Benchmarking Myopia and the Need for Business Drivers white paper

Benchmark Myopia and the Need for Business Drivers

It is a typical practice in many industries to be curious about, and focus on, benchmarks to get an idea of “where you stand” on a particular metric. To be clear, benchmarks are a good piece of information to know when examining your performance—but when leaders, particularly in HR, live and die (i.e., base their self-esteem, “assess” organizational performance) and make key decisions and plans based heavily on benchmark performance (what we call benchmark myopia), it is time to take a step back and reveal some hard truths about this practice.

The Pursuit of Average

When you stop and think about it, a benchmark is just a pursuit to achieve somewhat better-than-average against a number that may not even reflect a true reality. The benchmark simply reflects your particular vendor’s database. Being in the 75th percentile against a weak benchmark database doesn’t exactly inspire much confidence. For that matter, how do we know that being in the 75th percentile against a “strong” benchmark database means anything of value? A lot of firms will talk about the size of their benchmark database, but ask the tough question—exactly how big does that database need to be for it to be effective? Exactly how many other data points will help your organization make more money? NO ONE KNOWS THE ANSWER TO THIS QUESTION! So, why chase that number?

What Do They Mean?

Did you ever think about what the benchmarks actually mean? On an employee engagement survey, if your engagement score is a 4.00 and the benchmark is 4.10—what exactly does that mean? Are you doomed to failure? Is it worth it to invest a lot of time and money to get up to 4.10? What is the business impact of getting to 4.10? If you get to 4.10, will the clouds open up and money start falling out of the sky? Guess what—NO ONE KNOWS THE ANSWER TO THESE QUESTIONS! So why chase that number?

Competitive Advantage

Same example of an employee engagement survey—exactly how much higher than the benchmark do you need to be to have a clear competitive advantage? How much below the benchmark until you have a competitive disadvantage? NO ONE KNOWS THE ANSWER TO THESE QUESTIONS! So why chase that number?

Random Targets

Some of the organizations that we have talked to want to be at the 75th percentile, some want to be at the 90th, and some want to be at the 99th percentile. When we ask them, “why is that your target?” it is not usually an answer that is based on any analysis, rather a “that’s what the CEO wants” response. HR leaders need to have a clear business case for creating a benchmark target. One organization in particular told us that they were in the 99th percentile on their engagement survey, so they were a “best-in-class” HR function. We asked “how are your business results this year?” Their answer was—“not great.” Do you see the disconnect between chasing a number and actually working on business drivers?

HR as a Business Partner

If HR wants to be a real business partner and have meaningful impact in the organization, then the path should be towards driving business results and not saying “we should try to get higher survey scores.” Contrary to what “thought leaders” say, employee engagement rarely drives actual business results (Spell, Mondore, & Lowery, 2016) and survey scores do not appear on the profit-and-loss reports. The answer lies in a few key areas:

  1. Connect the Survey & Business Outcomes: Yes, you should do employee surveys, but rather than just chasing a benchmark, bring in actual business outcome data and uncover what elements of the work environment from the survey drive the business outcomes (e.g., sales, productivity, turnover).
  2. Improve the Outcomes Not Benchmarks: Share this analysis with both your senior team and EVERY leader in the organization. All focus should be on “what can we work on to drive outcomes” versus “how can we score higher against the benchmark next year.”
  3. Be Actionable: Provide easy reports linked to action planning tools so that leaders can take action without having to be professional statisticians, or sift through lengthy reports. SMD Link is the only patented technology that provides simple insights to all leaders at all levels based on advanced analytics, and then feeds these insights directly into an action planning wizard.
  4. Get a Guarantee: Get a survey vendor that guarantees results not just a bunch of reports. Assessment companies make a lot of wild claims about the magical connection between running a survey and generating business results. Those companies should prove those connections and stand behind whether their tools actually drive the results. It’s called results-based pricing, and SMD is pioneering it in the employee assessment space.

To learn more about benchmarking, register for our webinar on March 8th at 1:00pm EST, click here to register.

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Reference

Spell, Mondore, & Lowery (2016). Is a Narrow Focus on Engagement Making Organizations Miss the Mark? A Comprehensive Examination of the Impact of Engagement on Business Results. Retrieved from http://smdhr.com/whitepapers/criterion-study-white-papers-download/

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