What Is HR Benchmarking? A Comprehensive Guide

This blog post was previously published on www.whitecollars.net

What is HR benchmarking?

HR benchmarking is a strategic process that involves comparing various business metrics either across different organizations or within the same company. This practice is aimed at assessing how well a company is performing in its industry, identifying areas that need improvement, and determining best practices for achieving organizational goals. HR benchmarking relies on both quantitative and qualitative data to evaluate the success of HR processes.

HR benchmarking can be conducted at multiple levels, including the industry, organization, department, and individual role levels. After collecting relevant data, the ultimate goal is to identify and implement effective practices and processes to drive organizational improvement.

Types of HR Benchmarking

1- Internal Benchmarking

This type depends on the internal data available in your organization. Internal benchmarking is conducted by comparing departments, teams, and roles with each other to measure the best-performing side. HR would usually collect all data and reach an average KPI to be your standard in the organization.

2- External Benchmarking

External benchmarking compares your organization’s data with other organizations in the same industry. It indicates your performance across competitors. Before preparing the HR strategy, you need to find and analyze these metrics to set milestones your HR needs to achieve throughout the year.

If you are below the benchmark, you can find areas of improvement that help achieve the average benchmarking. In case your organization is above the benchmarking numbers, your strategy should aim at maintaining these standards.

The main 4 HR benchmarking metrics

When implementing HR benchmarking, it’s essential to focus on relevant metrics. While specific metrics may vary depending on business needs, some are universally important:

1- Absence Rate

Every organization seeks to offer their employees the best environment so they can carry out their tasks while feeling satisfied. Your organization should aim at balancing work-life by providing all the employees with the right to have vacations.

That being said, the absence rate is an important measure to determine if your employees follow a standard across organizations. Calculating absenteeism can help you calculate your employees' return on investment and productivity. Your HR partner can track and report for you the average rate of absence across industries so you can analyze this data.

?

2- Cost Per Recruitment

This metric calculates the total hiring costs such as agency fees, traveling costs, relocation costs, and employee referral bonuses. Optimizing these costs to the benchmark across other organizations can reduce the overall expenses of the organization and increase profit.

Maintaining a long-term work relationship with a staffing agency will keep all these costs under the benchmark as they will use best practices to source the best talents on your behalf at a lower price than managing to recruit and source candidates in-house.

3- Full-Time Equivalent

Full-time equivalent is the number of full-time working hours worked by full-time and part-time employees. This metric unifies the working hours across all different types of employees to measure the effort and productivity of all teams. Breaking the working hours into FTE sets a primary metric to evaluate the efficiency of full-time employees, part-time employees, and contract employees.

FTE gives you insights into employees’ performance to assess their eligibility for bonuses and promotions. Moreover, if your employee is asking for a pay raise, you need to measure their performance and decide whether they are eligible for the raise or not. Accurately measuring the employees’ KPIs will boost their satisfaction through appreciation and encouragement. In turn, this will increase retention rates in your organization and lower the turnover rate.

4- Vacancy Time-to-Fill

I would like to let you know that having open vacancies in your organization requires a timely manner to fill the position with the best talents. A longer time to fill the position means the workflow will be affected and thus the success and achievement of the organization’s goals.

This benchmark measures the skills of your recruiters in sourcing and hiring the right candidate. You need to understand the standard time to fill vacancies to be able to calculate the recruiting fees.

To continue to the Advantages of HR Benchmarking, and the HR Benchmarking Process go to the main blog at Whitecollars