No Benchmarking in LOs LO7641
Tue, 28 May 1996 11:21:39 -0400

Replying to LO7631 --

Hi If Price,

Your example of the dysfunctional effects of benchmarking in a
organizational climate where there was keen competition for resources is
an excellent illustration of the core paradox at the heart of the concept
of a "learning organization" which is:

People come together in informal groups to learn new ways to perform
effectively. If this learning is successful, the new ways of behaving are
institutionalized over time in policies and procedures, programs and
systems to ensure their repetition. All would be well if the world didn't
change, but it does. And when it does the formal, institutional
arrangements designed to perpetuate success in one context tend to inhibit
further learning! So we have the paradox that the ends of learning (better
performance), once achieved, destroy the contexts for learning (poor
perfomance). Success leads to failure! Or, to put it in another less
extreme way: an excessive focus on current performance drives out the
learning processes which allow effective performance in the future!

I have seen this process working first hand in an industrial distribution
company. After many years of using only financial measures, we decided to
measure customer satisfaction using on-time delivery as a proxy (it was
easy to measure). The numbers were "bad" - only 50% of customers got their
goods on time. Shocked by this, we all set out on a learning process,
tracking back the systemic cause/effect loops and forming cross-functional
teams at progressively lower levels in the formal organization. We
marvelled at the complexity of the cause/effect loops which were
operating. On-time delivery numbers improved steadily; we reported the
successful initiative to the board; congratulations all round.

Then we made a big mistake: we decided that managers would be rewarded
based upon on-time delivery with a portion of their quarterly profit share
depending upon the measurement. Learning stopped. The managers seized
control of the information system and "fixed" it in many ingenious ways,
so that they had an early warning system of any unfavourable report. They
could then 'fix" these problems in the same way. Some orders could be
excluded from the system completely. They took to phoning customers to
extend deliver dates so that goods could be back "on-time" again (witness
a similar dynamic in the measurement of on-time arrivals in American
airlines). In short, as soon as we hung material rewards on the outcomes
of learning, our proxy for customer satisfaction became separated from the
whole improvement process of the real system. It turned into a "paper
system" with a life of its own, but totally disconnected from reality and
consuming real resources to maintain it. After a while we stopped looking
at it, knowing that you couldn't trust the numbers anymore and we wondered
whether the customers had really noticed the improvements.

The same processes are active in the quality movement. I note that Robert
Galvin, retired builder of Motorola, recently described ISO 9000 as a
"high-cost bureaucratic imposition".

It isn't easy....

Best Wishes,

David Hurst (
Speaker, Consultant and Writer on Management
Author of "Crisis & Renewal: Meeting the Challenge of Organizational Change"
(HBS Press, 1995) See Books at


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