HR benchmarking first hit the scene in 1980, finally giving organizations a way to assess relative performance for important measures like turnover.
For all its benefits, this first wave of benchmarking relied on surveys and other data that was often self-reported and therefore subject to bias. The data was also typically 24 months old, which was “good enough” at a time when commercial markets were more predictable and industries evolved more slowly.
Now, however, organizations are operating in a more fast-paced environment, and data can lose its relevance more quickly. Luckily, vendors have responded by addressing some of the long lag times associated with traditional HR benchmarking, enabling organizations to access more dynamic insights.
Finding the Right Standards for Each Organization
The main benefit of benchmarks is that they help organizations determine whether they are lagging behind their industry peers. For example, you may be aware that you have a 13 percent turnover rate, but you can’t necessarily tell if that’s a problem unless you have something against which to compare it.
Placing your organization’s performance within a broader context can certainly help you spot trouble and determine where you need to focus your energy — but the analysis shouldn’t stop there. Consider how Merck KGaA used people analytics to challenge the global span of control benchmark of 8-10 reports per manager. Merck’s analysis revealed its sales teams could actually achieve higher performance if they were smaller than the global benchmark.
This more strategic approach to HR benchmarks will become more common in the near future. In Visier’s “HR Trends 2020″ report, we predict that people analytics will become even more accessible this year, making it easier for anyone within the organization to test benchmarks against internal workforce data and find the right standards.
This is one example of how HR can use benchmarking data strategically. Your data is unique to your organization and should be leveraged to improve overall objectives. By seeking out ways to test external numbers against your own internal data, you can find the right standards for your organization.
Taking Your Benchmarks Further
Challenging standards is just one way HR can use people analytics and benchmarking data strategically. As the availability and accessibility of benchmarking data increases, HR will also be expected to make benchmarks available in real time.
Gone are the days when benchmarks are only available in PDFs and refreshed on an annual basis. Instead, this data will keep up to be more reflective of the current work environment, while people analytics technology will aggregate and anonymize this information, making it available to everyone who needs it in real time.
Additionally, HR will also be tasked with benchmarking more. More data types mean HR will have the ability to compare and measure the performance of more workforce programs, such as employee skills or diversity and inclusion. Additionally, benchmarks will become more granular. For example, instead of looking at the overall balance of male and female employees, organizations can go deeper into exploring benchmark representation of women in leadership positions.
To improve your HR and business outcomes with HR benchmarking data, follow these tips:
1. Integrate Real-Time Benchmarks Into Your Workflows
The businesses that succeed in the future will be those that react quickly to disruption. By having access to the most current benchmarks possible, you can pivot on plans and proactively make changes without delay.
2. Use Analytics to Test Standards
Measure your organization against industry and market data. Then, use these findings to see how they stack up against your organization’s goals. Strive for continuous improvement by being better than the average and setting new goals informed by data.
3. Consider Making Benchmark Data Accessible and Self-Serve
When everyone has the facts and insights to support their decision-making process, you can create a culture of better decisions that contribute to more strategic outcomes. Understanding what is normal and what is not (at a broader level) can shake people out of insular thinking.
4. Speak the Language of Business
What is guaranteed to get the attention of a CEO? Demonstrating the dollar impact of a problem.
HR needs to be continuously demonstrating how people issues relate to areas like revenue, profit, and shareholder value. Traditional HR benchmarks will tell you whether your percentage of women engineers is lower than industry average, for example, but not how much this is costing you in terms of lost productivity or corporate revenue. With analytics-integrated benchmarking, on the other hand, you can more easily link current diversity comparisons to financial data, tying the numbers back to something the business cares about.
5. Explore the Real Causes of Problems
Traditional benchmarks will help you validate that there is a situation that needs investigating, but you can’t solve a problem unless you know what causes it.
Let’s say your turnover rate is 10 percent above the industry average. The benchmarks indicate a problem, but not a cause. Is it because you cut your training programs? Is it your approach to rewards? Are toxic managers bringing down morale? At this point, you can go back and test your hypotheses one by one by digging through the information in your HRIS, but this can be prohibitively time consuming.
With dynamic benchmarks supported by analytics, more advanced statistical approaches provide a kind of shortcut. For example, a clustering analysis can help you see what is common across people who are resigning and what is common across people who are staying. When the problem is more clearly defined in this way, HR is more likely to get C-suite buy-in for programs.
6. Provide Relevant Insights
An organization’s fate, which is more precarious in a VUCA world, is the primary preoccupation of the C-suite. In the same way that journalists focus on facts that will help the public answer the question “Are we safe?,” HR must focus on facts that will help the CEO answer the question “Is our business safe?”
If HR is to do this, it will need benchmarking data that is timely and granular. For example, seeing up-to-date benchmarks by performance groups will help you determine whether your ability to fill critical roles is at risk. When this is combined with predictive capabilities, you can paint a picture for the future and identify potential red flags that can be addressed immediately.
In a business environment where the only constant is change, it’s important to keep moving the needle on business outcomes. To maintain a concerted effort, always have timely, critical HR benchmarking numbers accessible to key people on a self-service basis.
And just because you are better than the benchmark, don’t assume that’s as good as you can be, particularly when innovation is a major focus for your organization. Like athletes who break new records at the Olympics, successful businesses are continually outperforming the competition and setting new standards.
Caitlin Bigsby is product marketing director at Visier.
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Caitlin Bigsby has more than 20 years of experience in HCM software solutions and has worked with organizations across diverse industries to help them maximize the value of their investments in both their people and their software. As product marketing director at Visier, Caitlin is applying her knowledge about transactional HCM and shining a light on how analytic insight can elevate the strategy of human resources. Prior to Visier, Caitlin held consulting and product management roles at Saba Software and Oracle.