Benchmarks

There is a scene in the movie “Caddyshack” in which two of the characters are having a chat after golf:

Judge Smails: Ty, what did you shoot today?
Ty Webb: Oh, Judge, I don’t keep score.
Judge Smails: Then how do you measure yourself with other golfers?
Ty Webb: By height.

I know – I do manage to find ways to get golf references into the screed a lot.

Charts

(Photo credit: GrapeCity)

However, what you just read is an example of benchmarking – measuring your performance or a business unit’s performance against a standard.  It’s something we all do.  Clients ask if their email open rates are good or if their site’s bounce rate is higher than others I’ve seen.  Most of the time a company tries to identify standards that come out of best practices and benchmark themselves against them.  Sometimes even entire industries (usually through a trade association or some other third-party) will anonymously aggregate the results  across the industry to help the members figure out if their results are on par with the industry as a whole.

We see the benchmarks all the time in financial results.  ARPU in the wireless industry, for example, is a very public benchmark; percent subscriber growth is one in the cable industry.  I find them helpful but am probably not as fixated on them as a lot of other people.  Here is why.

In my consulting experience I’ve found very few businesses that align exactly.  Sure, many of the folks with whom I work face the same general challenges, but asking, for example, if a bounce rate is high if it ignores the purpose of your page or site vs. what others are trying to do. Where I have a bigger issue with benchmarks is when companies use them to judge other companies (or other people!).  Those sorts of comparisons get our eyes off our own goals.  By comparing and judging, we’re implying that every business is on the same journey (or that every person is as well).  We can’t know for sure what those journeys involve.

Benchmarks are like many other business tools.  In the right hands and using the right perspective they can be very useful.  The again, some companies do what Ty did in the example – he’s a tall guy, let’s measure results by height!  Used without context or skewed to a purpose or to pass absolute judgement, they’re dangerous.  That’s my take – what’s yours?

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Filed under Consulting, Thinking Aloud

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