200 free articles, tools and resources for your success.