Have you been struck by how frequently the first question lawyers
will ask, when exposed to a new suggestion about how they might run
things at the firm (from the smallest to the largest issues) is: "Well,
what other firms are doing that?"
On one level, this is to be expected; we are trained to be creatures
of precedent. Likewise trained to be risk-averse, the answer
(assuming it’s "lots of other firms") will
be reassuring: None of those other firms has, as far as we
know, sailed onto the rocks. But if the answer is, "well, none,
really—but don’t you think it’s a marvelous idea?," we know
the initiative is stillborn. The analysis hits a full brick-wall
stop at the words "none really" and tunes out "but don’t you think…"
As someone temperamentally disposed—for reasons I can take
no credit for, it’s just the way I grew up—to
think more like an entrepreneur or businessman, this reaction has
always, at some gut level, baffled me, as thoroughly as I nonetheless
understand it intellectually.
Then it occurred to me that business does the same thing: Only
they call it "benchmarking."
Hence to Harvard Business School’s Working
Knowledge to
see what the managerial wisdom has to say on this topic, and here’s
the best piece,
from earlier this year, "When Benchmarks Don’t Work."
Their definition of benchmarking:
“The ongoing activity
of comparing one’s own process, product, or service against the best-known
similar activity, so that challenging but attainable goals can be
set and a realistic course of action implemented to efficiently become
and remain best of the best."
Unlike too many definitions, this one actually embodies some insight
into what the activity under consideration is designed to achieve: And
it reveals an internal contradiction. It simultaneously asks
one to "compare…against the best-known similar activity," and then,
as an utter non sequitur, proclaims that the goal of that comparison
is to "become and remain best of the best."
Are you sensing the same cognitive disconnect I am? By hypothesis, comparing yourself
to others is at odds with becoming the "best of the best." (To
be sure, it’s mere managerial good hygiene to know what the competitive
landscape looks like, but if you’re counting on scrutinizing that
familiar territory to spark the Eureka moment transforming your firm
into a Wachtell, write me about it when you’re done.)
But back to our friends at Harvard Business Review. They
clearly demarcate the value of benchmarking for internal commodity-like
processes, services, and functions, from its utter inappositeness
if applied to core functions. More strongly, they posit—with
inarguable correctness, in my mind—that even internal "support"
services should provide more than commoditized levels of service
(emphasis supplied in the following):
"But benchmarking also has its limits. When you ignore
the differentiated output that internal support
or shared services groups provide, such straight-across cost or numeric comparisons
become meaningless. Today’s successful support unit earns its keep
by being a trusted partner to the business units
it serves. So, comparing
its results to those in a benchmarking survey is counterproductive.
Companies should save the benchmarking surveys for commoditized processes
or services."
And the primary reason why internal "support" services must strive
to provide "supra-commodity" levels of service is simple. Commodity
levels of service are available elsewhere, cheaper, faster, and better:
"Perhaps
many HR, IT, and finance departments do indeed strive to be low-cost
suppliers of standardized services. But if so, they are not likely
to remain internal departments for very long. After all, an outsourcer
of these services enjoys economies of scale that virtually no internal
support unit can hope to match."
What does this mean on the ground?
For HR, it means that an "expensive" department that takes professional
development seriously is earning its keep.
For IT, it means that supplying analytic applications and decision
support methodologies individually tailored to your practice groups
take it well above "commodity," transaction-processing mode.
For finance, it means that if it provides practice group leaders
and billing partners highly granular information on the profitability
of individual matters, clients, and sub-specialties, it is earning,
conservatively, 10 times the extra amount it "costs" to offer that
expertise.
This is the bottom line, and what your "support" departments should
aspire to:
"[S]ervice units whose goal is to provide differentiated
services and to upgrade the skills and capabilities of their professionals
will necessarily spend more. They are not less efficient than their
low-cost counterparts; rather, they expect to create even more value
for their enterprise. Their strategy is fundamentally different."
What’s the strategy for your service units? If it’s embodied
in the answer to the question, "What other firms are doing it?,"
your strategy, like it or not, is one of guaranteed mediocrity.
