HR
benchmarking – measuring and comparing HR policies and practices with those of
other organisations
Why
is it important?
By
measuring areas such as recruitment and retention, reward and performance
management and showing how these compare with other companies, the function has
tangible metrics to demonstrate its performance to the board. A recent report,
Measuring Human Capital, by Personnel Today and Deloitte & Touche, found
that more than 45 per cent of respondents use some form of benchmarking to measure
human capital.
Is
benchmarking the same as HR metrics or the balanced scorecard?
All
can be used to measure the performance of the workforce and HR’s impact but all
use different approaches. The balanced scorecard, for instance, works on a tick
box approach, while metrics make use of a set of indicators to measure
performance. HR benchmarking is probably the most popular because any company
of any size can do it.
So
what and how do I benchmark HR?
You
choose – but avoid benchmarking everything in sight because it will dilute your
focus. A recruitment benchmarking survey will measure things like cost, time
and speed of hiring a candidate; a training benchmarking exercise could be as
simple as counting the number of training days per employee. Other popular
areas for benchmarking include measuring retention rates or absenteeism.
Ideally,
statistics relating to these areas are extracted automatically from an HR
system, but even the latest versions of major software applications can’t
always manage this. Sometimes data may have to be drawn manually.
Once
the data has been collected, you need something to compare it with, and
databases containing metrics from a range of organisations are available. The
Saratoga Institute for instance is the worldwide leader in HR benchmarking and
has introduced its New Workforce Diagnostic System which claims to ‘map your
corporate DNA’.
Make
sure you choose the right kind of organisations to compare yourself with or you
could get a completely skewed picture of your performance. Many HR
professionals seek to achieve ‘world-class standards’ and while it’s admirable
to aim high, you must be realistic in picking comparators. Some sectors have
formed their own grouping for benchmarking, such as local government, police
forces, higher education and legal firms, with each having key areas for
benchmarking that address the issues they face.
Benchmarking
internally from department to department can also be beneficial. Your best
performing units may outperform the corporate average and just upgrading
everyone internally to this standard may help improve performance. It also
meets with less resistance from managers.
Whether
it’s internal or external though, it’s important not to see HR benchmarking as
a solution – it measures performance but doesn’t give answers as to why your
retention may be lower than that of a competitor.
So
there must be strategies behind the benchmarking that enable you to, at the
very least, use benchmarking as a ‘where you are now’ indicator on which to
build.
The
following is a checklist of the key points to bear in mind.
–
Assess your data collection capabilities and revise if necessary
–
Make sure you use appropriate comparators
–
Find out about any benchmarking groupings particular to your sector
–
Remember that benchmarking in isolation won’t make HR strategic or innovative
and creative
–
Don’t make assumptions about statistics and ratios
Where
can I get more info?
Books
The
HR Healthcheck: Benchmarking HRM Practice Across the UK and Europe, authors
include Chris Brewster and Elaine Farndale
The
HR Scorecard: Linking People, Strategy and Performance by David Ulrich, Mark
Huselid and Brian Becker
Websites
www.saratogainstitute.com – The
organisation which claims to have invented HR benchmarking.
www.ipma-hr.org – Offers an interactive
database where users can customise benchmarking data.
www.theworkfoundation.co.uk – Has a high number of reports and books on
the subject.
www.ep-first.com – US site where you can
download or buy a hardcopy of the European HR Index Effectiveness
Report.
www.watsonwyatt.com – Lots of free
reports and documents.
Reports
Measuring
Human Capital Value by Personnel Today and Deloitte & Touche.
www.deloitte.com
By
Sue Weekes
Case
study Greig Aitken on benchmarking at the Royal Bank of Scotland
Greig
Aitken heads up the HR strategy and planning function of the Royal Bank of
Scotland Group, where his responsibilities include human capital measurement, strategy
and HR communications. He is steering a major human capital measurement
initiative across the group.
Why
did you decide to undertake HR benchmarking at RBSG?
We
recognised that benchmarking would be a key contributor to our broader human
capital measurement strategy, which allows us to measure the effectiveness and
impact of the Group’s investment in people and help inform our HR strategy.
What
functions do you benchmark?
Since
2000, we have been pulling key people data for more than 100,000 staff across
the world into one data warehouse. This information is used to track metrics
such as headcount, turnover and absence, and enables us to segment the data
into meaningful groups and map it against other HR and business information.
Where
do you source your comparative data?
We
work with benchmarking and research organisations in North America and Europe
and have established separate benchmarking norms for each of our business units.
Has
it helped improve HR performance?
It
helps HR baseline its activities and inform staff how HR is performing relative
to its peers.
What
three tips would you give an HR professional considering an HR benchmarking
exercise?n Spend time understanding what the business issue is, what you need
to measure, what inputs you need, and what format your outputs need to be
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–
Benchmarking data varies in quality so select your external comparative data
sources carefully, and make sure you are comparing ‘apples with apples’ as
individual definitions vary greatly. Identify key, high impact measures and
work on these first
–
Be aware that benchmarking measures past performance. If your aim is to use
benchmarking as predictive or diagnostic tools, you need to think about
integrating them into a broader human capital measurement approach that
includes more predictive techniques
