Risk Management

Benchmarking Blunders: Three Pitfalls to Avoid

There is plenty of advice on how to get benchmarking done right. Megan Stoffer has three tips about how to not get it wrong. There is a subtle but useful difference between the two.

Jump These Gaps

  1. A vague or unclear objective
  2. An uninspiring comparison group
  3. A lack of action

It is critical that when a business decides to benchmark that it does so with a specific goal in mind. In the rush to find out “how you’re doing,” you never decide what aspects of the business you want to measure. As a result, collecting the right information and making the right comparisons becomes a guessing game that cannot be won, not to mention a big waste of time.

However, when you have a clear goal but pick the wrong groups for comparison, you are still going to have a less than optimal benchmarking process. Stoffer says benchmarks can be a bad thing when they are applied to merely justify average performance, such as when everyone in your peer group is falling short in a particular area. You need to cut that behavior out:

Selecting the peer group is often at the heart of the problem. Most companies consistently evaluate their performance against direct competitors. In order to gain the most value, you sometime need to compare yourself to the best. Ask yourself: who is best in class in this particular area in the world? What sectors are known for excelling here? By assessing the performance of leading and aspirational companies outside of your immediate peer group, we often find that companies can gain greater insights and learn more.

Finally, a lack of action is a seemingly goofy but all too real problem in business, where benchmarking reveals all the data the business needs, and then the business just sits on it. A benchmarking process that does not trigger change is like buying a box of crayons that are all white. Use the data available to make positive changes.

You can read Stoffer’s full article here: http://corporate-citizenship.com/2014/10/13/benchmarking-blunders-three-pitfalls-avoid/

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