In 1988, Benchmarking became one of the world’s mostly widely talked about and used
measurement and management tools. 1988 was when we recognized the first winners of
the Malcolm Baldrige National Quality Award: Motorola, Globe Metallurgical Inc., and
Westinghouse Electric’s Nuclear Fuel Division. In subsequent years, Xerox, Fedex, IBM,
Cadillac, Milliken, Texas Instruments and The Ritz-Carlton all received the honor. They
all had one thing in common that set them apart from their competitors: they all used the
same measurement tool-Benchmarking- to dramatically improve customer service,
quality, reliability, and accuracy of their business processes. Companies around the world
all wanted to understand and implement Benchmarking as a means to achieving
competitive advantage. This same desire to compare our companies and their
performance exists today!

In those early days of Benchmarking, there were very few companies and fewer
individuals who had the expertise to effectively implement this new tool. All Baldrige
winners have the responsibility to teach anyone who wants to learn how they achievedtheir results. Desire to learn was soon replaced by the need to learn. As more companies
deployed benchmarking, their results led to breakthrough improvements. Back then there
were no benchmarking clearinghouses, no consortiums, no benchmarking exchanges, no
websites to log onto. In order to understand the what, how, and why of these award
winning and top performing companies, they had to talk to each other. They established
dialogues that provided a meaningful exchange of information. This exchange of
information lead us to ask more and more questions about how and why companies did
what they did to achieve their results. We were able to understand the practices and most
importantly, the context the practices lived within. Companies around the world used
Benchmarking to dramatically improve their business processes and achieve new levels
of competitive advantage.

Benchmarking is more than a numbers game!

Benchmarking has become a misused and misunderstood measurement tool. Today,
companies rely upon others to collect information from anyone interesting in submitting
it. The data is scrubbed and filtered, massaged and manipulated, and run through AI
tools. The end result is a number that provides little insight, no context, and has little
value. This number is then used by a company to make a decision that can have negative
consequences on the bottom-line, on quality, customer service, or employee inspiration.
Take the example of the “benchmark” for number of employees served by 1 HR FTE:

1:85. This number was provided by a well known HR consulting firm and published in
the August 2020 issue of a popular HR journal.
The unfortunate scenario that unfolds when a CEO sees this ratio will play out in far too
many companies. The CEO first asks their CHRO, “What is our ratio?” If the ratio is
lower, the directive is to cut staff. If the ratio is higher, the CHRO is questioned about
their function’s effectiveness: “What do other organizations get from HR that we don’t?”
The questions that should be asked by the CEO are:

  • What is the Value Discipline of these organizations and to what extent does HR
  • align with it?
  • What is the strategy of the business and how do these HR FTE’s contribute?
  • What is the Effectiveness Rating of these HR FTE’s?
  • Are the HR FTE’s seen as Business Partners or Administrators?
  • What impact are the HR Business Partners having across the company?
  • What do these HR FTE’s spend there time doing?
  • What is the ROI these organizations receive from HR?
  • What is the financial performance of these companies?
  • Does the performance of these HR organizations exceed your own?

Not one of these questions can be answered by the ratio 1:85. The only way to answer
these questions is to use comparative Analytics about these companies that are
performing at the level you want your HR organization to perform at. Once these
questions are answered, it may prove that this ratio has no significance to your HR
Strategy or service delivery.

Benchmarking is more than a numbers game!

Metrics and ratios do play role in Analytics and Benchmarking. Metrics are best used in
the Benchmarking process as result measure. Metrics should be used to determine if the
results achieved by another company are more successful or effective than your own
results. If another company is achieving a result that exceeds your own, then the
opportunity to understand the what, how, and why of their practice or process forms
the basis of the Benchmarking study. The metric is not the driver of change. The
practice or process that produces the desired level of performance is the driver of
change. Comparing your metric to someone else’s metric is NOT benchmarking.

Benchmarking is:

a continuous, systematic process for evaluating the products, services and work processes of organizations that are recognized as representing best practices for the purpose of organizational improvement.

The Benchmarking Book by Michael Spendolini

The proper deployment of the Benchmarking process can make significant and dramatic
improvements in organizational performance. Emergency medical teams benchmark pit
crews at the Indianapolis Speedway. To ensure that Benchmarking does produce the
breakthrough results that top performing company’s experience, I offer the following
suggestions:

  • Use your business strategy to determine the need for change, not a comparison of metrics. Do what’s right for your business, your customers, and your employees.
  • Analyze, document, and measure your process before you engage in dialogue with a potential partner. If you don’t know the results of your own practice or process, you can’t set goals for improvement, and you can’t determine who is performing at the level you need or want to.
  • Choose your partners wisely. Don’t let someone else choose them for you. Staying within an industry or segment can limit your thinking and contribute to the “best of a bad lot” comparison.
  • Be prepared to provide something your partner will value in exchange for their participation in your Benchmarking study. Treat them like valued customers, they may be.
  • Adapt the “best practices” of other companies, don’t try to adopt them. Just because it works for them, doesn’t mean it will work for you. Most practices are not plug and play.
  • Following the teachings of the GOAT, Coach John R. Wooden: “The willingness to win is not as important as the willingness to prepare to win.” Preparation improves learning.

Benchmarking is a measurement and management tool that has the potential to enable
breakthrough thinking for an organization.

Einstein was right,

the significant problems that we face cannot be solved with the level of thinking that was used to create them.

As has been outlined here, Benchmarking is NOT simply the comparison of metrics
across a group of companies. It requires thoughtful preparation, discipline, tenacity, and
an open mind.

Benchmarking is more than a numbers game!

For more information on HR Analytics and Benchmarking, contact Brian Lowenthal, Managing
Partner, Lion Valley HR Solutions, brian@LionValleySolutions.com or 216.533.7465.