Is Benchmarking a Worthwhile Exercise for HR?
This article was originally published on LinkedIn on January 6, 2017.
I’ll start this piece by saying that I am a bit biased on the topic, having started my career at the Saratoga Institute (now known as PwC Saratoga) – the pioneer and leading standard in HR Benchmarking. However, I’ll also say that over time, I have come to see that benchmarks have “their time and place.” Here are some of the lessons I’ve learned along the way as I’ve helped organizations leverage benchmarks for various projects – from ad-hoc requests/questions to comprehensive HR Transformations:
1. Not all benchmarks are created equally – the truth of the matter is that some metrics lend themselves for better benchmarking than others. Even within our 200+ metric Saratoga benchmarking database, I believe that some measures are better suited for comparison than others. For example, metrics around Turnover, Spans of Control, HR Spend/Ratios, and Recruitment are pretty comparable across organizations and so make for stronger “benchmarkability.” However, when you look at metrics around High Potentials, Retirement Risk, and Time to Full Productivity (as a few examples) – there is larger variability in how organizations track these measures and therefore require more caution as you compare with other organizations.
2. Standards, Standards, Standards – It’s important to assess the level of detail in the definitions used to collect the data. If the definition leaves too much room for interpretation, chances are you aren’t comparing a true “apples to apples” with others in the benchmark.
3. Don’t forget your own internal benchmark – I often encourage my clients to utilize two benchmarks – an external benchmark and an internal one. The internal benchmark may be based on time period trends (e.g., quarter to quarter) or it may be based on comparisons across relevant groups/divisions within the organization. The internal comparison is really important because it shows progress for your own organization and also illustrates realistic, future potential movement in the results– which leads me to my next point…
4. An external benchmark is not always the target – Clients may want to use the benchmark as the goal, but that’s not always ideal and can lead to undesired behaviors. As you set targets, it’s important to consider both the external benchmark and the internal trend. I had a client once who was looking to shorten the time to fill positions for a specific role, where the median benchmark was 46 days. However, their own internal trend over the last three years had been around 68 days. Having the external benchmark gave an indication of what the market was doing, but the internal trend provided a dose of reality in terms of what was possible for them. Thus, as they set targets, they used a target of 60 vs. 46 in the following year.
5. If you’re waiting for the perfect peer group - you may be waiting forever – It may be nearly impossible to find benchmarks for a very specific set of peer companies. Thus, it may require realigning expectations a bit around what a “strong or solid enough” peer group might entail. For example, if you’re looking at turnover, benchmarking against your geographic area may be more important than your specific industry because that is where you compete for talent.
6. Do it at least once a year – It’s a healthy check to assess how you’re performing in comparison to the industry on an annual basis. For the majority of metrics (except for maybe some recruitment and turnover metrics), most benchmarks don’t move that drastically on a more frequent basis.
PwC Saratoga is a global leader in workforce measurement, having been in the field for over 30 years. AD and PwC Saratoga have partnered together to offer a special benchmarking program for AD members. To learn more about PwC Saratoga benchmarking program, visit their website or reach out to Talia Rozensher at talia.rozensher@pwc.com or (267) 330-2561.