“The seeds of improvement are within us.”
The golden rule of measurement is this: Use the fewest and highest quality metrics possible, but only as often as they can be acted upon. Doing otherwise dilutes the message and meaning of a company’s measurement practices and detracts from the objective of a company metrics; that is, to ensure the most accurate and actionable answers possible to three important questions:
1. How are we doing?
2. What are our opportunities to improve?
3. If we act, how likely are we to make the intended improvement?
These are not chump-change questions. Whether financial or stakeholder metrics, answering them can spell the difference between success and failure. Lots and lots of metrics as well as techniques like benchmarking and best practice analysis are used in an effort to answer these questions. Benchmarking and best practices are searches for answers to “How are we doing?” and “What are our opportunities to improve?” respectively. To a much lesser extent, they provide an answer to the question of “If we act, how likely are we to make the intended improvement?” As we shall see, the last question is at the heart of the effectiveness of both inquiries.
Benchmarking is the process of comparing stuff your company does to the same stuff being done by other companies. Sometimes they are competitors and sometimes they are not. The idea is to get a handle on achievement using an external standard of comparison: Are we better, the same, or worse than our competition. On the surface, this can seem a worthwhile pursuit; however, for many companies – those with clear and high internal standards – it is a largely irrelevant comparison. That’s because the standard for a vision-based company is internal. In the vision statements that we have helped to create, the company’s leaders go to great lengths to describe a unique way of competing at a very high level that result in achievement such as increased market share, sales, customer and employee loyalty, and so forth.
As an example, a supermarket Customer of ours described a unique way of competing that its leaders believed would get them to success with customers, which they defined as: making my life easier and more fun. This unique definition of success called for a different strategy and, therefore, different metrics even though the end result – increased percent primary customers and profitable sales growth – is not uncommon in the grocery industry. In this context, benchmarking could very well be a distraction from the process of moving toward the company’s customer goal. In addition, a common executive reaction to benchmarking data that put an unfavorable light on the executive team is to explain away the differences and question the benchmarking methodology. In the scheme of things, neither of these reactions is particularly useful for moving a company forward.
A more sound way to proceed is to focus on movement toward the company’s goals and not whatever the competition is doing or the processes and metrics promoted by consultants. This is not a blanket indictment of benchmarking; rather, it’s a call to be discriminating in the use of the tool. There are common metrics that companies within an industry share, such as employee turnover and percentage repeat customers due to customer referrals that get at the gold standard of achievement; namely, loyalty. While it might be pleasing to discover that your company has surpassed, or is at least staying up with a key competitor, the information is typically not actionable and may well be distorted.
It’s in the search for answers to “What are our opportunities to improve?” that companies go in search of best practices. However, what is considered a best practice in one company may not work at all in another company. This was certainly the case in the early 1990’s with Outback Steakhouse and its unique practice of requiring a restaurant manager to buy a stake in his or her restaurant. It was widely considered to be a best practice and a key to the company’s phenomenal growth. As a result, many companies tried the program only to abandon it after making a substantial investment in the procedures and commitments to their managers that could not be kept.
The reasons for caution in the use of best practices has to do with their potentially hidden link to a company’s culture. A best practice often occurs within a unique culture and is invariably tied to it. In short, the embedded culture determines whether a practice will be promoted, accepted, and eventually embraced. In addition, skill drives any best practice and a company that seeks to adopt one needs to be realistic about the skills on hand to implement it. By the same token, a company that has to watch its pennies is well-advised to assess the affordability of a practice before adopting it – something that is almost impossible to accurately do.
Finally, in some companies, there is another challenge to the adoption of a best-practice; namely, the company’s vision. A company’s vision and its unique way of competing may render another company’s best practice irrelevant and possibly disruptive. It is not that best practices should not be pursued but that they should be adopted with an informed degree of caution. This is particularly true of culture-bound practices such as many human resource or service procedures.
“Bootstrapping” (i.e., figuring something out on the cheap) is a major tool of the entrepreneur as its source is the ageless truth that necessity is the mother of invention. Most startups have very limited financial resources and little in the way of specialized talent. Often, they cannot afford access to benchmarking studies, nor do they have the time required to do a proper best practices analysis. We invented Bright Spot Analysis™ for just this kind of situation, but have learned with use that its application is much broader than that.
In more than 30 years of looking at data across many industries and companies, one thing has become clear: No matter how bad the situation, someone somewhere in the company seems to be getting “it” right. For example, a retailer with a terrible reputation for customer service will inevitably have a handful of stores that seem to defy the odds by consistently doing a great job with customers. These are the company’s Bright Spots. These shining lights of competence are a rich source of answers to “What are our opportunities to improve?” and direct answer to “If we act, are we likely to make the intended improvements?”
Bright Spots represent a way to move forward at low cost with an even lower risk of failure. In any company with more than a handful of business units, or teams for that matter, there are outliers. At the same time that some of them are knocking the bottom out of performance, there will be some that are setting the standard for excellence. It is these Bright Spots that present the opportunity for internal benchmarking and internal best practices analysis. For example, the supermarket chain mentioned above was struggling by almost any industry measure of performance; nonetheless, there were a handful of stores in one market that were 2.5 times better than the company average on its key measure of customer loyalty. While we were not looking outside of a particular region of the country, it’s likely that among the company’s several hundred stores, there were other Bright Spots that could shed some light on identifying a path toward system-wide improvement.
While Bright Spots may be low-hanging fruit on the march toward system improvement, study of them should not only focus on what they are doing right but whether it is different in meaningful ways from the “dull spots.” The inclination would be to dive into the Bright Spot and conclude that what it is doing should be done everywhere. Studying it is a good start, but caution is in order because the reasons identified as the source of its excellence may not differentiate among the high, medium, and poorly performing units.
That’s why it is always a good idea to temper the enthusiasm of discovery with the likelihood that the reasons you have identified are not necessarily the reasons for achievement. In order to not play the fool, it is best to investigate whether the explanation for the Bright Spot exist in varying degrees among the units at other levels of performance, and not just the worst levels. If so, then it is likely not a good explanation nor a candidate for an internal best practice. For example, a Bright Spot Analysis in a hotel company might show that “cleanliness” is high on the list of things that customers mention as exemplary within the Bright Spots. However, it might also be the case that even in the underperforming units, cleanliness is more than satisfactory. That’s because a clean room is not a differentiator in the hotel industry; instead, it is the price of entry to competing for customers as hotel guests will not pay more for it.
At best, getting better is a marathon with no magic formula that will ease the pain of a long run. A company’s leaders have lots of tools at their disposal to begin the process of improvement. OSAT (overall SATisfaction) is not one of them as it has no diagnostic value. Net Promoter Scores is a widely accepted tool, but one based on very weak measurement practices. The benchmarking tool may lead to pleasant results; especially, when the company doing the benchmarking turns out to be the standard. However, it is really not much of a tool. For one thing, the companies being benchmarked have often already moved on to better performance while the benchmarking companies are still trying to figure out how they did it. For another, benchmarking assumes that the companies are directly comparable which may not be true. Benchmarking, like OSAT, has no diagnostic value. Finally, best practices make sense, but they can be very expensive, take a lot of time, and may not be made readily available by their hosts. Moreover, they offer no guarantee of helping the company that adopts them.
Bright Spots are a whole different story as their internal nature precludes the resistance of “not invented here” and minimize the issue of skills. Another advantage is that Bright Spot Analysis is relatively in expensive and often more useful as they come with full disclosure of information. Very often, what they represent is a unit leader doing what he or she was supposed to be doing but, perhaps, with a personal touch that makes the difference. Finally, while Bright Spots Analysis can be complicated, its guaranteed access to full information and immediate relevance to a company’s improvement should make it first choice among the many things leaders can do to answer the questions of “how” to improve and “if” we change will it make a difference.
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