This item is the next in our series about “great classics,” the business rules that make common sense but are often corrupted in practice if leaders are careless.
We are told we should always benchmark against others if we want to be best in class. Serious benchmarking was especially drilled into business leaders at the height of the total quality movement several years ago. The problem comes in choosing which other firms become the benchmarks. If your focus is too narrow, and you benchmark only against firms in your immediate relevant market, you may just be capturing data from a “club of the mediocre.” A few months ago one of our associates was eating lunch with someone from a company whose customer service was being hammered in news articles and on the customer blogs. Grumbling about unfair the criticism was the person said, “We have looked carefully at our two major competitors and we know they are no better.”
Hello. The lament misses the point. Had no one thought of benchmarking against different companies that have really figured out how to do excellent customer care in a call center and have the customer satisfaction numbers to prove it? Several insurance companies, faced with severe competition, have established excellent service centers. So have mail order catalog companies. Any frequent catalog shopper can probably name several.
Even if you are benchmarking against the correct targets, it’s easy to fall into the trap of just looking at comparative statics, what your AVERAGE number is for “this or that” during the present quarter, with perhaps a simple comparison to a comparable average in a prior period. But a more sophisticated look will analyze change over several periods, and in particular will look at the RATE of change. It’s not just a matter of whether you’re getting better or worse, but how rapidly you are rising or falling. Senior leaders need to be alert that some of their corporate division leaders may not WANT to find change because of concerns about their own corporate reputations. If a CEO has this issue, at least one person on the company’s board needs to ask questions.
Careless and imprecise benchmarking practices can mask serious trouble. Even if a company thinks it IS following the rule to benchmark frequently, the truth may be otherwise.
Watch this space soon for the next item in the series about the rule to “always hit your numbers.”