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by Mark Heymann - UniFocus Chairman & CEO
Benchmarking has been a key part of business performance assessment for as long as I can remember. From the days of my first job with the airlines to my first consulting client and up until now, companies are constantly looking to benchmark their performance. We benchmark customer feedback, productivity performance, financial results, and the list goes on. Historically, it has been used as a means of identifying opportunities and in its simplest sense, motivating a team or organization to find ways to get better, since no one wants to be on the bottom of the list or find that their performance does not measure up to the group.
In its present application, benchmarking takes two primary approaches: internal, where one looks at performance in terms of other operations within the same organization; and the other perspective is external benchmarking, which looks at the comparisons of one’s performance in relation to competitors or at times comparisons of like performance measures across industries.
We all know that benchmarking is a practice designed to improve performance, especially for the group that is perceived to be under-performing. But how effective is this “tool” in reality or how much more effective could we make it, given some insightful changes in how or when it is applied?
Let us start by challenging the use of an external benchmark as a frequent measure of performance. I would suggest that external benchmarks are useful from a strategic and not a tactical level. By that I mean, if a company is building or refining a product, looking outside is useful. Finding how one measures up, identifying product strengths and weaknesses (think strategic SWOT analysis) is a proper use of external measures. But that is where it stops. Once an organization determines its product and/or service delivery strategy, there is no great use in constantly comparing oneself to external factors, especially non-industry comparisons.
Even within an industry, the point of external comparison is to create differential advantage, which again is strategic. Once strategic decisions are put in place, one wants to measure if those “changes” have created the positioning advantage and those are frequently different measures than the ones used to promote the new strategic initiative. I would therefore suggest that external benchmarking is useful but only on a periodic basis, at maximum once per quarter or even twice per year. Strategies don’t change monthly, so frequent external measurement will not be very effective and can be costly. Once it is determined that the strategy is working, constant monitoring of perception and attainment of those strategic issues is necessary, but that is where internal benchmarking is more effective and comes in to play.
Internal benchmarking enables an organization to assess the success of its own products and services in light of like conditions. And this is useful to an extent but also raises some challenges. Staying with the effective part of internal benchmarking, given the need to normalize the comparative data depending on the metric being assessed helps ensure consistency throughout the organization. When I get my car serviced, I am interviewed to assess my perception of the service received. This is an effective process and ensures that all service organizations of this particular brand are functioning according to established standards. Benchmarking here is useful and as noted above, can motivate teams to improve as they don’t want to be on the bottom of the list. When I first got into the hotel industry, a client of mine used comparative benchmarking to push performance and was relatively successful using a limited group of measures.
While the above noted approaches can be useful, I think there is an innate weakness in the whole benchmarking process, both internal and external. Even utilizing the process of ranking, when benchmarking, can have an impact that is contrary to the stated goals of the process. This potential negative impact applies to the high performers, not the lower performers.
The challenge comes from the impact of being on the top of the list, or near that top. Does this position create complacency? If I am running a race against slower runners, does this bring out my best performance? When I look over my shoulder and see that I am in the lead, do I slow down or run harder? The answer is generally, I slow down.
We see frequent events where superior performance occurs only because the field is so competitive, and benchmarking is designed to get those competitive juices flowing. Therefore, while lower performers may improve, how much better would the top performers do with a different approach to comparative performance? And as importantly, are the better performers really living up to their real potential? The answer, from the various review work that we do, is probably not.
In summary, I think new and better approaches to comparative performance would be of benefit, both for external as well as internal criteria. Externally, periodic assessment which feeds the strategic process is more than sufficient. Looking at internal numbers, benchmarking is surely also useful to either measure attainment of satisfaction levels or to assess performance. But in the latter case, your top performers may not be meeting their true potential, and organizations may be leaving dollars on the table, or losing guests, that could be recovered.
Mark Heymann can be reached by e-mail at
mheymann@ unifocus.com or by phone at
972-512-5105.
This article appeared in Lodging Magazine in the September 2010
issue.
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