The Dark Secrets of Benchmarking

This is a guest post

Everyone loves a bench-marking exercise, right?

It helps you understand your place in the world – where you excel, right?

It shows you the gold standard, best practice, the benchmark you aspire to, right?

Wrong.

Bench-marking is honest and pure, so, what brings me to such a bold outburst?  Well, there are a couple of reasons:

  1. Knowing that our own brains play tricks on us
  2. Plain, old-fashioned common sense

My brain really plays mean tricks on me??

Your brain works in some odd ways.  Brain science tells us two really important things that put us at a disadvantage if we are unaware of them:

  • Confirmation bias.  This is the tendency of people to favour information that confirms what they think.  And let’s face it, every bench-marking exercise starts with a subtext, there is no such thing as an open-minded enquiry, those dice are loaded right from the start.  If you want to prove that you are could be in the upper quartile for productivity AND satisfaction you will find the evidence.  Your brain will work overtime to prove you right.
  • The Dunning-Kruger effect.  This is where the incompetent suffer an illusion of competence.  Interpreting benchmarks is full of subtlety, averages mask outliers and measures interact.  This is a highly skilled job for someone who really understands the industry and the interrelationships between the KPIs.  The biggest fans of bench-marking are often your finance team who are trying to get a handle on your performance.  These are your numbers guys, so they should be the most obvious people for the task.  BUT, their training means that they look at the world through a filter of right/wrong, black/white, better/worse.  They have some of the skills to interpret benchmarks, but so often they over-estimate their ability and understanding so fail to see the subtleties and the pitfalls in their findings.

So, what about the common sense?

Well, let’s think it through:

  • The quality of the research.  The research firm is an honest broker and they have undoubtedly produced a high quality, accurate benchmark report.  A reasonable assertion, but pause for a second, think about completing a bench-marking survey, how long did you spend on it?  How honest were you with the answers?  Still confident about the quality?
  • The absolute foundation stone of comparative analysis is to compare apples with apples.  In all likelihood your bench-marking report is like a shopping trolley full of different fruit that you are trying to compare blindfolded and with thick, woolly gloves on.  You are likely to be comparing high-class customer experience operations with the cheapest outsourced body shops.
  • What are you hoping to achieve from a bench-marking exercise?  If your vision is to give a great customer experience why base your analysis on someone else?  Reviewing bench-mark data can be a deeply engrossing exercise but I can think of nothing less useful for your future vision than staring in someone else’s rear view mirror.  I always find that Mums make the smartest statements – I am sure, as a kid, your mum asked you “If Johnny jumped off a cliff would you?”  Be bold, be brave and plough your own furrow.

Gosh, is bench-marking of no value whatsoever?

Operations focused on the customer experience will find it of limited use because, quite simply, they don’t get the results that they do by marching to the beat of anyone else’s drum.  To get the most value you have to be smart how you use it:

  • Bench-marking is just a tool, it has its uses but it isn’t an end in itself.  If you approach it with an awareness of how your brain loves to fool you, and you can see when your brain is hijacking your objective thinking then you can apply your analytical skills usefully.
  • Be aware of the see-saw.  There is an inevitability that if you drive productivity, quality will suffer; if you want to deliver a really great customer experience then it is unlikely that you will be in the top decile of efficient operations.

If you want to create an experience that is truly special start with your vision, your customer and the experience you aspire to and design your metrics and targets from there.  Focusing on bench-marking is by it’s nature limiting your potential to someone else’s experiences.

As Nobel winner Prigogine said the best way to cope with the future is to create it”.  Rip up the rule book, shred the bench-marking report and allow yourself to shape being the best you can be for you and your customers.

Dougie Cameron consults and writes about improving your customer experience through your people.  As a reformed finance guy, he challenges the misuse of numbers.  Find out more at addzest.co

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Comments

  1. I agree that the most difficult people to deal with on benchmarking over the years were all the bean counters. True that they see things in green(color of us dollar) and white only. However, when it comes to areas of manufacturing or warehousing and you’re counting the number of widgets produced within the hours of a shift or how many cases were picked and palletized for shipping in a day, KPI is very practical to use and very hard to distort the numbers even with a human brain, unless you don’t take into consideration down time such as line change overs, maintenance issues, or waiting for raw materials. In that case I can see where one shift can look better than another in benchmarking.

    • Many thanks for the comment Phil!

      There are some great numbers guys out there as well as some damned lazy and unimaginative ones. As John le Carre said “A desk is a dangerous place from which to view the world”. If the numbers guy can apply the desktop exercise to the real world they are an asset. If not, they are a hazard.

  2. I’m with Dougie on this one. My approach has been that it is more important to understand whether our operations are improving or not, than to worry how they may or may not stack up against supposed competitors. There are so many factors that will be different, and even many of the factors under our control are not stable over time as supply chains shift. For example, when we started bringing back work from offshore (because we had got that much better) it looked like our labour costs were going through the roof – but only compared to buying the products already built. So even tracking one’s own improvement has challenges! Similarly, do you count lead time based on when a product shipped or when it arrived? Different firms do it differently, often for legitimate reasons. But it all confounds the comparison.
    I figured that as long as we were steadily improving, and that we could increase the rate of improvement, then our customers would notice and we could outcompete other companies.
    Thanks for the post.

  3. It’s a great point Hugh and thanks for the feedback.

    By definition people assume that they are comparing like with like when they look at benchmarks – but even the definition of the benchmark is subject to interpretation! I think your approach is a pragmatic one.

  4. Dougie,
    I have always had a problem with benchmarking as it smacks of needing third party or external validation for the things that a company does or wants to do. For me, this points to a lack of clarity, courage and honesty about how it really feels about how it is performing and how it is serving its customers. That’s the real problem and no amount of benchmarking will solve that.

    Adrian

  5. Dougie Cameron says:

    Thanks for the comment Adrian.

    Couldn’t agree more – why look at someone else to see what your 10/10 should look like? Have the courage to describe the vision and set the targets accordingly!

  6. Nice post, and one that makes some excellent counterpoints to a recent post of my own on benchmarking. As you say, Dougie, it can be helpful but there are also some pitfalls.

    Here’s my post on ways customer service benchmarks can be useful:
    http://www.toistersolutions.com/blog/2013/10/7/what-we-can-learn-from-customer-service-benchmarks

  7. James Lawther says:

    Thanks for your comment and link Jeff.

    I think most things are useful, but only if you use them appropriately.

    As you say in your post:

    There are three kinds of lies: lies, damned lies, and statistics ~ Mark Twain

    James

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