Does Benchmarking Really Save Companies From Failure?

Even in the very best organisations, bad practice is waiting just around the corner.

In 2014 General Motors began the recall of the Chevrolet Cobalt which would ultimately affect nearly 30 million cars worldwide.

The problem was with the ignition switch which could shut off the car while it was being driven, disabling power steering, power brakes – and, crucially, the airbag.

The issue had been known to GM employees for a decade. A sixteen-year-old girl had died in a frontal crash in 2005, the first death attributed to the defective switches.

A redesign of the ignition switch went into vehicles a year later, but a simple mistake – the engineers failed to alter the serial number – made the change difficult to track later.

Ultimately the flaw would kill 124 people, and seriously injure 275 others.  Not recalling the vehicles sooner was deemed affordable in the pursuit of profit.

During this time, General Motors was leading its sector in customer satisfaction. At the same time as their cars were devastating families, they were picking up heaps of industry awards.

It’s common after the emergence of any scandal, be it VW, Oxfam, Mid Staffordshire, for us to call for tighter regulation, greater consumer controls, and transparency of performance.

But does any of this help prevent complex system failure?

The latest call is from the Social Housing Green Paper which has been published in response to the Grenfell tragedy and has been billed as a “fundamental rethink” of the system.

The government has suggested the introduction of new league tables, which would effectively name and shame landlords to highlight bad practice. The ‘power’ would shift more towards tenants and enable them to see how their landlord ranked compared with the average.

There’s also been talk of an industry wide Charter and an increasing focus on benchmarking.

Can You Benchmark Your Way Out Of A Crisis? 

Best practice and benchmarking are often just a race to be first at being average. The chances of someone else’s best practice working in a different environment is unlikely.

Not only is it unlikely but the very act of best practice and benchmarking can drive standards down. It encourages all organisations to think alike. At sector level it creates groupthink, and we all know groupthink is the avowed enemy of innovation.

Within organisations, a culture of following best practice can quickly become a culture that is frightened of doing new things. In times when we need radical solutions to big problems – trying to be more like each other is a criminal waste of time.

When Good Companies Go Bad

It’s tempting to think that tighter regulation and scrutiny prevents system failure but there’s little actual evidence it does.

There’s a problem with managing risk retrospectively: you’re always looking behind you, and often looking in the wrong places.

F1507A_IW_LOOKINGFORRISK

This graphic from a HBR study shows auditors are rarely looking at things that could bring companies down.  Policies don’t destroy companies, toxic cultures do. But cultures are rarely audited as it’s pretty much impossible to do – it’s easier to tick boxes.

When things go wrong in organisations it’s often the result of a complex web of perverse incentives, simple mistakes and a culture of people looking the other way.

It’s almost never because there’s a singular Bond villain type saying “I’m going to do this on the cheap even though it’s bad for customers and will probably kill folk”.

Redefining Trust In A Digital Age

There’s rarely a simple solution to complex problems but I see a huge opportunity for companies to rebuild relationships around principles of trust and transparency – and this won’t be achieved by charters and following a herd like regression to the mean.

The network effect of technology has created a way for people to share experiences more quickly, and to more people with more detailed information than ever before.

Today, any customer can go behind an organisation’s flattering customer satisfaction scores with a simple Google search.

To rebuild trust organisations must adopt new behaviours to reduce the gap between organisational rhetoric and the reality.

At Bromford that means pushing ourselves ever more local and away from the corporate centre – building relationships based on openness, respect, and accountability.

  • It means abandoning paternalism and the ‘we know best’ culture that has dogged the social sector for generations.
  • It means creating a culture where people do the right thing for the customer and call out inconsistent behaviours regardless of hierarchy.
  • It means establishing trust building as the number one goal, rather than the relentless pursuit of efficiency and profit.

I’m pretty sure General Motors, VW, and Oxfam would have been near the top of any industry league table.

You can’t regulate relationships and you don’t build trust with a Charter.

The market is , as Seth Godin said , begging us to be remarkable.

Who wants to win the race to mediocrity anyway?

  1. Andrew Humphreys (MBA) August 28, 2018 at 11:27 am

    Thanks for this Paul. When I saw about the introduction of league tables to social housing providers, my heart sank somewhat as I agree with you, I don’t think they will lead to significant improvements on their own. Partly, satisfaction ratings will always relate to customers’ expectations and often vary across different demographic segments.

    I think that international aviation is a much better example of how to make improvements across a system. Every time there is an incident, it is investigated and changes to the system are made as a result. By system, they mean the people (staff and passengers), the policies/rules and the equipment and technology that is in use. I don’t think they use league tables in this process.

    Whether it is a safety incident or more generally unmet customer expectations, if we are to improve social housing, I think we need to look at the system in the same way (people, policies/rules and equipment/technology (including the housing itself)). This, I believe, will enable us to identify the true causes of the failures and then redesign the system to remove those causes.

    My other concern about league tables for Social Housing (as with other sectors) is that they will skew HA’s behaviour towards the measurement system (i.e. how to score as many points as possible) and away from delivering the highest possible quality of social housing.

    Reply

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