Pursue performance over benchmarking for ultimate success

Fast Company

2 days ago

Regression to the mean is the unfortunate outcome of most benchmarking today.
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'How are we doing against the industry benchmark?'
This question made me recoil, and I felt my body tense up.
I heard it twice in a short period of time at two different organizations. In both cases, the question led toward the same outcome: justifying current performance and not seeking true excellence.
Ever since customer satisfaction and employee engagement surveys began, survey companies have been selling benchmark data to their clients. I have personally been involved with surveys for over three decades and I consistently object to the practice. In short, survey providers who cannot help their clients truly address the issues discovered sell them excuses about why they are good enough.
Yes, it makes me mad. Why? Because it is the ultimate deception. As long as there is a lengthy list of bottom feeders in your industry, you are safe. You are not that bad. And with this false sense of security, you will make the biggest mistake: understanding your customers and creating exceptional value that will be worth the price and profit margins you charge.
Two cases exemplify the issue
Let me explain using two examples. In the first, the organization was celebrating an improved Net Promoter Score (NPS). Their 10-point jump sounded very respectable. But it was based on a 9% sample of its customers. 'Where are the other 91% of your customers,' I asked. 'If they refuse to respond to a 5 minute survey, how committed are they to a long-term profitable relationship?'
Stop celebrating relative successes and instead examine the true essence of your customer relationships.
In the second case, the company enjoyed close to a 90% response rate from its employees and celebrated beating the benchmark by double digit points. Cause for celebration, right? Think again. The company is a top industry performer and should never compare itself to the average. This company's expectations are very different than the expectations of number 50 on the industry list. It ought to determine how to lead the industry, not follow it!
Benchmarking—the wrong perspective
Using industry benchmarks has its flaws:
Regression to the mean: Benchmarking directs the attention to the industry average, not the leaders.
Imitation over innovation: When focusing on competitors' perspectives, one imitates their practices, not creating new one to delight customers.
Competitors over customers: Focusing on competitors provides the wrong reference point for business value creation. Instead, focus on the customers.
Blind context: Companies factor many decisions into creating and delivering value, which is then reflected in their customer scores. Profitability, market segments, and cost positioning are a few factors that can direct different strategies and therefore different customer engagement.
Lowering standards: Benchmarking often results in relaxed performance standards. If the mean is acceptable, so is the justification to ignore the performance of competitors exceeding it.
Future backwards: Customer scores reflect past performance and past value delivery. Companies may already be innovating, but those new developments are not part of the overall discussion as they are not reflected in the scores.
But beyond these arguments, there is simple trust. The business truth we ought to consider above all.
Is 50% customer satisfaction a good or bad number?
If the industry benchmark is 22%, you are killing it. Keep it up
If the industry benchmark is 83%, you are in trouble.
Do you understand how ridiculous this conclusion is? Fifty percent of your customers are not happy with the value you deliver. They are at risk of switching to the competition. Should that a big enough red flag for immediate attention?
In the empowered-customer era, we can no longer afford to compromise and play with the number. We live in a world where every customer is a segment of one. A personal brand using our product or solutions to promote their brand. They create content publicly and share their opinions. No, 50% customer satisfaction should not be considered good results. Unless, of course, you decide to get rid of the other 50% of your customer base.
The pursuit of absolute performance
In the late 1970s, benchmarking was first introduced by Xerox Corporation to compare themselves to their intense Japanese competitors and ensure they raise their performance bar. The original purpose was constant improvements and adopting best practices. But like many great concepts, it has become a method to relax the pursuit of excellence. Even for the bottom feeders in any benchmark, the goal was to become average, not exceptional.
In a time when we are concerned about the impact of AI on organizations and performance, we can be confident that average work will be automated and taken over by AI. True exceptional value will be the survivor of the fittest. If your response level is low, it means your customers do not believe the sincerity of the dialogue you proclaim to conduct. If your employees do not take the time to respond, your situation is dire. The current state of surveys does not seem to produce the sincere dialogue necessary to truly improve relationships (customers or employees). We need to rethink this system.
The addiction to the false sense of security peddled by survey companies with benchmark data should end. It is the pursuit of relative performance over ultimate performance. Relative performance focuses on the good enough vis a vis the competition. Ultimate performance is delightful and surprising customers, so they have no reason to consider any other provider. The former creates a false sense of security the latter ensures business continuity.
To achieve ultimate performance, we ought to establish a true dialogue with our customers. A dialogue in which customers take the time to provide the insights and organizations address it sincerely, completely, and on time. This is not a one-time event but rather an ongoing dialogue about the performance process, ensuring that we are always ahead, not with the industry average, but with our customers' expectations.
In a world of ultimate performance, the real question we ought to ask is 'How can we outdo the current performance and value?'
Lior Arussy is chairperson of ImprintCX and author of Dare to Author!
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