In business, something that works well for a leader in one company is not easily replicated in another.
Today, many leaders are rejecting benchmarking--the practice, promoted by many big consulting firms, of adopting the best-practices from high-performing companies.
Leadership transition doesn't happen by simply taking someone else's leadership approach and using it as a template in one's organization. When Jacques A. Nasser, Ford Motor's ex-CEO, quickly implemented a General Electric-style performance evaluation system in the late 1990's, the new forced-ranking system resulted in a $10.5 million settlement of two class action suits with the company slipping into a crisis management mode of operation.
Leaders are better off when they think creatively of what people need and how they can give it to them.
Booz & Company Partner Paul Leinwand and Managing Director Cesare Mainardi, co-authors of the recent Harvard Business Review article "The Coherence Premium," and the book The Essential Advantage: How to Win with a Capabilities-Driven Strategy, are available to elaborate on why they believe many current approaches to corporate benchmarking are flawed and destructive, including...
- Benchmarking is often evidence of the absence of strategy. It establishes targets for spending, revenues, investment, and other decisions, but mostly without context. There is no strategic objective guiding the company's leadership, only a herd mentality that industry or functional norms are worth mimicking.
- Benchmarking distorts the true nature of competitive advantage. Leading companies have a well-developed, differentiated approach to the market and will have no true peers to benchmark against -- i.e., there should be no competitor that does what you do, as well as you do it.
- Benchmarking can discourage differentiation. Most companies struggle to find a differentiated way to add value in the market -- and very few achieve it. Benchmarking encourages companies to build capabilities similar to those of the competition, reducing the chance that they will actually distinguish themselves by setting new standards with new ideas, added value and a unique market position.
- Benchmarking can encourage complacency. While benchmarking can prompt companies to get up to snuff on activities -- cutting the cost of invoicing, for example -- it can encourage complacency among those on the far right side of the bell curve.
- Benchmarking copies bad examples. Many companies are not very good at strategy development. Copying such companies just internalizes their strategic weaknesses.
- Benchmarking ties up valuable resources. These initiatives generate a huge amount of activity and develop lives of their own inside of companies. A more productive use of those resources would be developing a differentiated strategy that makes a company less like its competitors, and more able to create unique value in the marketplace, based largely on its own capabilities.
For more information on benchmarking versus creative leadership read the article: Copycat or Born Leader?