A few thoughts on the art of benchmarking.

In my decade of experience in CRE I have seen far more bad benchmarking studies and reports than I have seen good ones. It can almost be dubbed an epidemic other than for the fact that many bad ones truly are trying to be good and insightful but simply miss the mark for deliverability.

Benchmarking is the activity of evaluating where something is today and comparing it to where it should actually be given market conditions, performance of competitors, performance of other companies or simply an industry standard. Benchmarking is supposed to do one of two things: 1) identify opportunities for improvement (savings) or 2) identify where you are doing well so you can do more of it. Both of these are premised on the understanding that benchmarking is intended to drive action.

Bad benchmarking reports usually fail in the same ways:

  • Assume a perfect world where any action could be taken.
  • Are overly aggressive in the amount of work that can be completed.
  • Assume that bad data is an implication that performance is also bad.
  • Form false equivalencies between the data being benchmarked and the standard being used (apple vs. orange situation).
  • Rely on incomplete or faulty data (on either or both sides of the comparison).
  • Do not identify specific actions that can drive improvement (instead rely on general comparisons only).

All of these lead to the same result: the benchmark study is presented showing a 30% savings opportunity across several areas of spend; the room is ecstatic in the belief that you are suddenly going to save them millions of dollars; everyone leaves happy and content; only a fraction of the save actually happens because it was never realistic to hit the target to begin with.

Most of the performers of the benchmark studies will readily acknowledge the achievement gap when challenged. They will point to the need to identify specific actions, offer to assist, push really hard but still ultimately say it is up to the business to actually force through the changes – regardless of political realities, uncontrollable circumstances or in-the-weeds assumptions that turned out to be impossible to make real.

Benchmarking is an wholly valuable exercise that can absolutely yield amazing results for companies when performed correctly or managed as part of an on-going improvement initiative. However, it can easily go very, very wrong and lead to a great deal of unfulfilled targets.

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