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Every company wants to know where it stands in relation to its competitors — and where its various teams and departments stand in relation to each other. Is your organization falling behind its peers with regard to employee turnover or engagement? Are there some teams that have adopted innovative processes your business needs to spread organization-wide?
These questions and others can be answered with the effective use of HR benchmarking. Let’s explore what HR benchmarking entails and why it might be worth pursuing at your organization.
What is HR benchmarking?
HR benchmarking is a valuable tool that helps organizations assess their performance by comparing various metrics and characteristics to internal or external benchmarks. The goal is to gain insights into how an organization measures up to its peers and to identify opportunities for improvement and innovation.
To conduct HR benchmarking, organizations must select relevant metrics to compare, such as employee turnover rate, time-to-hire, and factors that reflect employee engagement. These metrics should be chosen based on their relevance to the organization’s objectives and the availability of benchmark data. Organizations should also compare qualitative factors, like HR policies and organizational practices, to gain a holistic understanding of their performance.
HR benchmarking, while a useful tool in the right circumstances, has its limitations. Benchmarking data may not always be readily available, especially for niche industries or less-common metrics. Ensuring data is actually comparable can also be challenging due to differences in organizational size, industry areas, or geographical regions. In addition, benchmarking relies on effective analysis and interpretation of data to drive meaningful change. Organizations must ensure that benchmarking efforts are accompanied by a commitment to continuous improvement, a willingness to adapt, and a focus on implementing actionable strategies.
Types of HR benchmarking
There are several types of benchmarking that organizations can employ to gain insights and identify areas for improvement, each catering to different organizational needs and objectives. Before diving into a look at four major benchmarking categories, it’s important to note that organizations can combine multiple types of benchmarking based on their unique needs and goals. Which benchmarking type makes the most sense depends heavily on a company’s priorities, available data, and desired outcomes.
Internal benchmarking involves comparing data across different teams, departments, or other groups within the same organization. It allows organizations to identify relative strengths and weaknesses while encouraging knowledge sharing and collaboration among different units.
External benchmarking entails comparing HR metrics and practices with other organizations, usually in the same industry or sector. This type of benchmarking helps organizations gain insights into industry standards, best practices, and emerging trends. By comparing themselves to competitors, organizations can identify performance gaps and new opportunities for growth.
External benchmarking can be further divided into two subcategories: competitive benchmarking and functional benchmarking. As the name indicates, competitive benchmarking focuses on comparing HR metrics and practices with direct competitors. Functional benchmarking instead involves determining how and why competing organizations are successful in specific areas, like market share or employer brand.
Strategic benchmarking goes beyond HR metrics and practices to compare an organization’s overall HR strategy with other industry leaders. It examines high level items like the alignment of HR strategies with organizational goals, the effectiveness of talent management practices, and the ability of HR to adapt to changing business needs. Strategic benchmarking provides insights into innovative HR techniques that can drive long-term organizational success.
Process benchmarking focuses on specific HR processes or activities, like training and development or employee engagement initiatives. It involves comparing process efficiency, effectiveness, and outcomes with other organizations to identify areas for improvement and innovation.
The uses of HR benchmarking
HR benchmarks play a crucial role in helping organizations drive positive change. Here are several reasons why HR benchmarking matters.
At the most basic level, HR benchmarks let organizations objectively evaluate the performance of their own HR department and initiatives. Benchmarking allows organizations to identify performance gaps, highlight areas of strength, and set realistic goals for improvement. Benchmarking facilitates knowledge sharing and encourages organizations to stay informed about emerging trends and cutting edge practices.
HR benchmarks provide evidence-based insights that support decision-making. By analyzing benchmarking data, organizations can make informed decisions regarding resource allocation, investment in HR initiatives, and strategic planning.
HR benchmarks drive a culture of continuous improvement within organizations. By regularly comparing performance against internal and external benchmarks, organizations are motivated to strive for better results and constantly raise the bar. Benchmarking encourages organizations to challenge the status quo, seek innovative solutions, and implement plans to enhance their HR practices.
HR benchmarks help organizations gain a competitive advantage in managing their human resources. Benchmarking provides insights into industry trends, enabling organizations to adapt their HR practices to meet evolving needs and stay ahead in the market. And by benchmarking against industry peers and leading competitors, organizations can identify areas where they lag behind and prioritize new initiatives to address them.
Accountability and transparency
By providing standards organizations can measure themselves against and share with employees, HR benchmarking promotes accountability and transparency within organizations. Rather than making vague promises to employees and failing to provide tangible evidence of improvements, companies can closely track progress across various key metrics and share this data with team members, fostering trust and credibility.
HR benchmark examples
All organizations should strive to align their HR benchmarks with their business objectives. Here are a few examples of common HR benchmarks that address several key drivers of organizational success.
Employee turnover rate
Employee turnover rate tracks the proportion of team members who leave a company over a set period. It helps organizations understand the stability of their workforce and the effectiveness of their talent retention strategies. Comparing turnover rates with industry averages allows organizations to identify potential issues and implement strategies to improve employee retention.
This benchmark assesses the average time taken to fill job vacancies within an organization, an important measure of the efficiency of the recruitment and selection process. Comparing time-to-fill metrics with industry benchmarks provides insights into how an organization can attract and hire top talent in a more timely manner.
Training and development funding
Measuring the resources allocated to employee training and development initiatives lets organizations evaluate their commitment to enhancing employee skills and competencies in a tangible way. By comparing their own investments in talent development with industry benchmarks, organizations can see if they’re ahead of their competitors or if they need to double down on their professional development initiatives.
Diversity, equity, and inclusion metrics
Diversity, equity, and inclusion (DEI) metrics measure the participation of underrepresented groups within the organization. These metrics may include the percentage of women in leadership positions, the representation of minority groups, or the effectiveness of specific DEI programs. Organizations can see how their results measure up to external benchmarks to identify gaps and foster a more inclusive work environment where each employee feels like they belong.
5 HR benchmarking best practices
HR benchmarking is a complex process that looks different at every organization. But there are some best practices your company can implement to ensure its benchmarking program actually contributes to organizational success. Let’s take a look at several of the most important.
1. Clearly define objectives
Before starting the benchmarking process, your organization should clearly define its objectives. What is your company looking to get out of the benchmarking process? Are you most concerned about an apparent lack of employee motivation? What about employees’ opinion of management and the company as a whole? Gathering feedback in advance using tools like pulse surveys is a great way to get some clear direction for benchmarking, ensuring it aligns with organizational goals while providing insights that are actually meaningful.
2. Select relevant metrics
Choose HR metrics that are relevant to your organization’s objectives and align with applicable industry standards. Focus on a select group, rather than aiming to cover a huge amount of ground at one time and biting off more than your company can chew. Prioritize key performance indicators that have a direct impact on HR effectiveness, employee engagement, and organizational success.
3. Ensure data quality
Accurate and reliable data is critical for effective benchmarking. Organizations should ensure that data collection methods and processes are standardized and consistent. Verify the accuracy and validity of data sources, whether internal or external, and consider using reputable industry surveys, databases, or benchmarking service providers to access reliable data.
4. Maintain confidentiality and data privacy
Respect confidentiality and data privacy when sharing or accessing benchmarking data. Ensure compliance with relevant data protection regulations and maintain the anonymity of participating organizations. This promotes trust and encourages other organizations to share data more readily, leading to more accurate benchmarking results.
5. Continually improve with employee feedback
HR benchmarking should be viewed as an ongoing process rather than a one-time event. Foster a culture of continuous improvement by regularly revisiting benchmarks, tracking progress, and updating goals. And don’t limit collecting and analyzing employee feedback to the initial phase of benchmarking. Leveraging an employee engagement platform to track how your initiatives are landing with your workforce and how to maximize the ongoing impact of those programs is a part of HR benchmarking no organization should neglect.
Obtaining external HR benchmarking data
External HR benchmarking requires access to confidential information from other organizations — or relying on publicly available data that may be incomplete or out-of-date. Thankfully, there are many potential ways to access quality, relevant data to meet your external HR benchmarking needs.
Identify relevant sources
Begin by identifying reputable sources of external HR benchmarks. These can include industry associations, research firms, consulting organizations, government agencies, or specialized HR benchmarking service providers. These sources often conduct surveys or research studies that collect and analyze HR data across various industries. Always verify the credibility of your organization’s sources and carefully assess the quality of the data collection methods they use.
Leverage industry networks
Tap into industry networks and professional communities to gather information on benchmarking initiatives. Attend industry conferences, seminars, or webinars where experts or organizations share insights and benchmarking data. Engaging in industry-specific online forums or networking events can also provide opportunities to connect with peers who may be willing to share benchmarking data.
Research published studies and reports
Look for published studies, reports, or whitepapers that provide benchmarking data on HR practices. These may be available from research organizations, consulting firms, or industry-specific publications. Academic journals and scholarly articles can also be valuable sources of benchmarking data, particularly for specialized HR-relevant topics.
Participate in surveys and research
Participating in industry surveys and research studies can provide organizations with access to benchmarking data. Keep an eye out for relevant surveys conducted by reputable organizations. Participating in such surveys may grant organizations access to benchmarking reports or insights in return.
Collaborate with peers
Establishing collaborative relationships with industry peers can be an effective way to exchange benchmarking data. Engage in industry-specific networks or communities where organizations share best practices and benchmarking data. As noted above, building trusted relationships with peers can lead to the mutual exchange of valuable benchmarking information.
Consider custom benchmarking studies
In some cases, organizations may opt to commission custom benchmarking studies tailored to their specific needs. This approach involves collaborating with a specialized HR benchmarking service provider or research firm to design and conduct a benchmarking study that aligns with the organization’s objectives and targets their industry.
Enable effective HR benchmarking success at your organization
HR benchmarking requires both an accurate, updated source of information and the ability to act on the insights benchmarking reveals. Gathering this data on your own is a daunting task, and without effective guidance on how to address any issues your organization uncovers, there’s a good chance all that effort will go to waste.
Thankfully, your organization can address both of these key benchmarking aspects at once with the Achievers Employee Experience Platform. It includes Achievers Listen, a science-backed employee engagement platform that empowers HR and other people leaders with the ability to collect, analyze, and collaboratively act on real-time information from your entire workforce. Combined with Achievers Recognize, a recognition and rewards platform that gives your company a firm grasp on the main lever of employee engagement, your business will have everything it needs to maximize the value of internal benchmarking and develop an attractive database that could entice industry peers to share their own valuable data.
Try a free demo of the Achievers Employee Experience Platform today and see how it can support HR benchmarking at your company.