“Opening the Black Box” is our ongoing series on the data treatments, assumptions, and methodologies behind our analyses. In this series, we answer frequently asked questions on how we build, validate, and make decisions about our data.
Thoughts or feedback for us? We welcome it.
One of our longest-tenured team members often reminds us that the most challenging effort for CEM is constructing peer groups. You can only extract accurate and actionable insights if the underlying peer group is relevant.
Every organization that serves members ultimately faces the same question: Are we delivering value to our members? A value-for-money assessment becomes possible once you can look at how peers with similar characteristics compare on cost-effectiveness, investment performance, and member service, and you can learn from what you see.
Why does CEM create different peer groups?
CEM uses peer groups depending on the question being asked. While the criteria vary, each peer group is designed to bring together organizations that face sufficiently similar cost, performance, operational, or strategic considerations to make the comparison meaningful.
The five peer groups below serve different purposes, and each is built using selection criteria tailored to the analysis. We summarize below what each peer group is designed to compare, the primary and secondary factors considered, and why those factors matter.
| Peer Group | Primary Basis | Secondary Factors |
|---|---|---|
| Investment cost & performance | Total assets under management, because size is the primary driver of cost | Geography, org type (corporate vs. public); for US DC plans, membership and account balances are also considered |
| Investment talent staffing | Implementation style (internal vs. external) and governance complexity are the primary factors | Size/AUM is not a major consideration because our staffing benchmarking adjusts for scale |
| Pension administration | Total membership, because it drives servicing needs | Geography and plan type are also considered |
| Communities | Shared ongoing need in focus area (global communities, e.g., Global Leaders) or geography and objectives (regional communities, e.g., Maple Communities for Canadian plans) | — |
| Custom research & analytics | Ad-hoc based on client's specific question or need for analysis | — |
In addition to our standard product-specific peer groups, subscribers may also request a custom peer group. These are treated as secondary peer groups and are provided as an additional set of analyses alongside the standard benchmark. A common example is an “aspirational peer group,” such as comparing against significantly larger investment organizations or against pension administrators with the highest service scores. Other examples include secondary peer groups based on industry type (e.g., corporate utilities peers) or locality (e.g., Californian peers).
How our data principles apply
At CEM, every peer group is constructed in accordance with CEM’s Data Principles. Our objective is to create peer groups that are analytically meaningful and ensure subscriber confidentiality.
To achieve this, every peer group must satisfy the minimum count requirements defined in CEM’s Data Policy. These requirements ensure that results are statistically reliable while protecting the identity of every participating organization.
Peer groups are not static. As organizations evolve, their most relevant peers often evolve as well. At the beginning of every data cycle, CEM conducts a comprehensive review of all peer groups. The proposed peer group is then discussed during onboarding for new subscribers or during annual refresh meetings for existing subscribers. This gives subscribers the opportunity to ask questions and provide feedback before benchmarking begins.
We welcome subscriber input throughout this process. However, to preserve the integrity, consistency and independence of our benchmarking methodology, the final authority to include or exclude organizations from any peer group rests with CEM.
Our committment to you
The trust our subscribers have placed in us over the years, many for close to a decade without interruption, is something we take seriously. This series is one way of honouring that trust. We are not here to simply explain ourselves. We are here to open a dialogue that pushes our work, and the industry, forward.
We look forward to hearing from you. If there is a question you would like us to address, please reach out to us at insights@explorecem.com.
This blog is part of our “Opening the Black Box” series. If you’d like to receive new posts in your inbox, please click here to subscribe.