One of the tools HR can employ to improve its ability to develop programs and initiatives that benefit the bottom line is benchmarking.
Unfortunately, there are a number of misconceptions about the practice.
Measuring isn’t benchmarking
Measuring and benchmarking are often confused as being synonymous, they are not. Measurement is a component of benchmarking. Benchmarking involves comparing a function’s outcomes, systems, programs, or products with those of other organizations. Numbers are used to facilitate this comparison.
Surveying isn’t benchmarking, either
Surveying (and the making of comparisons associated with surveying) is also only one component of benchmarking. Organizations conduct informal surveys of other companies’ practices all the time. Most organizations also regularly participate in formal surveys, the most common concerning employee compensation. The benchmarking methodology is much more involved than the survey process. In addition to the significant measurement component, benchmarking involves more detailed comparisons.
Comparisons
Don’t get me wrong. Benchmarking with the “best” is a fine thing. The more innovative and effective a process or product is, everything else being equal, the larger the improvement that can be expected in performance if the organization is able to implement something similar.
However, you don’t have to compare with the “best” when you benchmark. These companies can also be difficult to identify, and a best practice in one organization might be totally inappropriate for another.
It can also be difficult, quite frankly, to access “first hand” information from so-called “best practice” companies. Sure, there are a lot of books and articles available, some at fairly significant cost, but only so much can be learned from written descriptions — the reality is almost never as good as the description.
Best practice companies get a lot of requests to enter into benchmarking partnerships. HR executives and mangers from these companies are constantly bombarded with inquires from well-intentioned, often desperate, HR professionals. Requests for advice, presentations, site visits — you name it. Eventually a time will come when they must limit the requests they can realistically address.
What, exactly, does a best practice company have to gain when it is asked to benchmark with a firm significantly below the “benchmark” level on the performance scale? With the volume of work passing across the desks of HR professionals increasing every day, another benchmarking request may not receive very high priority.
The benchmarking methodology, followed correctly, can yield tremendous returns to any human resources function willing to take it on — without making one comparison to a“best-in-class” practice. In addition to the benefits that accrue to HR from the design of corporately aligned HR measurement systems (an integral component of the benchmarking process), the greatest value from benchmarking will come from the contacts and network of “partner” HR functions developed during the benchmarking process, as well as the improvements in processes, products and services that these associations will allow the organization to make.
The HR functions an organization compares with don’t have to be “best-in-class.” They should, however, have a familiarity with your organization’s issues and challenges, a desire to benchmark and “partner” with you, and an interest in innovation and developing original approaches to HR process, product or service opportunities. True, implementing a “best-in-class” process may allow a huge “leap” in effectiveness or performance, but a partner with such a process may not be easily identifiable or accessible, or the process not suitable or appropriate for your organization. Incremental improvements, like those that can potentially be identified from organizations closer to your own activity or performance levels, may be a better alternative.
Cost
Time: The largest single cost component of the benchmarking program will likely be “time.” Another axiom: time is money. Time to sell/promote the benchmarking idea. Time to do research. Time to identify and convince benchmarking partners to participate. Time to design and develop the benchmarking program and train your staff (survey design, design of spreadsheets or databases for storing and collecting benchmarking data). Time involved in collection and analyzing the data, writing the reports. Time involved in comparing your process, product or service to those of your partner organizations, or other external benchmarks. Time involved in implementing changes and monitoring the results. Unless your HR function has nothing else to do (unlikely, to say the least), much of the time the HR staff spends on benchmarking activities will be time taken away from other activities or initiatives.
Expertise: The HR function needs to be knowledgeable and skilled in measurement techniques and the benchmarking process in order to implement a successful benchmarking program. This means acquiring benchmarking expertise. There is, however, usually a cost associated with acquiring expertise — in anything. Benchmarking is no exception.
At the other extreme, the organization relies totally on its own staff to design and implement the benchmarking program.
Outside experts can be expensive depending upon the scope of their involvement and fee structure. On the other hand, to leave the design and development of the program to staff with no expertise in the area is setting the program up to fail. Of course one of the things organizations pay outside experts for, in addition to expertise, is time. Time the outside expert spends on the program is time that the organization’s staff can spend on other HR initiatives. In practical terms, organizations that are tightly budgeted on staff head-count, but have extra money to spend on resource material consulting fees, may wish to consider some form of outside help.
Sundry expenses: In the preparation phase, costs can include the purchase of software applications and other products designed to facilitate measurement and benchmarking. During the data collection stage, for example, where a survey will be used to collect the data, common costs include photocopying (of survey instruments), and postage (if the survey is being mailed). In the qualitative phase, costs can include travel expenses associated with visiting other organizations to conduct in-depth interviews of their policies and practices.
Limit the scope: The first stage of the benchmarking process involves the identification of benchmarking opportunities. Part of that process involves focusing your efforts on as small a number of clearly defined opportunities as possible. Benchmarking costs are limited accordingly.
Use existing measurement, best practices: Although it’s not an approach I recommend, some organizations choose not to actively identify and maintain relationships with benchmarking partners, instead preferring to seek out already existing benchmarking data applicable to the object of benchmarking. There is plenty of quantitative data available and best practices information that can be used.
Be certain the program succeeds
Most important, the cost of benchmarking should always be considered in relation to the potential payoff to the organization in improved financial, customer or employee results. That’s why the best answer to the “cost argument” is to put measures in place to ensure that the organization prepares well, follows through the entire benchmarking process and implements a successful improvement.
Colin Dawes is a human resources manager with the University Health Network in Toronto. This article is an edited excerpt from the Carswell publication Best Practices: Human Resources Benchmarking. For more information contact 1-800-387-5164 or visit www.carswell.com.
Unfortunately, there are a number of misconceptions about the practice.
Measuring isn’t benchmarking
Measuring and benchmarking are often confused as being synonymous, they are not. Measurement is a component of benchmarking. Benchmarking involves comparing a function’s outcomes, systems, programs, or products with those of other organizations. Numbers are used to facilitate this comparison.
Surveying isn’t benchmarking, either
Surveying (and the making of comparisons associated with surveying) is also only one component of benchmarking. Organizations conduct informal surveys of other companies’ practices all the time. Most organizations also regularly participate in formal surveys, the most common concerning employee compensation. The benchmarking methodology is much more involved than the survey process. In addition to the significant measurement component, benchmarking involves more detailed comparisons.
Comparisons
Don’t get me wrong. Benchmarking with the “best” is a fine thing. The more innovative and effective a process or product is, everything else being equal, the larger the improvement that can be expected in performance if the organization is able to implement something similar.
However, you don’t have to compare with the “best” when you benchmark. These companies can also be difficult to identify, and a best practice in one organization might be totally inappropriate for another.
It can also be difficult, quite frankly, to access “first hand” information from so-called “best practice” companies. Sure, there are a lot of books and articles available, some at fairly significant cost, but only so much can be learned from written descriptions — the reality is almost never as good as the description.
Best practice companies get a lot of requests to enter into benchmarking partnerships. HR executives and mangers from these companies are constantly bombarded with inquires from well-intentioned, often desperate, HR professionals. Requests for advice, presentations, site visits — you name it. Eventually a time will come when they must limit the requests they can realistically address.
What, exactly, does a best practice company have to gain when it is asked to benchmark with a firm significantly below the “benchmark” level on the performance scale? With the volume of work passing across the desks of HR professionals increasing every day, another benchmarking request may not receive very high priority.
The benchmarking methodology, followed correctly, can yield tremendous returns to any human resources function willing to take it on — without making one comparison to a“best-in-class” practice. In addition to the benefits that accrue to HR from the design of corporately aligned HR measurement systems (an integral component of the benchmarking process), the greatest value from benchmarking will come from the contacts and network of “partner” HR functions developed during the benchmarking process, as well as the improvements in processes, products and services that these associations will allow the organization to make.
The HR functions an organization compares with don’t have to be “best-in-class.” They should, however, have a familiarity with your organization’s issues and challenges, a desire to benchmark and “partner” with you, and an interest in innovation and developing original approaches to HR process, product or service opportunities. True, implementing a “best-in-class” process may allow a huge “leap” in effectiveness or performance, but a partner with such a process may not be easily identifiable or accessible, or the process not suitable or appropriate for your organization. Incremental improvements, like those that can potentially be identified from organizations closer to your own activity or performance levels, may be a better alternative.
Cost
Time: The largest single cost component of the benchmarking program will likely be “time.” Another axiom: time is money. Time to sell/promote the benchmarking idea. Time to do research. Time to identify and convince benchmarking partners to participate. Time to design and develop the benchmarking program and train your staff (survey design, design of spreadsheets or databases for storing and collecting benchmarking data). Time involved in collection and analyzing the data, writing the reports. Time involved in comparing your process, product or service to those of your partner organizations, or other external benchmarks. Time involved in implementing changes and monitoring the results. Unless your HR function has nothing else to do (unlikely, to say the least), much of the time the HR staff spends on benchmarking activities will be time taken away from other activities or initiatives.
Expertise: The HR function needs to be knowledgeable and skilled in measurement techniques and the benchmarking process in order to implement a successful benchmarking program. This means acquiring benchmarking expertise. There is, however, usually a cost associated with acquiring expertise — in anything. Benchmarking is no exception.
At the other extreme, the organization relies totally on its own staff to design and implement the benchmarking program.
Outside experts can be expensive depending upon the scope of their involvement and fee structure. On the other hand, to leave the design and development of the program to staff with no expertise in the area is setting the program up to fail. Of course one of the things organizations pay outside experts for, in addition to expertise, is time. Time the outside expert spends on the program is time that the organization’s staff can spend on other HR initiatives. In practical terms, organizations that are tightly budgeted on staff head-count, but have extra money to spend on resource material consulting fees, may wish to consider some form of outside help.
Sundry expenses: In the preparation phase, costs can include the purchase of software applications and other products designed to facilitate measurement and benchmarking. During the data collection stage, for example, where a survey will be used to collect the data, common costs include photocopying (of survey instruments), and postage (if the survey is being mailed). In the qualitative phase, costs can include travel expenses associated with visiting other organizations to conduct in-depth interviews of their policies and practices.
Limit the scope: The first stage of the benchmarking process involves the identification of benchmarking opportunities. Part of that process involves focusing your efforts on as small a number of clearly defined opportunities as possible. Benchmarking costs are limited accordingly.
Use existing measurement, best practices: Although it’s not an approach I recommend, some organizations choose not to actively identify and maintain relationships with benchmarking partners, instead preferring to seek out already existing benchmarking data applicable to the object of benchmarking. There is plenty of quantitative data available and best practices information that can be used.
Be certain the program succeeds
Most important, the cost of benchmarking should always be considered in relation to the potential payoff to the organization in improved financial, customer or employee results. That’s why the best answer to the “cost argument” is to put measures in place to ensure that the organization prepares well, follows through the entire benchmarking process and implements a successful improvement.
Colin Dawes is a human resources manager with the University Health Network in Toronto. This article is an edited excerpt from the Carswell publication Best Practices: Human Resources Benchmarking. For more information contact 1-800-387-5164 or visit www.carswell.com.
