Benchmarking

Generic Benchmarking Term

The dictionary term for Benchmarking is the process where you compare your process with that of a better process and try to improve the standard of the process to be followed to improve quality of the system, product, services etc. *

Benchmarking is generally used by organisations as a process in relation to their performance management and strategic managment plans to evaluate how effective their processess, with the aim of increasing productivity or employee performance.

It is widely considered that benchmarking should not be considered as a one-off but as a continous ongoing process to ensure that organisations are complying and improving these practises. Generally, when most people think of benchmarking, these two main types of benchmarking are listed: Performance and Best Practice Benchmarking.

Performance benchmarking - This involves comparing the performance levels of organisations for a specific process. This information can then be used for identifying opportunities for improvement and/or setting performance targets. The industry benchmark from which organisations compare themselves against usually come from industry recognised organisations or leaders in that field of expertise.

Best practice benchmarking - This is where organisations search for and study other organisations that are high performers in particular areas of interest.

* (Definition taken from Free Wikipedia)

HR Benchmarking

HR Benchmarking is a process of collecting data on various aspects of HRM systems from either world class or highly comparable firms or large numbers of firms worldwide, using the data to evaulate the performance of your own firm, and thereby identify areas that need improvement.

In general, there are two types of benchmarking suitable for HR:

• Benchmarking HR processes and or practices
• Benchmarking HR outcome data

Benchmarking HR Processes

From a strategic HRM perspective, benchmarking at the level of the HR best practices or processess makes little sense. Even for competing firms in the same industry, as you may not know whether they are using the same practices or processess to manage their human resources and will be unlikely to share this information with competing firms. This said, this form of benchmarking may at least be confidence-building or serve as a source of inspiration to improve. Benchmarking HR processess can also tell you if your firm is at least doing enough of the right things to achieve competitive parity when it comes to people management. Benchmarking HR processes or practices tends to be done against a small number of organisations and using qualitative approaches such as site visits and relationship building.

Benchmarking HR Outcomes

Irrespective of the value of benchmarking HR processes, knowing how competitive your firm is or how efficient it is on the HR metrics important in your industry will tell you if there is room for improvement and how much has to be achieved to remain competitively viable.

Comparing your HR performance metrics such as employee turn-over, overtime usage, satisfaction levels with similiar or competing firms gives additonal meaning to these numbers. HR metrics can be purchased, either from specialist consulting firms or through the memberhsip of benchmarking clubs rather than doing this yourself. However, many types of HR data can be benchmarked, for example:

• Voluntary turnover rate per annum
• Unexcused days of abseentism per employee
• OH&S incident rate per 100 FTE staff per annum
• Average payroll expense per 100 FTS staff per annum
• Cost of recruitment per recruit
• The ratio of HR Staff numbers per 100 FTE employees
• Exit costs

This information shown above has been taken from the HRINZ Business Peformance Course, written and presented by Keith Macky on the behalf of HRINZ.