Lesson Learned #7
The idea of benchmarking your processes against other divisions, other firms or other industries to drive innovation or develop new performance targets has long been appealing. Unfortunately, what we have learned is that it can be very costly and it just doesn’t work very well in practice. Trying to benchmark a company’s processes against other companies (or even divisions) presents three basic problems:
(1) It’s very difficult to define the parameters of a process carefully enough so you are actually making meaningful comparisons.(2) Processes never operate in isolation. To study them you also need to look at the corresponding management systems and organizational behaviors. And (3) because of #1 and #2, it can be a very expensive and time consuming exercise to do properly.
But perhaps the biggest problem is that even if you get by the problems mentioned above, managers, who ultimately determine whether the benchmarking information is useful or not, have a tendency to agree with positive variances and dismiss negative ones. Favorable variances reinforce current practices and actually can create complacency. Negative variances can be all too easily challenged because the business environments being compared are inevitably different in some way. It’s often too easy for managers to use different cultures, systems, people, customers, and facilities to diminish the validity of a benchmarking exercise. Very often the last comment you hear is the inevitable “apples and oranges” analogy.
Some businesses use benchmarking to inspire and energize their managers, almost like a form of industrial tourism. This may be perfectly valid and certainly gives managers a chance to see how others tackle certain common issues. We actually use a form of benchmarking extensively on projects but we only benchmark processes against themselves. We will look at a process and see how well it has been accomplished in the past. This creates a “best demonstrated” benchmark against which we can measure and study the reasons for variances. If we (and the area managers) can figure out what helped create the “best demonstrated” performance, we can try to re-create those circumstances or conditions on a more regular basis. The advantage of this approach is that managers are striving to replicate something they have already achieved with their own cultures, systems, people, customers, and facilities.
