Benchmarking blunders: Three pitfalls to avoid
A benchmark can be an incredibly powerful tool for corporate responsibility practitioners to understand and improve their performance. When done correctly, it can enable businesses to learn from each other and make smarter decisions.
However, we’ve noticed there are some mistakes that companies consistently make when conducting a benchmark. Here are three common pitfalls to avoid:
- A vague or unclear objective
Too often, companies begin a benchmark without a clear purpose. There is often the desire to skip this step and jump straight to evaluating performance. Without a well-defined objective upfront, you won’t know what information to collect or who to compare yourself against.
Before beginning a benchmark, ask yourself: what am I interested in learning? What do I want to achieve? We have identified five strategic aims from improving internal processes to communicating performance to external stakeholders (see our paper The Power of Benchmarking).
- An uninspiring comparison group
There really is such a thing as a bad benchmark. A bad benchmark can be used to justify average performance when your peer group all falls short in a particular issue area. Additionally, a benchmark can stifle innovation by overlooking companies or industries that excel in a particular area.
Selecting the peer group is often at the heart of the problem. Most companies consistently evaluate their performance against direct competitors. In order to gain the most value, you sometime need to compare yourself to the best. Ask yourself: who is best in class in this particular area in the world? What sectors are known for excelling here? By assessing the performance of leading and aspirational companies outside of your immediate peer group, we often find that companies can gain greater insights and learn more.
- A lack of action
Companies often spend the time and resources conducting a benchmark assessment simply to let the findings sit on a shelf (or an inbox). A benchmark allows a company to understand the market and inspire fresh ideas to improve performance, but it is up to the company to apply this knowledge.
Benchmarks can be great ammunition to build the case internally to do more. Share your findings with your company’s sustainability council or bring to individual departments to spark discussion. Additionally, consider publishing the results to explain your performance in context to stakeholders.
To make the most of your next benchmark, remember these three things – set a clear objective, consider companies outside the box, and share your findings.
Benchmarking blunders: Three pitfalls to avoid was written by Megan Stoffer. Megan is a Senior Researcher with Corporate Citizenship in New York.
For further insight on benchmarking, see our paper: The Power of Benchmarking.