Benchmarking: why it is time for a change of focus

The
finance, engineering and production parts of a business are relatively easy to
measure and compare. The function and disciplines of HR are, however, built on
shifting sands. Tomorrow’s legislation can cause us to change focus suddenly
and devote the main part of our attention to an activity that was previously
neglected. But the need to be flexible, proactive and equally reactive do not
mean we should  be immune from
measurement and unaccountable for the resources devoted to HR.

Human assets

There is
no doubt that, at one extreme of benchmarking “human assets”, the desire to
measure is in danger of becoming an end in itself. Because of the complexities,
differences, fluidity and regular changes in the people side of the business we
should rely on a few key measures.

In over 20
years of studying HR practices we have seen that some of the most effective and
value-added HR functions have staffing levels approaching a quarter of those in
some ineffective functions – effectiveness measured on an anchored scale. So
there are no “perfect answers” or ideal staffing ratios and balances in
HR. 

So there
are no perfect measures. We must, however, seek out key ratios and statistics
that can be readily collated and easily compared if there is to be any basis
for improvement. Surprisingly few HR functions – less than  30 per cent, according to recent research –
have a clear understanding of how time is allocated to activities and
departments.

Therefore
a straightforward activity analysis should be maintained in HR, whether it is
centralised or devolved. This pro- vides a mechanism for internal measurement
and comparison on a “period-by-period” basis. It is also the first-level data
for any form of external benchmarking. 

Who does
what and at what cost is a powerful measurement. Beyond this, we should measure
those issues that have a financial edge, such as the cost of recruitment and
turnover, absenteeism, disciplinaries, how much line management and external
resource is involved. So if benchmarking is to be cost-effective it is
important to ensure that:

·       
The
whole HR team is involved

·       
The
parameters are agreed and clearly defined.

·       
The
measures are manageable and are seen to be of value to your organisation.

·       
The
target comparator organisations agree your definitions.

·       
The
process has a clear time scale and is managed effectively.

Using an
existing framework with tried and tested parameters is likely to be the most
cost-effective option. But always be sure that the framework and comparator
group can include measures you regard as critical for your organisation .

By Derek
Burn

Partner,
MCG Consulting Group

dab@mcghr.com

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