Are American companies benchmarking their way to mediocrity?

• Author: Ladd, Scott
• Position: BUSINESS PERFORMANCE

Corporate decision-makers often point to benchmarks as a key tool in assessing performance and predicting future success. But is benchmarking undermining competitive advantage and blurring strategic focus?

Booz & Co. analysts believe some of the current approaches to corporate benchmarking may be flawed and actually hinder performance. According to Booz & Co. Partner Paul Lein-wand and Managing Director Cesare Mainardi, co-authors of the forthcoming book The Essential Advantage: How to Win with a Capabilities-Driven Strategy, benchmarking is often evidence of the absence of strategy.

It often establishes targets for spending, revenues, investment and other decisions--but mostly without context, they say (in a press release). There is no strategic objective guiding the company's leadership, only a "herd mentality" that follows industry norms perceived to be worth emulating.

"Of course, benchmarking can be very helpful with table stakes factors, like the cost of a process. But too many companies use benchmarking as a crutch and rely on it as a competitive guide and a stand-in for real strategy," says Mainardi. "The way benchmarking is practiced at most companies provides no insight into...