What is HR benchmarking?

Benchmarking is the process of comparing similar characteristics between businesses, identifying the most successful practices, and integrating them into the company procedure. After collecting data for comparison purposes, HR professionals can better determine the benchmark– the target that they want to shoot for.  

Companies usually benchmark against similar competitors of the same size or industry, intending to incorporate better practices into their routines.

Why should HR leaders care about benchmarking?

HR professionals can reap valuable information from benchmarking. They can use benchmarking to identify the gap between techniques in their own company, and similar practices in more successful companies. Through analyzing the reasons for these gaps, HR leaders can determine which practices and policies are effective, and which need adjustment. Studying competing company practices can also keep HR leaders informed regarding the constantly changing landscape of customer demands. HR leaders can use benchmarking to improve:

  • Recruitment
  • Engagement
  • Retention
  • Training
  • Compensation planning
  • Budgeting
  • Turnover rate

What can HR leaders do to ensure effective benchmarking?

To implement impactful benchmarking, HR can:

  • Define the focus area. HR leaders can collaborate with colleagues to pinpoint the issue in need of improvement, and formulate a question that the benchmarking process will address. For example, a company looking to hire in house brand marketing designers could ask: what compensation can we offer that fits the company budget and needs, as well as attracts and retains talent? 
  • Identify the measurements. Difference metrics allow HR leaders to compare specific aspects of their company with those of other companies. HR leaders can measure, for instance:
    • Quality of hire
    • Turnover rate
    • Quality of work
    • Market index 
    • Average compensation per employee
  • Collect data. Professional HR leaders engage in extensive, in-depth research to find external information that accurately corresponds to their measurements. They often purchase benchmarking reports that save them from having to sift through irrelevant information and provide accurate, pertinent data.
  • Study the gaps. Comparing internal and external metrics, HR leaders should ask what their organization can do to achieve the success that other companies have reached. Based on the data they collect, HR leaders can implement changes that align with company strategy. Perhaps, for instance, a company prides itself on high base salaries. So, they decide to decrease funding for employee wellness programs and increase base pay. This way, the employer can offer a more competitive edge for designers’ compensation plans, while maintaining alignment with the high base salary strategy.
  • Design a plan to implement the changes. HR leaders and colleagues can collaborate to implement an executive-backed plan that achieves the designated goals. Creating a detailed plan that meshes with the company culture can increase the chances that employees will readily accept the new changes. 
  • Analyze the long term results. After a specified period, HR professionals should follow up to ensure that the new changes are leading to positive results, and then provide a detailed report to distribute to collaborators.

How does benchmarking improve company culture?

Benchmarking is an ongoing process of company growth and advancement. Using benchmarking to enhance the employee experience and increase compensation, retention, and job satisfaction can lead to greater employee well-being and in turn a healthier company culture.