Camilo Becdach, Shannon Hennessy, Lauren Ratner

Managers either love or hate benchmarks. Those in the former camp see benchmarks as valuable metrics for understanding the competitive landscape and for triggering important internal discussions; they believe companies should strive to meet or exceed benchmarks. Those in the latter camp argue that every company is unique and that it’s therefore unhelpful and illogical to compare one company’s decisions, structure, and head count to another’s.

Both camps are right, to some extent. Organizational benchmarks can tell a company, for example, the average number of employees its competitors have in each department. But that information is meaningless without deeper insights into what those employees actually do. Thoughtful leaders use benchmarks not as default targets, but rather as indicators that shed light on areas in which a company’s investment differs markedly from competitors, and then as a starting point to generate ideas for how to operate more efficiently.

Leading companies complement benchmarks with a thorough diagnostic, encompassing internal quantitative and qualitative analyses (such as time-allocation surveys that highlight the activities to which employees devote most of their workdays). Done right, a diagnostic will surface what should change: Where are the bottlenecks in core processes? Are employees using cutting-edge tools, or are manual processes limiting their productivity? Are they spending too much time on low-impact tasks?

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