5 min read
Benchmarking is an old concept which got more and more unpopular over time. Why would we align to what 80% of companies do in the same way as 80% of companies are not really successful in their respective industries?
Benchmarking reloaded
So here’s the argument for ‘benchmarking reloaded’: We should not go for ‘most companies’ – we should go for ‘what are most successful companies have in common’. And on top we should not only focus on the specific industry but on cross-industry patterns which makes findings even stronger and impactful.
Financial top performing companies
So if a majority of financially successful companies cross-industry are having certain results in common (but different to the rest of less successful organisations) then the message is getting interesting. Especially in an age of digitalisation a lot of data is available and therefore benchmarking in a new way is becoming attractive again.
But of course there are some common pitfalls which still have to be taken into account when it comes to benchmarking. Below are some examples and some questions the F-Top practice answers. Read about how to avoid common pitfalls.
7 pitfall to avoid in benchmarking
Pitfall 1 Benchmark is done at too high a level
Many companies think that one overall corporate benchmark is sufficient. However, larger organisations should be split into logical units to obtain a useful benchmark. If you group together units with large differences you might find that the results do not reflect reality – and draw the wrong conclusions (e.g. 2 units with high and low numbers may average into a satisfactory result – but each unit may be facing different kinds of problems which need to be addressed).
Pitfall 2 “5 Metrics are enough”
We’ve encountered many organisations who want to run the whole people management area with a dashboard of 5 to 10 metrics – like driving a car. But there is one thing people forget: First of all, even if there are only few metrics and symbols on the car dashboard, there are far more measurement points below – so if one control lamp is on it could mean many different things. Running a company is more like flying an airplane – and have you seen the dashboard of an airplane? Of course it’s important to limit the number of metrics to those with a useful business impact, but 5 to 10 are far too few in order to control all people management processes.
Pitfall 3 The numbers are not linked to underlying activities
Benchmarking is very often understood as comparing numbers while neglecting the activities that influence it. However, in many cases only the underlying qualitative activities can explain a gap in the numbers – and you have to change things on that level to improve the results. Therefore, it is also vital to look at all the activities which are connected to the metrics in focus. This enables a company to quickly identify what to change in order to close the gap.
Pitfall 4 Focus on numbers instead of actions
Benchmarks work with numbers and therefore suggest that the measurements need to be absolutely exact. This is not correct- benchmarking should only give indicators as to where improvements can be made. Some benchmarking organisations produce huge amounts of numbers but very little useful information. Key numbers should be linked to detailed activities to enable a company to setup concrete action plans.
Pitfall 5 “Focusing on single metrics”
Companies often tend to select single metrics (e.g. time to hire) and focus on it rather than looking at whole management processes. Looking at metrics which cover whole processes and their underlying activities allows you to identify what needs to be changed and the financial results of making those changes. Furthermore, it’s important to combine metrics from different areas to spot correlations and interdependencies. If you do something about one area you have to be sure that there are no negative impacts on others – or in the best case, different areas can be improved just by solving one major problem.
Pitfall 6 The benchmarking approach and process
In our first pilot round over 20 years ago, we tried something like an online survey. We sent out a questionnaire and very good descriptions. But looking at the data we got back we found that – even with excellent descriptions – 10 companies interpret a single term (e.g. number of talents) in 10 different ways. So the very fancy and easy approach using online tools is limited. It is much more important to sit down in a thorough process with the client and walk through all raw data definitions in detail, understand the company specifics and freeze the data in such a way as to be comparable within the knowledge base. Only this ensures that you are comparing apples with apples.
Pitfall 7 It’s really just a sales tool
Benchmarking is frequently used not only to support the client in finding gaps, but also to support the consulting company in generating more business. Benchmarking results can be interpreted in many ways and it is important that the provider be an independent institution in order to obtain honest and usable results. Ensure that your external partner does not have a hidden agenda.
