To Benchmark or Not to Benchmark: When Does it Make Sense?

Measuring culture and engagement is de rigueur these days. As companies vie for the top employer positions, it seems to make sense that we should compare our performance to the competition.

Athletes benchmark their performance with every visit to the pitch. It makes sense; they are running the same 100 m race as the next guy, so time is a valid metric of progress and, ultimately, success. But what if the playing field is different. What if you are comparing your company to competitors who you don't want to emulate – a corporate culture is not the same in every company. The secret sauce that makes one company successful is not going to be the same in others.

I have built benchmarks, adjusted them, validated them, updated them. It’s hard work because there are many nuances to consider. Here are some of my caveats to external benchmarking efforts developed over years of building them first-hand.

How old is the benchmark? I revisited the validity of a benchmark that was developed in 2006, prior to the crash, positing that the urgency for innovation changed as a result of the wakeup call delivered in 2008. Opinions held and priorities felt in 2006 would have been turned upside down. You don’t want to benchmark your company against old business models.

How does it connect to performance? I reevaluated a 6 year old benchmark against current financial performance data for the companies in the database and could not find a definitive connection to strong scores on the survey to better business performance. Does your benchmarking service mention that explicitly in their offering?

What if you are better than the competition? Telus recently launched the Telus Transformation Office where they will now offer consulting services to companies wishing to replicate the success they had in their corporate culture transformation journey. They had a unique vision of where they wanted to move the company and devised a customized approach over years of trial and error. Diagnosing their own internal weaknesses led them to set priorities that fit with their vision of the future. This could be your company too.

How are peer groups selected? Are there enough companies who are truly similar to yours that you would feel comfortable being compared? Some important factors in peer group selection are: size, revenue, geography, global reach, industry, ownership structure, age, number of companies, number of respondents per company, response rate within each company. One VP I spoke with didn’t feel his vendor's benchmarks were really meaningful – his company’s culture was collaborative, while the closest competitor was task oriented. He wanted to build more collaboration, not less; he did not want to move his company toward the competitor's culture. So what value is the benchmark showing gaps in factors that may not be relevant for his journey?

How do you define engagement? You say engagement and I say engaaaagement. There are many theories of engagement and vendors with surveys covering all of them. The only important factors are those you connect to the bottom line. Depending on your organization, connecting employee engagement to financial performance may be more or less direct – Retail is less complicated than Banking, for instance. It is important for every company to understand what engagement factors are most meaningful and what business problems you are trying to solve.

Now it might seem from this discussion that I am against benchmarking. I am not. I would like to encourage you to change your focus from external to internal. Think about building your own metrics and algorithms linked to your strategic priorities.

Monitor financial performance. You already have functions such as Marketing, Finance, and Sales which are actively benchmarking the business’s profit and performance compared to your competitors. They know who is stealing your lunch and where you are doing well.

Identify differences. Some aspects of your company will be stronger than others. Chances are it’s not a big leap to figure out where you need to improve. There will be pockets of strong performance somewhere.

Understand the drivers of engagement and performance in your company’s environment. You can’t just take a vendor’s word for it, you have to validate that the factors used actually do make a different to how your company is performing.

Be clear on where you want to go. There is no point in using external benchmarks to pinpoint a so-called deficiency that is not even part of the transformation road map.

Replicate good. Now the trick is to spread good to other areas of the company; of course, you will have to analyze the how and why of good. These factors will not be identical to your competitor.

Get started. There is no perfect starting point, so just get going. Your insights will come over time. They will never come if you wait for all the stars to align.

When your internal benchmark metrics connect to business outcomes, you are on your way to creating proprietary metrics for your company.

Metrics Guru Dr. John Sullivan has written an excellent article on this topic.

Proprietary Metrics - the Next Big Thing in Talent Management