Benchmarking Is the Process of Improving Performance
Mike Poskey | June 20, 2017
Companies around the world use the practice of benchmarking to catapult their organizations to the top in their industry. Benchmarking is the process of improving performance by continuously identifying, understanding, and adapting outstanding practices and processes found inside and outside the organization. Almost any activity that can be measured can be benchmarked, though, in practice, organizations should start with those things the company successfully excels at in business.
As most executives know, employees make up one obvious area of focus that affects the bottom line, spans across every department, and is crucial to good customer relations. Employees impact the profits and success of a company more than any single department or process does, and measuring those employees should be considered just as high of a priority as streamlining operations processes.
According to industrial psychologist and management consultant Dr. Robert K. Smith, companies that succeed typically focus 80 percent of time and resources on top-producing, quality employees. Less successful companies focus that same amount of time on problem employees. Dr. Smith notes a study done by a top tech company to determine what the productivity difference was between mediocre engineers and high-performing engineers. It found that top-performing engineers are 20 times more productive than mediocre engineers are—a 2,000 percent difference.
This study led the company to focus on its peak-echelon engineers. Now, the company pays 103 percent of the market price for those great engineers to guarantee that it's getting—and keeping—the best. This tech giant understands that a successful company hires the right people in the first place and then devotes time and energy to assisting these good hires in their job growth and satisfaction at the company.
Most organizations are home to a variety of employees with hopefully at least a few top performers and usually more than a few mediocre and poor performers. Who wouldn't want to hire another star employee? Today's successful companies are devoting more time to identifying and retaining top-talent employees.
Virtually every company has at least one horror story about a recent hire who looked great on paper but didn't work out on the job. He or she had the education, experience, and skills necessary for success. He or she even had experience in the same industry working for a competitor. In the interview, he or she said all the right things. But after it was all said and done, "it was a bad fit" due to his or her having a bad work ethic, not working well with coworkers, and not being able to take direction from his or her manager. Benchmarking can help you go beyond the objective criteria and focus on the most critical aspects of whether or not a candidate can, and will, do the job successfully.
Process of Benchmarking Employees
When a company hires a new employee, it introduces that employee to the entire work environment, and in most cases, to its clients and customers, with their varying communication styles and own personal strengths and weaknesses. How do you know, upon hire, if that new employee is going to be suitable for the job, the company culture, or the management style? Deficiency in any one of those areas can lead to a "bad fit" hire and cost the company thousands in hiring and replacement costs, and not to mention possible employment-related lawsuits and the cost of decreased morale.
To determine the profile of a star employee for your company in a specific department and job title, utilize benchmark studies. With benchmark studies, employees can be subjectively and objectively measured through a scientific process. The best place to start is within your own organization. There are always outstanding employees elsewhere, but chances are you will not be able to find out any more information from them than the facts that are listed in their résumés.
Whom Do You Benchmark Against?
Do a benchmark study on an entire department. Before doing so, prepare a list of criteria (key performance indicators, or KPIs) that suggest what makes an excellent, mediocre, and poor employee, including items such as sales records, retention numbers for a manager, profit margins, and safety records, to name a few. I also encourage clients to include managers in their benchmark studies. This will assist in incorporating the manager's style into the resulting benchmark. After all, one of the most important factors with regard to retention and productivity is compatibility with the manager's style. What if you had a "star" employee but he or she left the company due to working for a "poor" manager? Did your company manage that valuable asset wisely?
Setting Benchmark Criteria
In preparing your list of criteria that will be used for employee evaluation, make sure the data are up-to-date. Is this person still adept at the activity you want to measure? A salesperson might have been awarded for top sales 5 years in a row, but if the last award was in 2006, that person probably should not be held up as an example today. Don't base your criteria solely on the job description. Most job descriptions address the minimum requirements of the job but fail to shed light on the KPIs that correlate to success in the role.
"We hire for attitude and train for skill," said R. Rajagopalan, the manager of a Ford plant in India.
To determine the style, strengths, and weaknesses of current employees for the benchmark study, these subjective factors must be measured in objective ways, rather than just relying on a personal interview. To accomplish this, successful companies are using objective behavioral assessment tools to help in measuring these factors. These objective tools reveal certain characteristics that may be imperative for a person to successfully complete the job. An individual might have been a top accountant at a former job where the boss micromanaged. However, the individual might not succeed as well in a new job where the manager is more hands-off. Such traits can be uncovered in a benchmark study and might introduce some factors that had not previously been considered in why certain people in that position perform at higher levels than others do.
How To Use the Results
By conducting this type of benchmark study using behavioral assessment tests, a company can develop a job analysis of the critical objective factors necessary for success (core competencies). These profiles of success can be compared with job candidate profiles and will greatly enhance the probability a company hires the right person the first time. When hiring, use the same criteria used in the benchmark study to determine whether a candidate was successful in his or her past job and would be successful in this new one. The benchmark studies give the human resources department a guide for areas to look for and avoid in new employees.
To avoid hiring mistakes, companies need to incorporate into the hiring process those KPIs that have proven critical to success in a given position, basically customizing the criteria to each position within the company. If companies continue to disregard the reality that they can't simply hire on these objective factors alone, they limit their organizations' potential.
Is the Expense/Time of a Benchmark Study Worth the End Result?
To determine that answer, ask a few more questions. What is the cost of having a mediocre employee compared to a star? What is the cost of rapid turnover? According to the Small Business Administration, for every single dollar an employer invests in personnel screening, the employer gets back from $5 to $16 in reduced absenteeism, improved productivity, lower turnover, safer working environments, reduced insurance premiums, and decreased liability. And those savings are just with basic screenings and don't allow for the higher levels of output that one could garner from a workforce staffed with top performers as a result of benchmarking.
What happens when elite employees start becoming a majority in your company? You must continue to benchmark to ensure that changing needs within your company are reflected in your hiring process as well.
Mike Poskey | June 20, 2017