Drama and Business Values of Corporate Benchmarking
"Tact," my wife once explained, “is the intelligence of the soul.” It was a dramatic point, and it has stayed alive in my mind across these past 20 years.
“Tact” is a powerful word. The first reason corporate benchmarking is an effective management tool resides in the fact that the findings are perceived as “tactful.” Zeal, force, focus, and technical competence -- all these attributes bring a business strategy to life. But perhaps one of its most hidden but vital values is “tactfulness.” Without it, most management advice is just that: advice.
Advice becomes part of a valued and trustworthy business transaction when it can be put cost effectively into action. But even that is far from enough. The advice must fit; it must be tactful. It must satisfy upper management, make sense to those in charge of operations and implementation, and it must also be perceived as valuable by key stake holders in the investment and external communities. Tactfulness goes a long way in addressing the complex and urgent demands of this new age of corporate transparency.
So, in this larger context, what exactly is benchmarking and why is the advice it generates tactful? Benchmarking is about comparing one firm’s systems to a set of another firm’s parallel systems. The goal is to discover not only what is missing in the current client’s system, but also to uncover under-exercised business potential by seeing how the competition does it better. It takes place directly and tactfully between parties of two corporations as organized by an outside consultant.
It may all have started when Mr. Toyota visited Henry Ford in Detroit many years back, with a consultant and translators in tow. If you think long and hard about it, it may have started back even further. To make it concrete, one current client has a board of directors that wants to be assured about environmental risks. They want to make sure that their environmental management systems, especially when it has to do with the urgent and competent reaction to a discovered incident in the public, are second to none.
So, for example, we have taken representatives of that board to five remarkably distinct chemical manufacturers in a four-month period. To me, what’s astonishing about this request is that the client is a historic utility. Yet they desire to compare-in a closed trust-based setting-their systems to those deployed by companies that manage chemical risks from Bhopal to the tank car spill in my hometown’s railroad depot.
Asked by a retired executive and experienced attorney in my group “why” would the board care about chemical risk systems, the answer boiled down to the fact that any discovered needs would be perceived by the chair and the board members as “tactful.”
In this particular assignment, we are comparing how best to report incidents, how best to organize and contain the public expression of the crisis, and how best to assure upper management that response systems exist and have been tested and refined. From the particular can come understanding of how corporations are moving from an emphasis on compliance to one on good programs. Most serious boards take this kind of executive assurance quite seriously. Lessons from competitors, facing similar market pressures and challenges, are often only a part of the answer. Lessons from leading firms in other industries can often be transplanted through benchmarking, and take flower again.
Here at the AHC Group we have refined a method that makes benchmarking more useful than just a bunch of numbers. We have learned to contextualize the findings in reference to a dozen “field variables.”
These are a dozen recurrent and malleable variables that face and shape most leadership councils. Five of these dozen are touched upon below:
- Protecting the Boss
- The Illusion of Staff Certainty
- The Logic of Vital Lies
- The Logic of Discovering a New Approach
- The Simple Truths Underlying Corporate Benchmarking
We live in such an automated and structured corporate world that direct skills have sometimes been removed from consequence. Any good consultant is as honest as a four year old. They get inside the firm’s needs by being a trustworthy outsider. Yet what’s more important is the inside reception of the issue. Benchmarking allows one to offer upper management of one corporation the opportunity to learn about a superior approach without large or indirect insult to the thousands of people already on staff to support an existing system and organization.
Moreover, it helps protect the board and the boss from the normal blind spots in any organization. In public affairs and government, people learn the skills of diplomacy to accomplish these kinds of intangibles.
In business, the measures of tactfulness are the frequency by which affirm calls you in. Once you are inside, you begin to see the pattern. Senior management has come to expect some distortion from its staff. In addition they have come to know the pattern by which information comes to them, often with a rosy spin or as a confirming message. Benchmarking, if properly transacted, creates a set of correctives. It allows the separation of vital lies from working truths.
Take the recent California energy crisis. For the last four months, it has been difficult to keep perspective on all the claims and counterclaims.
Yet one client of ours has us benchmarking the approach of the nation’s top 10 power marketers. This allows a working knowledge of how Reliant, Dynegy, and others address the California situation. It also helps a client think through its business strategy relative to the existing dominant utilities such as Pacific Gas and Electric and Sempra. But more importantly, it allows some measure of the up and coming new players such as CALPINE, and the other pure play independent power producers.
We cannot, of course, disclose much more than this. But by setting up common benchmarks on how ten different firms looked at California across the last 36 months, an informed user of benchmarking information can see a bit better into the near future. We don’t wish to over sell this service, since the culture and history and anticipated strategic needs of each company are massive, constituting a mansion of information only a privileged few see.
Yet it is the same set of external forces shaping the California crisis that are open to benchmarking, and depending on the facilitators skill, you can discern how one firm differs from another in its choice of responses.
In sum, a firm needs to learn how to question itself without breaking the bank. Benchmarking allows that kind of rigorous and rapid learning, with tact at its core.
Bruce Piasecki is president and founder of the AHC Group, which provides business development advice on a range of environmental energy and materials issues. In addition, Piasecki is a professor and former director of Rensselaer Polytechnic Institute’s Masters of Science program in Environmental Management and Policy. This piece copyright 2001 AHC Group and Corporate Strategy Today, a GreenBiz News Affiliate.