HR benchmarking is more than cost-cutting

HR teams that join benchmarking networks seem to be making a desperate, yet
futile, attempt to justify their existence. It is highly ironic, therefore,
that the growth in the use of HR benchmarking seems to bear a direct
correlation with the huge losses in HR jobs through outsourcing. The main
reason for this is that benchmarking is using the wrong type of measures for
the wrong reasons.

HR databases suffer from two fundamental flaws. Most of the data comprises
meaningless activity measures (for example, number of training days per employee),
which is usually of no great interest to anyone outside the HR department. Yet,
when more business-focused measures are used (profitability per employee, for
instance), the database can show no causal connection to HR activity.

One particular metric that I regard as the worst possible piece of data that
an HR department can collect is the "full-time equivalents per HR
department FTE" ratio. What is better, 100:1 or 50:1? Surely it depends
entirely on what the "1" HR person is actually doing. Would anyone
ever try to gauge how effective a football team may or may not be on the basis
of the players-to-manager ratio?

No doubt accountants are interested in this metric because they regard HR
costs as an overhead, and overheads are usually a one-way street. So even if
your FTE/HR ratio is the best on the database (although I’m still not sure
whether "best" means lowest or highest), there will always be
pressure to reduce HR’s cost.

HR teams that have signed up to these databases seem to have missed the whole
point about benchmarking. It is meant to be a continuous improvement technique,
not just a cost-reduction tool. Improvements can and will come from increasing
resources as well as reducing them.

The only possible good I can see coming from such databases is that if
inefficient and ineffective personnel administrators want to act like turkeys
voting for Christmas, then they get what they deserve. This should free up
precious resources for those HR people involved in more important work.

I would go further and argue that an organisation can never have too many HR
people if they all actually add lots of value – an argument that any board
director can understand and accept as long as they see some convincing

I would not say the same for accountants, however. The sooner we publish
their FTE ratio, the better. Let’s see how they like it.

By Paul Kearns, senior partner, Personnel Works

Comments are closed.