Effective benchmarking can reveal the dramatic impact a well-run HR department can have on a company’s staff turnover and profitability.
One successful chief executive, whose company has benefited from having its HR policies and performance analysed, said, “I now know that our employee turnover has fallen from almost 16 per cent overall to 13.5 per cent in the past six months - achieved in an area of low unemployment and against a background of difficult recruitment conditions.
“The saving direct to the bottom line for this year alone will be, we reckon, equivalent to at least £250,000.”
This quote represented the first stage in the main board’s recognition that the HR function was adding value.
It has progressed to explore and develop a range of personnel initiatives that went on to reduce both absenteeism and grievances.
The HR manager was able to identify areas of weakness by checking against national and industry benchmarking databases.
This was achieved by starting to measure, record and compare issues such as turnover, recruitment time and cost, absenteeism, disciplinary cases and grievances, training time and cost.
More importantly, she was able to identify internal comparative data and the underlying difficulties with individual areas of the company, structural issues and management style.
Suggesting solutions on a site-by-site and departmental basis, she gained rapid acceptance of some quite radical and valuable new HR procedures.
The power of the straightforward comparative data gathered, which could be seen to relate to corporate profitability, was immense. Access was gained to departments that for years had ploughed their own furrows and which had virtually ignored all but the most pressing HR requirements.
Obviously, not all managers feel comfortable with the measurement and benchmarking process. By definition, 50 per cent or more will be at or below the median data-line, so the study must not be seen as simply a scoring process.
The greatest likelihood of success will be achieved by the application of subtle change management skills.
By Derek Burn, partner, MCG