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What Is HR Benchmarking? A Comprehensive Guide

Moustafa Ahmed August 19, 2023 3 min
hr benchmarking and how to rate you employees

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 are 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 the return on investment and productivity of your employees. Your HR partner can track and report for you the average rate of absence across industries so you can analyse this data.

2- Cost Per Recruitment

This metric calculates the total hiring costs such as agency fees, travelling 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 as well.

4- Vacancy Time-to-Fill

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.

Advantages of HR Benchmarking

Find and Adopt Trends

HR benchmarking is executed by collecting qualitative and quantitative data across sectors and other organizations. This requires analyzing and understanding new shifts in HR and comparing them in your company. If your organization lacks these new trends, you need to investigate why they weren’t adopted earlier and how to catch these new trends to stay ahead in the market.

Boost Employees’ Satisfaction and Experience

Encouraging your recruitment agency to improve its work process and sourcing skills through benchmarking metrics will ensure you are offering your employees the best experience. Accordingly, you will retain your employees and ensure they want to achieve their goals to be praised and promoted.

Benchmarking will help you pinpoint wrong practices in the HR cycle and how you fix issues like high turnover rate, low engagement rate, insufficient training period and low life-work balance.

Data-Driven Decisions

Each one’s perception differs according to many inputs and values. If your organization depends on a few employees’ opinions, you will find yourself misjudging a lot of areas in your company.

Business decisions should be formed according to data and reports. Benchmarking offers accurate data which your organization can depend on to assess the performance of HR and how to improve the whole working experience for everyone.

HR Benchmarking Process

  1. Define the Benchmarking Type: Decide whether you’ll be conducting internal or external benchmarking.
  2. Determine the Area to Be Assessed: Clearly specify the HR processes or areas you want to benchmark.
  3. Collect Data: Gather relevant data through research and analysis.
  4. Analyze the Numbers: Carefully examine the collected data to identify trends and insights.
  5. Design a Long-Term Action Plan: Develop a strategic plan based on your findings.
  6. Forecast KPIs: Set Key Performance Indicators (KPIs) to track your progress.

In Conclusion

Partnering with a professional HR agency can facilitate the benchmarking process, ensuring that your organization benefits from industry best practices. Improving HR performance positively impacts all other facets of your business, as recruitment is the source of talent that drives your company forward.

By focusing on HR benchmarking and adopting data-driven practices, your organization can thrive in a competitive business landscape.

Why do we need HR Benchmarking?

Analyzing and understanding new shifts in HR and comparing them in your company, will give you privileges you didn't know they exist

Whitecollars Services
Analyzing and understanding new shifts in HR and comparing them in your company, will give you privileges you didn't know they exist