Should Contractors Benchmark?

By Ted Garrison

The answer is a definite yes - and no! Let me explain.

A better question would be, "Is it better to do things right - or better to do the right thing?" This question stimulates some interesting discussions, because our society has taught people to do things right. For example, if you didn't do things right in school you received poor grades. However, it doesn't matter how well you perform a task that doesn't need to be performed. In essence, the "right thing" is the "what" you should be doing, while doing "things right" is "how" you should be doing them.

Obviously, both are important. However, companies must start with the "right thing" and then learn how to do it the "right way." Ralph Strayer, the co-author of The Flight of the Buffalo, has said, "Anything worth doing is worth doing poorly." His quote often confuses people, but the key word in his quote is "worth." He isn't advocating poor performance. He's merely giving you permission to perform poorly while you learn. In other words, it's okay to make a fool of yourself while you learn something worthwhile.

Benchmarking is about measuring a company's performance on how well it does things compared to the best performers doing the same thing. Therefore, it makes sense to benchmark operational skills - the "how" operations are performed. Since there are many tasks that all contractors must perform during the construction process, it makes sense to maximize a company's performance of these tasks by benchmarking them against the best company's performance.

However, while benchmarking works to improve the "how" of a business, it would be a disaster with regard to the "what" the business does. The reason is simple. The "what" of a business is the strategy that makes that business different from its competitors. The greater the difference between one company and its competition, the more unique that company becomes and potentially the more profitable. In contrast, when companies benchmark the "what" of their business they merely become a "me to" company, which is a weak position.

Al Ries and Jack Trout reported in their book, Positioning: The Battle for Your Mind, that the strongest position is to be first. They added that unless the company in the first position does something wrong, it's almost impossible to dislodge it from its power position. The book indicated that being first is the most profitable position. They further argued that in most cases it doesn't matter if the contenders do a better job or offer a better product, they would find it almost impossible to dislodge the leader. The conclusion is the company that gets there first wins the battle for the customer's mind.

The most successful companies have both a sound strategy and an effective operational process. The strategy is the "what" of the company while the operational process is the "how" of the company. So while it makes sense for the contractor to benchmark its operational processes against the best in the industry, benchmarking strategy doesn't work.

Michel Roberts, CEO of the consulting firm Decision Processes International, confirms the importance of focusing on the "what." He explains that companies that master neither strategy nor operations fail and companies that master both do very well.

The last two options, namely focusing on either operations or strategy explain why strategy is more important. The company's research found that most companies focus on the operational processes. They concluded that is a result of the fact that since most people spend their careers dealing with operational issues, they tend to focus on improving operational issues. Because they have little strategic experience, they avoid it, with the result that they are often working on the wrong things.

Unfortunately, if you don't take the time to determine "what" needs to be done, the effort expended on operations may be wasted. DCI's data supported this position as they discovered that companies that do the "right" thing outperform companies that focuses on doing things right. In essence, a company must have the right strategy if it hopes to succeed at beyond a marginal level. (A lack of clear strategy is probably why so many construction companies have such low profit margins!)

Strategy is about creating a defensible competitive advantage. In other words, it is about doing something different or unique. Therefore, contractors can't benchmark their strategy because that creates a "me-too" approach to business. Contractors must differentiate their performance, which means they can't benchmark the "what" of their business.

Ted Garrison, author of Strategic Planning for Contractors, works with businesses in the construction industry. He can be reached at Growing@TedGarrison.com.