Peer Company Sponsored Benchmarking- What to Look Out For

In many industries, there exists companies who sponsor benchmarking and other types of “data sharing consortiums”. In the Utility Industry, within which we do a significant amount of work, there are a growing plethora of organizations who want you to exchange data openly with them rather than with consultants or other facilitator-brokered services. PSE&G Peer Panels, Southern Company, and others are among the top “draws” for this kind of information sharing among utility organizations. Other industries have similar types of players.

It is not my intention to label these programs “good” or “bad”. In some cases they serve a valuable purpose for many of the participants. But you should also know that these programs are laced with risks- risks that must be understood if you are to manage your involvement proactively.

At the core, you need to ask yourself WHY these companies would offer such programs, other than to gain valuable competitive intelligence, potential acquisition analysis, or other covert reasons. If you’re concerned about their motive, don’t join.

But first, you need to get past the “lure” of these programs, as they all are VERY good at drawing companies in with the following arguments:

– They say the reason they manage these programs is to offer a public service to the industry. Sounds all too altruistic for me. See below- There is no free lunch….

-They say these programs are free. News Alert- they aren’t! Someone always pays. If it’s the shareholder that pays, then 9 times out of 10 they are looking for competitive intelligence. If its the ratepayer who pays, then these companies are about to have bigger problems on there hands, as there are few ratepayers who would support giving their money away to ratepayers in other jurisdictions. If you disagree, find me a few of them who are. Is there even one out there?

-They will also tell you that they provide these programs to “protect you” from the BIG BAD consultants. We’ll here’s another News Flash: There are TOO MANY alternatives out there for you to sell yourself out to your peer companies (future competitors). If you want to stay away from consultant sponsored initiatives, look to some of the other alternatives before you decide on the peer company initiatives, as the latter are a bit too risky in the long run.

-They market to “manager” rather “executive” level individuals. Why? Because mid level managers are more apt to share data without worrying about competitive concerns. Career advancement, workshops in cool locations, and networking are among the biggest drivers for these managers. Executive staff have many more concerns about confidentiality and the value of protecting strategic data and insights, and are often in a much better position to judge when and how to make such tradeoff decisions.

– They will tell you that they are the only option if you want to have “lots of participants that look like you”. True, these programs are good draws. Also true that these companies look a lot like each other- same industry, same region, similar regulatory environments, similar management practices. But is this necessarily an advantage? Perhaps the biggest commonality between these companies are data sharing protocols may be a little “too loose”. It’s also worth pointing out that groups of 20 or so in a sector like Utilities is still a small fraction of the industry. If you total up all utility companies worldwide (and despite conventional wisdom, ther IS a lot to be learned from off shore peers!), there are literally thousands. Once you take into account that many of their members are big holding companies with 4 or 5 subsidiaries, you’re left with maybe 2% of the industry. Hardly a quorum!

Once you get past the “lure” of these programs, you can then begin to filter out the good from the bad, or at least identify the ones where the risk/reward profile leaves a lot to be desired. Are there good programs out there? You bet. But it’s your job to evaluate your benchmarking partner on each of these factors. It’s also important to have a good “rules of the road” checklist (see past post “Rules of the Road”) to use for every invitation you receive relating to data sharing. Without this, you put your company, and yourself at risk.

Benchmarking is a fact of life in best performing organizations. Withdrawing from the game of data sharing is NOT the answer. Managing the process proactively IS.