The Pros & Cons of Benchmarking People Development
Measurement seems to be everywhere these days, but can an over-focus on performance data and benchmarking sometimes be detrimental to the intended outcome, especially for people development? Ezra's Insights Lead, Abigail Phillips, discusses the pros and cons of data-driven initiatives and the need to find the metric "sweet spot" to truly evaluate success.
It is often said in the business world that what gets measured, gets done. But does that mean to get things done, you have to measure everything, all the time?
That is a question that we at Ezra have to field all the time, particularly in an age where technology gives us limitless opportunities to collect, gauge, measure and analyze data on a whole range of metrics and features.
App-based coaching, which is growing in popularity by leaps and bounds, presents many opportunities for benchmarking, the term we use to describe the process of measuring business performance against the performance of others. We could, for example, produce benchmarks that tell our coachee leaders and their organizations how they are progressing in their coaching engagement against others in the same company, similar leaders in other companies within the same industry, or similar leaders in the same country or continent for that matter.
The big question is not could we do it. In most cases, it’s should we do it?
Coaching, even when it’s delivered virtually through a phone-based app, involves a very intimate interaction between coachee and coach. This is a relationship that must be built on trust which is, in turn, a by-product of confidentiality. Even now, when coaching takes place in a virtual setting, that emphasis on intimacy and confidentiality is no less important.
That does not mean you have to abandon measurement completely. Ezra offers coachees the opportunity to measure their progress against a pre-determined set of leadership competencies. The measurement involves input from the coachee and their managers before and after a period of coaching. But, it does not involve the divulging of the intimate details of the coaching sessions.
Can this approach to benchmarking provide benefits to individual leaders and their organizations? Absolutely, even if it does not quite satisfy our craving for broader, more in-depth comparisons.
Benchmarking is an essentially good practice that can provide important insights to a business organization. However, to fully understand what benchmarking can do for an organization, and what it cannot do, let’s look at a few pros and cons.
The pros of benchmarking and measurement
There is little doubt that establishing a benchmark helps to contextualise our own performance. Without an objective, data-based measurement, how do we know that we are succeeding?
Let’s apply benchmarking to a key business metric such as employee engagement. If your company’s average score is 5/10, at face value that’s average verging on poor. But, if you were told that most other companies in same industry had an average score of 3/10, all of a sudden that score doesn’t seem so bad.
The opposite is also true; if you found out most other companies had an average score of 8 or 9 out of 10, you are going to be more concerned about your own score by comparison.
So, it’s easy to see how benchmarking, applied in the right situations, can be a huge benefit to an organization that is trying to improve overall culture and performance. It would help determine whether there is something systemic that needs to be addressed, or whether small remedial measures are more important. Either way, it’s good information with a clear purpose.
The challenges of metric-focused development
Most HR professionals will tell you that there are limits to the value of comparing our own performance, or the performance of our organisations, to that of others.
Let’s return to the employee engagement example. We know employee engagement is important because there is a wealth of academic and commercial research that demonstrates its relationship to motivation, performance, length of service. All these things have a direct impact on the organisation’s bottom line.
This relationship is linear: a higher engagement score means higher KPIs and, ultimately, a better bottom line.
So, why then are so many companies obsessed with how their scores compares to others?
Whether you’re in the top 10 per cent or the bottom 10 per cent, there’s no room for complacency unless your score is a solid 10/10. It might make an organisation feel better about their seemingly low score to know that most of their competitors are in the same boat. But this isn’t going to help them maximise their ROI on their people.
In cases like this, organisations would do better to focus on their own benchmarks and try to improve performance against internal metrics. They can do this with the confidence of knowing that if their engagement scores go up, they are likely to be doing better in a broad range of other metrics.
It’s also important to note that not every group or indicator can be successfully benchmarked.
For example, let’s say you wanted to know how the department heads at your company were performing in comparison to people with similar positions in other companies. Depending on the size and growth-stage of the company, the people holding those jobs are likely to be very different from each other even if they have the same title.
Does it make sense to compare the head of marketing at an early-stage start-up, who has no direct reports and a minimal budget, to the head of marketing at a global FMCG who’s responsible for a large team and huge budget? Probably not.
Remember that benchmarks aren’t nuanced enough to control for meaningful differences – and this causes tunnel vision and at times, misguided conclusions.
Data-driven business decision-making is definitely the way of the future. But in saying that, it’s important to note that you have to put the work in to mine the right kind of data, and then apply it in the most meaningful way.
You never want to be in a position of spending time and money to measure something that doesn’t really give you the kind of insights and results you need to produce better outcomes. But when you do find that sweet spot – a metric that is completely relevant and helps you improve what you’re doing – it can be a transformative moment for any organization.