Have you ever taken the time to look at your organization’s HR policies and practices? If not, it may be time to do so. And, it would help if you took it a step further by looking at what other organizations are doing. That in its simplest element is HR benchmarking. It provides powerful insights for comparison purposes. You do this intending to increase the effectiveness of the HR and company processes.
Why is this important? Well, you want your organization to have a competitive edge. It also provides powerful insights into measuring your performance.
We will explore the topic of HR benchmarking as a tool for company development in a little more detail. Let’s see what we will uncover with this fascinating topic.
HR Benchmarking: What Does It Entail?
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HR benchmarking is a research-intensive process. Why do we say this? As we have stated, it entails collecting insights into the policies and procedures. And, this does not only apply to your organization. You must do the same for other businesses in your industry.
The scope of human resource benchmarking covers several factors. These include job promotions, health benefits, salaries, and other motivational aspects.
You must also determine how the HR practices contribute to the organization’s success.
Having the right HR benchmarking metrics is critical. It must cover both qualitative and quantitative data. The insights will be useful for the industry comparisons.
There are some specific things to know about HR benchmarking:
- It is a continuous process that you must periodically undertake. Only then can you identify milestones, and how best to utilize them for the company’s development.
- HR benchmarking is a strategic process, which requires adequate planning. The organization must outline specific goals it hopes to achieve.
- The teams must develop relevant patterns, metrics, or data they hope to get. Do you, for example, want to know how your recruitment and retention processes measure up against the competitors?
It becomes easy to set up a benchmarking system with clarity on the above. The aim should be to get valuable and reliable results that can transform the company.
Benchmarking Types to Be Aware Of
There are two major types of benchmarking. Let’s see what they are.
Internal Benchmarking
Internal benchmarking uses existing data to compare teams or departments within the company. It provides an excellent tool for monitoring performance and identifying organizational changes. The insights allow management to know whether performance and expectation are aligning.
But it also goes beyond organizational performance. The HR will take a keener look at individual performance, not necessarily the unit.
So, some of the key HR benchmarking metrics will include sales targets, budgets, financial performance, and so on.
External Benchmarking
External benchmarking is more intensive. It involves industry-wide comparisons. As stated above, it provides a fantastic tool for the company to assess its performance against other similar organizations.
When carrying out external benchmarking, do pay attention to the following. There must be similarities in the organization you are comparing yourself against. That means looking at factors like the number of employees.
It would be hard to get reliable results if, as a startup, you are comparing yourself with an established company, with thousands of employees. Ensure certain similarities when doing the benchmarking. As a startup, you should ideally only compare yourself to other startups.
It also helps to take note of other factors like regulations governing employment. Existing policies in one place may not apply in another. Some countries may, for example, have mandatory rules around insurance.
The same may not apply in your country. So, using insurance provision as an HR benchmarking metric may be misleading.
There are other benchmarking types to take note of. These include:
- Process benchmarking – used to compare with the leaders in the industry. Its purpose is to learn from the experience of others and to identify which areas have the greatest potential for short and long-term process improvement.
- Competitive benchmarking – a direct competitor is compared, but at a different level. You can set certain benchmarking metrics and define a competitor’s approach. For instance, by analyzing employee data on platforms like the Carnival Cruise employees page on SignalHire, you can better understand the team structure, roles, and expertise your competitors rely on.
- Functional or performance benchmarking – similar processes of companies are compared, but they belong to different industries.
There are different types of benchmarking, with good reason. Any process that involves humans can generate excellent insights.
The scope can cover:
- The organization’s structure to see whether it is ideal for the achievement of business goals.
- HR operational costs.
- Remuneration and benefits to gauge whether employees are getting the right pay, commensurate with their job.
- Career Development opportunities
- Work environment and schedules to ensure proper treatment of employees
- Employee engagement, retention, and factors that could interfere
- Wellness programs, productivity, and health.
Developing a Strategic Benchmarking Model
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It should be clear by now that the scope of benchmarking can be wide. That is why we mentioned the importance of approaching it strategically. The steps below will provide a guide on how to go about it.
- Outline the organization’s goals, plans, and business strategies. Collect as much information or data as possible from all the different departments.
- Determine what factors drive the business strategy. Let’s say the strategy is to increase the company footprint to other regions. The drivers will be staffing, training, onboarding, and so on. This is the data you will need to collect.
- Create linkages between the business strategy and key performance indicators.
- Identify the HR benchmarking metrics to analyze each driver. Take the example of cost-per-hire as a metric when considering staffing.
- Identify companies you want to use for comparison. The alternative is to use available internal or external benchmarking to compare the data you have collected above. Any deviation from the comparison data requires further analysis.
- Remember, benchmarking is a continuous process. Once you finish, recalibrate the benchmarks. Periodic reviews will let you know whether you are on the right track.
Benefits of HR Benchmarking to the Company
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We have hinted about the important role of collecting data-driven insights. But let’s explore a few more benefits:
Improving Employee Processes
The HR department manages all aspects regarding employees. These include recruiting, onboarding, training, and retention. Many companies struggle with some major challenges. A significant one is how to hire and keep the best staff.
Up to 47% of companies acknowledge that retention and high turnover are one of the greatest challenges they face. For the latter, the rates are as high as 35% every single year. Poor work environment and job characteristics account for 53% and 81% of voluntary turnover.
HR benchmarking insights can uncover ways to attract and retain top talent.
Benchmarking Uncovers Gaps
The biggest advantage of HR benchmarking is the amount of information the company gets. HR can identify gaps or areas that need improvement.
And it allows for the teams to focus on specific areas. Take the example of the process of performance benchmarking types. Such yield insights are specific to one area.
Let’s take the example of low employee engagement. HR has the opportunity to discover why this could be the case. They can then take the necessary steps to rectify the situation.
HR Benchmarking as a Tool for Organizational Change
Making changes within the organizational structure can be difficult. HR, for example, may not be able to justify compensation adjustments. But, comparison insights from benchmarking provide a strong argument. The same could apply to bonuses, perks, and other motivational factors.
Internal benchmarking for things like employee satisfaction can increase retention. The industry comparison may, for example, show higher motivation amongst employees who have access to training opportunities.
The management can use the insights to make appropriate changes to improve the work environment. And, that’s not all. The insights provide a microscope that allows the company to examine its existing procedures.
Better Decision-Making
Data-driven insights provide management with fantastic tools for decision-making. As we stated, aligning goals, business strategies, and plans is key when developing the benchmarking model.
These are valuable components when developing long-term strategies. And, continuous benchmarking provides information to keep the teams on track.
The Other Side of HR Benchmarking
There are some disadvantages to HR benchmarking. Do take note of the following points:
- HR benchmarking can be costly and time-consuming. The company must hire the right personnel to carry out the exercise. All these come at an additional cost that the company must bear.
- Inability to collect adequate data could yield unreliable results. The same applies to improper comparisons, thus irrelevant results. Take the case of a startup comparing itself with a more established company.
- There is a danger of dependency from following more successful companies. It is important to avoid the copy-and-paste culture, as a company should be able to chart its own unique path. And, finding that you are operating at the level of the best in the industry can lead to complacency.
- In comparing your processes to another company’s, you may ignore what could actually be working for your organization. Every company is unique – what works for one organization may not, for another. The teams must be mindful of that fact when carrying out the benchmarking.
Final Thoughts
HR benchmarking can yield tons of fantastic data-driven insights. The company can use such to make changes within the organization. It can lead to better recruiting and retention processes. And that’s not all in terms of benefits, as we have shared. And, the key to success is having the right HR benchmarking goal in mind.
Human resources benchmarking is an ongoing process. It should not be something that the company uses for short-term gains only.
Image source: pixabay.com
