The Time is Now for True Community-Based HR Benchmarking

"Why" is the watchword in HR benchmarking.  Current methodologies provide anonymous data and basic key performance indicators (KPIs) in surveys and subscriber databases to help you determine how "good" (or "bad") you are in comparison to others, but they don’t provide insight into why others are operating more efficiently and effectively.  For example, a benchmark report may indicate a certain company recruited for a specific type of mid-management position in X number of days.  But you don’t have access to the critical insights into why the cited company was able to recruit more quickly than you.

With a true, community-oriented approach to HR benchmarking, you have the ability to meet directly with people from peer companies and ask, "How did you reduce recruitment time for XYZ role?" A community approach enables the combination of qualitative and quantitative data and insights.

So what characterizes community-based best practices in HR benchmarking? Key components include:

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Comprehensive Content
Benchmarking personnel management processes – such as time management, payroll and pensions administration – is relatively straightforward as they can be quantitatively measured.  But talent management, consisting of "soft stuff" processes including personnel development, foreign delegation and recruiting, is much more challenging to define and measure.  But its measurement is crucial if you are to gain a holistic comparative view.  With an interactive community approach, you can gather the requisite qualitative data to answer the "why" question and accordingly improve your processes.

Hypotheses-Based Learning 
This is a significant enabler of "why" answers.  Here, functional HR experts gather for deep-dive brainstorming, and emerge with hypotheses-based excellence criteria.  This criteria helps you define quantitative measures and collect relevant KPIs on, for example, world-class recruiting practices.  You are then armed with data to conduct a correlation analysis between the KPIs and influencing factors to help you rise into a higher quartile.

Feasible KPI Definitions
The reality is that some HR "objects" cannot be feasibly measured.  For example, many HR managers are enamored with a "Human Capital Index".  But this attempt at combining the effectiveness and efficiencies of HR management into a highly sophisticated quantitative number simply isn’t measurable.  We recommend you remove immeasurable components from benchmarking activities, and instead focus on KPIs with an optimized effort-to-value ratio, including employees per HR FTE, output per HR FTE, function-specific labor costs, and total cost of HR per output.

Integration of HR IT and HR Service Scope as Relevant Influencing Factors 
While the HR processes companies run are relatively standard, there is a huge variance in the level of support different organizations provide for their HR services.  Thus, it’s critical to learn whether comparative companies are HR-minded or not in terms of their portfolio scope.  Further, there is a large gap between companies that strongly integrate and automate their HR processes and those that don’t.  Those with a "yesterday approach" to HR IT are unable to integrate workflow or collect qualitative data on employees.  Here, benchmarking helps you establish whether you are best-in-class or a "yesterday" company in terms of HR IT.

This article first appeared in SSON's May 2008 HR Service Delivery eAlert. For information on how to register for this targeted e-Alert click here