The Perfect Benchmark

There is really only one

Published: Monday, January 30, 2012 - 14:41

I don’t know how much is spent on the benchmarking industry, but companies and governments seem to spend an awful lot on it. The idea of benchmarking seems plausible enough—compare your organization against competitors, and voilá… you can provide many years’ worth of projects and plans to bridge the gap. Many organizations choose to do so, but is it really worthwhile?

No.

W. Edwards Deming would have called it a form of “copying.” Copying will always keep you behind the competition. Instead, you need to be looking for ways to differentiate yourself, not be more like everyone else. Let the competition copy you and spend their resources figuring out what you did to be great.

Also, Taiichi Ohno (of Toyota Production System fame) said that everything you need to know to improve performance is in your own system, if you know how to look. Unfortunately, most companies don’t know how to look. If they did, they wouldn’t be stuck in poorly designed systems trying to benchmark against competitors.

There are many assumptions about benchmarking. Here are three:
• Organizations that you benchmark against are comparable.
• The benchmarked performance is actually better than your organization’s.
• What you learn from benchmarking can be applied.

Organizations are like snowflakes, each one different. Despite the fact that IT vendors try to make them the same with standardized software, companies differ by customer demands, processes, work design, and many other factors. The difficulty this presents for benchmarking is legendary. When managers start asking questions about why there are differences (and there are differences), new questions arise. Measures become nightmares as each benchmarked organization uses different operational definitions (for measures) by interpretation or manipulation.

The haze created by the organizational measures brings questions as to whether the performance is actually better. One function or process may show better or worse than another, and this could be that the function or process (e.g., front-back office) may have the work segmented differently or have suboptimized—i.e., one function or process benefiting to the detriment of others.

Inevitably, benchmarking leads to such nonsense as “best practices.” Companies with perceived better processes are copied… if only improvement were only so simple. Innovation is compromised when organizations copy because copying requires little thinking. The copier is rarely better than the original.

There is a better way. An organization can identify measures that relate to purpose (or to what Deming referred to as “aim”) and acting on causes related to variation. Deming taught us this. What is your system capable of achieving, and what are the causes of variation for your system? Getting knowledge of your system (e.g., purpose, measures, demand, flow, and value) is more rewarding to organizations I have worked with because they get to understand more about themselves before worrying about competitors. This approach will give you a strategy that will allow you to achieve both innovation and unprecedented levels of improvement. Know thyself, and the rest will take care of itself.

And what should be the only benchmark after you understand your organization? In a word, perfection. If you don’t know what perfect should look like, just ask a customer. This doesn’t mean you will achieve perfection, but the pursuit is infinitely better than being just “good enough” through benchmarking against others.

About The Author

Tripp Babbitt

Tripp Babbitt the managing partner for The 95 Method - Executive Education and Advisors. The 95 Method is about giving organizations a method to use new theories to grow business.  Babbitt can be reached at tripp@the95method.com. Reach him on LinkedIn at www.linkedin.com/in/trippbabbitt

Tripp also has a podcast and YouTube channel called, The Effective Executive.