Organizations often look to benchmarks as a key component in evaluating where they stand on various metrics in the talent industry. While this is not always a bad thing, and can certainly provide useful information, many organizations get too caught up on benchmark comparisons and it takes away from the value of the metric as a strategic tool.
To truly be effective, the mindset must change from “How do we look against other organizations?” to “What does our organization need to work on to perform better?” Analytics are now readily available to show which metrics from people data are critical drivers of business results. Instead of benchmarking, talent leaders should focus on using survey results and analytics to create positive change in their organizations.
Average is Arbitrary
Consider that a benchmark is just an average. Thus, the pursuit of outperforming a benchmark is simply a chase to be better than average against a number that may not reflect a true reality — it just reflects your particular vendor’s database. Benchmarks are also subjective. They’re a number that can change when, for instance, a vendor surveys more clients or you switch vendors. If the target is arbitrary and highly fluctuating, why spend time and money aiming for it? Shouldn’t leaders spend time and money focusing on improving metrics that have proven connections to building their business, and not just trying to outscore the average organization?
A Benchmark Chase Is Costly
On an employee engagement survey, if your engagement score is a 4.00 and the benchmark is 4.10, what exactly does that mean? Is it worth the cost to invest time and money to get engagement scores up to 4.10? What will happen for the business if employee engagement is 4.10 versus 4.00? The truth is, no one knows. So why chase that number? If you are in the 99th percentile on engagement, maybe you’re not holding your employees accountable enough or maybe your benefits plan is too rich? The pursuit of the 99th percentile might be completely at odds with making your organization profitable or obtaining high growth.
Size as a Selling Point
Often, HR is concerned with the size of a vendor’s benchmark database, and a lot of vendors use the size of their benchmark database as a selling point. But consider why it matters — exactly how big does that database need to be for it to be effective? Exactly how many other data points will help your organization make more money? Sure, large databases are good to determine where you stand, but the more important question is why does that matter and what is the value?
Benchmark High or Low — Who Knows?
When using benchmarks to set goals and assess performance, exactly how much higher than the benchmark do you need to be to have a clear competitive advantage? How much below the benchmark creates a competitive disadvantage? No one really knows the answer to these questions. That’s because competitive advantage cannot be obtained by benchmarks — it comes from being strategic and focusing resources on areas that are linked to business performance, not by beating a benchmark.
Answering the Tough Question: Why?
Some organizations want to be at the 75th percentile, some at the 90th and some at the 99th percentile. When asked “Why is that your target?” the answer is usually “That’s what the CEO wants” or wanted for marketing use. Talent leaders need to have a clear business case for creating a benchmark target. Strive for strong performance in an area if it provides a return for the business, not simply to outperform a benchmark.
Hitting the Mark with Data
Table 1 shows an organization’s employee survey results, the corresponding industry benchmark percentile and whether each category was linked to business results. By only reviewing the benchmarks, one would think that the key areas of focus should be: staffing, accountability and compensation/benefits. A typical approach would be to invest in these areas because they need the most improvement regarding the benchmark. However, when you connect your employee survey data to business outcome data via advanced analytics, you uncover that customer focus, senior management, teamwork and career development are the areas critical to business performance. These areas should be focused on no matter where they land on the benchmark spectrum. If you had focused on improving low benchmark items, you would have been off the mark and disconnected from the true business drivers.
If talent leaders want to be true business partners and have real impact in the organization, then the focus should be on driving business results and not trying to get higher survey scores. Contrary to what many assume and what thought leaders may say, employee engagement rarely drives actual business results. Moreover, survey scores do not appear on the profit-and-loss reports. Consider the following:
- Yes, you should do employee surveys, but rather than just chasing a benchmark, bring in actual business outcome data and uncover what elements of the employee experience drive business results.
- Share this analysis with both your senior team and every leader in the organization. The focus should be on “What can we work on to drive results?” vs. “How can we score higher against the benchmark next year?”
- Provide easy reports and action-plan tools so that leaders can act without having to be professional statisticians.
- Get a survey vendor that guarantees results, not just a bunch of reports. Assessment companies make a lot of claims about the connection between running a survey and generating business results. Those companies should prove those connections and stand behind whether their tools actually drive results.
Scott Mondore is co-founder and managing partner of Strategic Management Decisions, a human capital analytics advisory. To comment, email firstname.lastname@example.org.