A search for company league tables will take you to some well-known global publications with myriad headlines that are the business equivalent of the “click-bait” you see in more popularist publications: “10 sexiest men for 2014”, for example.
As a chairman, CEO or equivalent, of a company that ranks high in any of these league tables, you’re likely to feel pretty good. But are company league tables a useful measure of performance? They’re great when you’ve moving up but what happens if you slip in the rankings or your growth strategy focuses too heavily on achieving a better rank?
If the tail starts to wag the dog, what will you lose sight of in the process?
Extending the dog analogy a little further, working towards rankings in league tables is similar, in my opinion, to breeding pedigree dogs. The kennel clubs of the world list the breed standards. Breeders, for whom this is a business, will breed for the genetic traits that most successfully meet those standards so that their product (the dogs) are more likely to win competitions, ensuring the breeder can sell their puppies for more and demand high stud fees for their sires. The long term health consequences of inbreeding are ignored in favour of meeting aesthetic standards and the incidence of problems increases e.g. breathing problems in Bulldogs, canine syringomyelia in Cavalier King Charles Spaniels or urinary tract blockages in Dalmations. These are just a few of the issues that have been highlighted since 2008 when the RSPCA started campaigning for change.
Back to company league tables
If you look at, say, The Sunday Times Best 100 companies, you will find a diverse selection of sectors represented. Information Technology, Finance, Health, Hospitality, Transport. How do you compare a software company to a company that owns hotels or a bank to a car manufacturer? It’s like the quest for Best in Show at Crufts. This year the breeds in the final round included: Maltese, Miniature Poodle, Flat Coated Retriever, Bearded Collie, Alaskan Malamute, Scottish Terrier and Saluki. How is it possible to compare them? They each have their own unique look and can perform only within the limits of their breed. The same applies to businesses.
So it follows that placing too much store on company league tables to measure success can be risky in the long run. Companies have no control over the cohort that is measured, nor do they have any say in the methodologies used. They are therefore at the mercy of the commissioning body, which may be reputable but has its own agenda. And they are at risk of vanity that could lead to the development of an inbred culture and, ultimately, an unhealthy organization.
How to enjoy the pat on the back whilst mitigating the risks?
In my view it requires a balanced approach, which values the internal health of the business as much as its reputation. Tools like employee engagement surveys and 360 degree feedback can be used to measure specific areas of the business and create a benchmark from which to measure future performance. The findings are unlikely to be published but measuring sentiment and performance will deliver every bit as much value as achieving a high ranking in a company league table.
That’s why internal benchmarking is a smart thing to do because it can inform business strategy, people development and performance management. And, if acted on appropriately, it creates strategic focus.