Performance and Productivity

Why You Should Benchmark In HR

Benchmarking is a systematic process that uses qualitative data to make comparisons between different organizations or sections of an organization.

January 22, 2020
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Date Published
January 22, 2020
Benchmark In HR

What is Benchmarking?

Benchmarking is a systematic process that uses quantitative or qualitative data to make comparisons between different organizations or sections of an organization. It is a continuous procedure in which organizations periodically identify, measure, challenge, and improve their practices for better ones. In accordance, HR benchmarking is done when HR policies, practices, and metrics are measured and compared with those of other organizations.

What is the importance of Benchmarking in HR?

Knowing where you stand in the market compared to your peers is critical in order to keep you in the game whether internally or externally. If used wisely and correctly, Benchmarking can transform an organization’s HR and workforce management strategies by proving that HR practices can impact affect an organization’s performance and success.

What will Benchmarking assist in?

  • Identifying areas of weakness and how to improve them.
  • Identifying areas of strength and how to maintain them.
  • Creating strategies for improvement
  • New or alternative ways to perform activities.

What can be benchmarked?

It’s crucial to wisely choose what you want to benchmark as benchmarking everything may end up diluting your focus and shifting your attention away from what matters most. Identifying which aspects of your HR activities to benchmark may be slightly tricky, but it’s important to choose those that have a significant financial and organizational effect on your business’ success. A few examples are:

  • Total Costs
  • Workers’ Compensation
  • Paid Leave
  • Recruitment Processes (ex: cost, time and speed of hiring a candidate)
  • Training (ex: training costs and number of training days per employee)
  • Retention rates
  • Absenteeism

How to benchmark?

1- Data Collection and Analysis:

The process starts with collecting data for certain aspects and analyzing it, either manually or using certain HR intelligence solutions. Once this process has been completed, you would need to determine what the analyzed data will be compared against. Data for comparison can be found in online/offline databases, reports, books and tools that collect metrics from a wide range of organizations.

2- Assessment and Comparison:

You may want to use the expertise of an HR consulting company to assess your HR functions and compare them to your peers in the market in order to deliver ready reports with no hassle from your end. Nevertheless, if you choose to complete this process internally, you will need to select the right organizations to compare yours with or else you could get an imprecise depiction of the status, therefore leading you to take wrong actions.

Internal vs External Benchmarking

Benchmarking is not necessarily external only (comparing your organization to other ones) but can also be internal (comparing your organization’s departments with one another). Raising the standard to your best performing units and upgrading all units internally improves performance and is usually met with less resistance from managers. However, internal benchmarking may not answer certain questions such as why your employee retention is lower than that of a competitor.

Key Takeaway:

Benchmarking is a tool that empowers your organization and allows you to gain a competitive advantage in the market if done accurately. It is a practice that must be done cautiously and wisely without making any assumptions about the market, statistics, and ratios. Knowing how your competitors are implementing certain actions, benefits or strategies can be incredibly advantageous to your organization.

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