Why your benchmarking project will fail

Benchmarking can offer meaningful insights into relative performance and help identify learnings for improvement. So why do so many organisations fail at this important activity?

Adam O’Brien discusses how learning to share, appreciating Picasso and acknowledging the benefits of yoga can improve your chances of project success.

Recently I undertook a benchmarking exercise for a business unit seeking to compare their performance against similar organisations. After agreeing on the process, we met to determine an appropriate benchmarking sample.

Understandably curious about the range of organisations they could choose from to form the benchmarking sample, my client asked questions like:

  • How many employees do they have?
  • How many locations do they operate from?
  • Where are their offices located?
  • Are they a public or private company, or are they a government department?
  • How much money do they spend on x and y?
  • What industry do they operate within?

Getting anxious when I refused to answer many of the questions, my client legitimately questioned how they could have confidence that the benchmarking sample would be comparable to themselves without these answers.

My client was on a pathway to project failure. Here’s why.

Reason 1 – You don’t know how to share

Telling a client “it’s your own fault” is not generally considered a wise career move. But in this case, it helped the client understand my challenge. I pointed out the confidentiality clause in the contract my client asked me to sign. This in summary, required me to keep confidential all information disclosed to me during the project and only use the information for the purpose of performing the services. Sound familiar?

Competing demands between protection of, and hunger for, information is challenging the way we do business. We’ve become so used to accessing swathes of information so easily, that when faced with barriers to access, we become agitated and annoyed.

Being sensible and practical about the legal arrangements we enter into to govern business transactions is one way to manage this competing demand and improve project outcomes.

Modern contracting arrangements recognise the demand for, and new uses of, information. While obligations to de-identify data play an important role, restricting the use of data for a particular project is impractical. Instead of drafting lengthy contract clauses dictating restrictions on the use of information, better practice organisations are now drafting ‘use of information’ clauses. These encompass:

  • acceptance that data obtained from a client might be used for purposes other than the performance of the services
  • requirements that data used for other purposes must be aggregated, non-identifying and not contain any Personal Information
  • undertakings that data sets will comprise sufficient sample accounts such that anonymity is not compromised.

These small changes to contracting methods can facilitate sharing and better project outcomes.

Reason 2 – You dislike Picasso

Picasso loved to draw faces imprecisely. A missing eye here, a sideways mouth there, he didn’t play by the rules. I believe Picasso would have made a great bench-marker. He understood there are multiple ways of doing things. That accuracy is not always absolute. That while people might take a little while to understand what he was doing, it would ultimately make sense to most.

One of the greatest challenges my colleagues and I face in benchmarking projects is convincing clients that benchmarking is an art form. Not in the traditional sense, of course. But in the sense that precision is rarely possible. That benchmarking involves shades of grey. That outcomes are indicative only.

As an example, my client was in finance, loved numbers and was constantly in pursuit of perfection. After completing a benchmarking exercise, my client requested we undertake the completed analysis again, as a costing figure that was supplied to us was now known to be inaccurate. On the face of it this seemed a reasonable request. On further inspection, the difference was equivalent to a change of less than 1% when compared to the original costing figure.

This is the heart of why benchmarking is an art. When comparing otherwise separate organisations to each other, there are no guarantees as to the absolute accuracy of information and data. Good consultants put a great deal of time and effort into collecting and cleaning data to facilitate comparability. However, absolute accuracy will never be achieved. For example, data sets may be collected over different time periods (full year versus financial year), or organisations may use different definitions for common terminology such as how many hours each Full Time Equivalent staff member works.

Re-doing the benchmarking analysis for my client with the new costing figure wouldn’t have had any impact on the conclusions we had previously drawn. Understanding the source data, how best to use it and accepting that benchmarking inevitably involves shades of grey is therefore fundamental to project success.

Reason 3 – You think Yoga doesn’t offer any benefits

Being flexible and committed is key to any successful benchmarking project. The two reasons for project failure above illustrate a need to be flexible with legal arrangements and to relax the pursuit for precision. But flexibility extends to other factors as well.

  1. Be flexible with time. Accurate benchmarking takes time. Time to thoroughly understand the objectives for the project. Time to collect the necessary data. Time to delve into the detail of the data to refine it and improve comparability. Time to properly analyse the results to ensure the project objectives are met.
  2. Be flexible in educating others. Because of the shades of grey in benchmarking, outcomes are often open to challenge and questioned by others, particularly those who are responsible for results which aren’t favourable when compared to the benchmark results. Project managers need to make time to talk stakeholders through the process and manage expectations from the start.
  3. Be committed. It’s one thing to make a decision to undertake a benchmarking project, but it’s another to stay committed throughout, particularly where the outcomes of the exercise aren’t favourable. Temptation to redo the analysis, make excuses for discontinuing the project or reduce resources allocated to the project can be immense. Always have a clear statement of objectives and gain senior buy-in and support from the outset to ensure proper commitment to the project.

Remember too that once results are in, the project shouldn’t stop. Attending a single yoga session won’t let you appreciate the full benefits of the exercise. Similarly, the value you get from undertaking benchmarking will be minimal unless you take steps to learn from the outcomes, apply them to your business and regularly track the success of your actions.

Learning from these three lessons above will improve your pathway to successful benchmarking.