Can benchmarking and knowledge of best practices help organizations today? Yes, but with a number of ... [+]
By John Kotter
Rarely are our best intentions to do things differently better defined than they are in January. If “benchmarking” or “best practices” have informed your resolutions, I hope you’ll take a moment to read this and consider the idea that these practices may now be creating more problems than successes in an increasingly fast changing world.
Benchmarking means comparing what you do to a (usually large) number of comparable organizations or individuals. Most often this is done in a quantitative way. So, for example, benchmarking data for “employee engagement” from surveys in 50 organizations might show you are in the second quartile from the top (therefore, better than average but not in the top 25%). Or, comparing your margins to your competitors could show you are in the third quartile from the top (below average but not at the bottom).
Best practices refers to behaviors, methods or systems which some sort of research shows the very top firms (those with the best scores based on some assessment) use in some arena that others do not use, or use less frequently. For example, the firms with the top employee engagement scores might seem to be differentiated from others by having far more communication going both up and down the hierarchy and across silos than is the norm today. Perhaps research also suggests that they do so because managers are trained in this and a corporate communications department focuses on this.
I heard the terms “best practices” and “benchmarking” becoming popular three or four decades ago. I suspect that this coincides with the increased availability of computers (to crunch data), the great growth of consulting firms (who collected industry data and could then show clients where they stood compared to others) as well as increased competitiveness in many places due to globalization (which led more firms to be interested in best practices).
Can benchmarking and knowledge of best practices help organizations today? Yes, but with a number of very important caveats. For increasing numbers of enterprises, benchmarking and the execution of so-called best practices can get you into trouble.
The main problem, first, is that data sets, both quantitative and qualitative, are not an up-to-the-minute reflection of reality. In many, if not most cases, they include information collected over the past decade. Second, unless we are talking about easy practices executed in small organizations, truly adopting a best practice throughout an enterprise might take two or three years. Thus, what you have successfully executed could easily be the best practice from a decade ago, or even longer. In a world that does not change much, you would not care. But that is hardly today’s reality.
As I have shown in many books and articles over time, the amount of change increases nearly yearly. That means that over a decade, practices that once seemed “best” may no longer be so in current circumstances. Though some basic idea or concept or principle may still be a winner, the way you use a powerful concept, if you want to be the best, might easily be very different in the details from 10 years ago. And yes, the devil is often in the details.
So what is the alternative? The only one that I have seen work is to create an organization that can constantly push its boundaries. I am not talking about “continuous improvement” as it is usually practiced, though that can be helpful too. The problem with continuous improvement is at least threefold. First, it is hard to really do it well. Second, it is all too easy to train some people who then lead efforts successfully for a while, but the whole system then slows down and ideas dry up as employees become tired of the additional work it means. Third, you can continuously improve at 25 miles per hour, but in a world that moves at 50 this eventually leads to disaster.
What kind of an organization is designed to push boundaries?
1) It makes sure the trains run on time every hour, every day. That is, it pays a great deal of attention to using the systems it has well, right NOW. Too often, organizations running as continuous improvement machines can neglect this fundamental rule.
2) It draws on as many brains to think and bodies to embed new ideas as is possible. That is, it doesn’t try to turn boundary-pushing into an exclusive activity for a few smart people. You can’t get the creativity or speed you need to be competitive with only a few participants.
3) It does not draw many into the effort by hiring “boundary pushing specialists,” put into a separate organization. When one group invents the future and then gives it to another to execute (with cash flow from the second often paying for the first), this expensive, two-silo solution can easily create jealousies, not-invented-here execution problems and more.
4) Sustainable boundary pushing will not work if you just assign people to innovation committees, create-better-practices task forces or the like. People need to want to do this because they find it fun, interesting, exciting or meaningful – perhaps because it is making a real difference for customers, investors, employees or society. This is possible if their hearts are in it, not just their heads. With appropriate leadership, we know that this state of affairs is not only possible, but is also a powerful engine for pushing boundaries. And we have seen it happen.
5) Organizationally, this sort of activity clearly works best when it mimics, to some degree, effective startups. The boundary-pushing structure is more like a network than a hierarchy. Policies and procedures and systems are at a minimum. Networks are much more conducive to many people jumping in and out with ideas, or help to implement these ideas, and doing so quickly. (Note that hierarchies are still needed, especially to keep the trains operating on time hour after hour, day after day.)
Benchmarking and knowledge of best practices can be used by skilled leaders as a way to wake up complacent organizations when the distance between what is being done and “the best” is clearly large. But even in those cases, using the information to mindlessly try to replicate what once worked well for someone, somewhere is rarely a formula for success. In a fast-moving world you need a new way of operating that invents significant numbers of better practices, sometimes even big jumps, all the time, and as quickly as possible. And since the odds are that the vast majority, if not all of, your competitors are not following this new approach, there is great opportunity here.
