Measuring HR Value through Benchmarking
Jeannette Swist
Benchmarking is action research - it is the process of identifying, discovering, learning,
understanding, evaluating key performance measures and adapting practices, metrics, and
processes across companies and industries. Benchmarking is one way to initiate and accelerate
the change process, which can lead to "out-of-the-box" thinking, while identifying change and
targets toward improvement. It provides a realistic viewpoint of strengths and limitations,
assessing where the organization is today, what is and is not working, helping identify valueadded improvement opportunities, and insights to help sell the need for change to top
management.
Designing a Benchmark involves a four-step process: plan, research, analyze, and implement.
Step One: Plan
How Do I Determine What to Benchmark?
What is Working, What is Not?
The first phase of Benchmarking involves planning. Part of the planning process calls for an audit
of human resource processes identifying which have been successful and which have not. The
only way to decide what is and is not working is to document, measure and analyze data.
Generally, this is called an audit of human resource practice areas, and can include: Selection and
Placement, Training and Development, Compensation, Benefits, Employee Relations, Health, and
Safety. Some typical measures of the practice areas may include: employee turnover,
absenteeism, accidents, and employee attitudes. More often, organizations fight fires by waiting
until they hear a warning signal, or they require a crisis to find out what is not working.
It is in an organization's best interests to undertake ongoing or periodic audits to measure
effectiveness. A thorough audit consists of looking at HR activities and their impact across three
levels:
Day-to-day operations,
Mid-level impact,
Strategic initiatives implementation
Keep in mind that an audit of only one of these three levels will provide a limited review. The
day-to-day operational audit looks at the interactions, work processes, and standard operating
procedures. A mid-level audit reviews managerial decision-making as it relates to the impact on
issues, service, policies, and practices. For instance, if the review is on implementation of
strategic initiatives, the focus is on adaptation, transition, and change.
An organization shouldn't overlook the importance of accurately assessing where it is today.
Tracking results allows an organization to create its own internal benchmarks.
Identifying Internal Benchmarking Opportunities
Day-to-day Operations: Look at any internal data human resources or a related department
collect. Are there any strengths or limitations in present policies, practices and procedures?
Mid-Level Impact: Conduct interviews with key managers to get ideas on current and desired
human resource practices and effects. Identify the gaps.
Strategic Initiatives: Identify how the strategic plan will affect HR. Conduct interviews with key
managers about how they think the plan will affect them. Consider brainstorming "what if"
scenarios.
Benchmarking provides choices. One choice is to look "outside" at what other organizations are
doing. Often, organizations simply overlook key features or innovative developments already
occurring "within" the organization.
One form of internal benchmarking involves tracking data over time. Some examples would be
tracking turnover, employee attitudes, or customer service over a designated period. An analysis
of the data may show particular trends. Trend data provides a way to gauge progress, make
continuous improvement, and plan for new programs and implementation of strategic initiatives.
Here are two examples:
Conducting Employee and Customer Surveys
Is the company providing effective and efficient service to customers?
It is possible to measure and benchmark results of servicing internal customers, a company's
employees, effectively and efficiently. In a consulting project with a replacement parts
distribution business, an organization survey was administered to employees every other year for
the past ten years. The survey results provided management with information (numbers,
percentages, rankings, norms, and demographic breakouts for both items and categories of
questions) to help them run the organization more effectively. Additionally, the survey results
served as a benchmark. As each survey was completed, its measures became the basis of
comparison. This helped identify progress, trends, and perceived differences in responses to each
question, category of questions, demographic groupings, and locations over time. It's been
interesting to watch top management use the survey results to benchmark themselves against their
previous results. Top management uses the bi-annual survey results as an opportunity to work
toward continuous improvement in employee satisfaction issues. From the results obtained, top
management forecasts a percentage increase and uses the results to see how closely they compare.
Here are some examples of questions that were used in the survey:
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In the near future, I will probably look for a new job.
I clearly understand the vision of my company.
This company sees the value of offering employees a flexible work schedule.
I have a complete understanding of how people advance in this organization.
My contribution towards health insurance is fair.
Participating in the upward appraisal of my supervisor is helpful to our business
relationship.
Knowing employees' opinions and perceptions can help with making informed mid-level policy
and strategic decisions. For example, the client learned two things: (1.) A third of its workforce
is a revolving door; and, (2.) A paradox exists in the company attendance policy and practices,
and causes much upheaval and distress in the organization. There are strategic implications when
a third of the workforce is continually turning - this is currently being looked into. Management
took swift and corrective action on the attendance policy by taking the employees concerns and
requested changes seriously.
It is also possible to measure and benchmark results of servicing customers. Over several years, a
health care provider tried many programs to improve on customer service. These efforts included
various training and recognition programs that were identified as "best practices." In spite of the
effort, customer service survey scores remained in the low to average range. In the past year, a
multidisciplinary committee of employees met and conducted many patient and employee
interviews regarding customer service and developed service standards. These service standards
communicated the necessity of teamwork, focused on the customer experience and were
department specific. As the service standards were rolled out, each department was required to
meet and share relevant survey results, discuss customer service expectations, standards,
measures, commit to actions that will improve/enhance customer service in the department, and
illustrate departmental strengths and developmental areas. Each participant was asked to
contribute to the discussions and write a personal commitment to deliver desired customer
service. In the sessions, customer service and consumers shopping experiences were discussed.
From the sessions conducted, participants learned that service is an important customer driver;
but had a hard time seeing the connection as to how it relates in the competing health care
marketplace. An exciting development is to view the learning process and see knowledgediscovery in action. Harvesting the knowledge can be used as a future benchmark and sharing
information and resources interdepartmentally.
FOCUS on specific, targeted issues and measures
Identifying areas that require benchmarking is important. Time spent thinking about the issue(s)
that needs resolution is vital. Begin this step by concentrating on an analysis of the problem or
opportunity. By writing down responses to each of the following questions, the specific issues to
be targeted will be revealed. Do not attempt to arrive at solutions to the problem/opportunity at
this time.
Figure -1. Focused Inquiry
A focused inquiry provides an in-depth review of the situation. It gives the respondent the
opportunity to think about possible root cause(s) and to think beyond surface symptoms. When
dealing with top management, it is imperative that human resource professionals document their
activities and the results. Data must be in quantifiable numbers, (cost, time, benefits, quantity,
percentages, numbers, dollars, differences, trends, profit/loss).
To successfully use benchmarking, clearly defined measures of competency and performance are
necessary. However, the paradox is that few clearly defined measures exist to benchmark against
in human resources and there are very few “standard approaches”. The benchmarking process can
be time-consuming and information difficult to obtain. Many companies relay on outside help to
contact competitors to get them the information they need in developing a benchmark.
Step Two: Research
Where Do I Find Benchmarking Information?
Begin the research process by reviewing the problem/opportunity statements developed in Step
one. The next step is to identify sources for benchmarking comparisons.
Figure -2. Sources of Information
Begin the research process by identifying and reviewing available resources. A good start would
be checking availability and extent of on-line databases with local libraries, colleges, and
universities. The online databases provide access to a wide variety of resources ranging from
articles in magazines, journals, newspapers, books, reference sources, internet resources,
government publications, conference publications, and transcripts of radio and television news
programs. The research challenge is to focus on a specific issue. For instance, some individuals
will focus too closely on details and miss the bigger picture, while others will conduct a search
that is too broad in scope.
The data collected must be meaningful and useful. Focus on the problem/opportunity statement,
Who, What, Where, and Why. The research will be easier if the problem is approached by
looking for possible solutions instead of trying to find efforts supporting the proposed solution. A
word of caution, hundreds of databases are available. Databases are also selective in their
coverage, and retrieval from them is based on key indexes. In searching for information,
searching several indexes may be necessary. For example, conducting a search on the topic of
employee turnover, will retrieve thousands of sources. It's important to have a focused
problem/opportunity statement. A focused statement identifies the key words, descriptors, and
subjects making for better retrieval of relevant citations. Some examples of a more focused search
statement might include: employee turnover AND salaries, employee turnover AND morale,
employee turnover AND information technology.
The second step in the research process is to network with colleagues through professional and
trade associations, chambers of commerce, etc. Conduct an on-line search on the Internet. Search
engines will help locate a variety of networking opportunities via web pages for professional and
trade associations, and state, federal government, and global resources.
The third step is to consider contacting organizations. Some organizations are willing to share
data and discuss their practices. Start by developing a contact list and tightly focused questions
for each intended contact.
Figure -3. Focused Inquiry Questions
A final note, a Code of Conduct is available on-line at the web site for The International
Benchmarking Clearinghouse of the American Productivity and Quality Center. The Code of
Conduct offers advice on how to engage in best practices studies ethically and effectively.
Step Three: Analyze
What Do I Do With All This Data?
In the practice of benchmarking, no standard methods or criteria exist on identifying and
evaluating practices as the best. When reviewing the data collected, look for real-world examples
of processes, methods, measures of results, activities and techniques that resulted in effective
performance. Focus in on the purpose, and background of the example. Try to differentiate
between nice to know versus need to know information. Do not become too focused on a
particular industry. Different can be useful! Compare the information collected against the twenty
questions posed in the Planning section, specifically the question concerning desired status. Look
for common findings, suggested improvements and gaps in the data collected. Continue to ask
more questions, such as:
When did the change occur?
How did the change support the goals of the organization?
What was the lesson learned?
What quantitative and qualitative data was collected?
How was the data collected?
How was it measured?
What were the results?
Were the measurements calculated differently from the data collected?
What elements fit into the organization's cultural environment?
What changes will the organization need to make to produce improvement?
Be wary of measurement comparisons. It may lead to comparing apples with oranges. Practices
that are effective in one organization will not necessarily work in another. Review the ideas and
modify what might be adaptable.
At this point, begin to develop recommendations, and action plan suggestions. The action plans
should include a time line and identify who will be accountable for what.
Step Four: Implement:
Why Is Implementation Necessary?
Implementing change in order to ensure continuous improvement is necessary. To add value to
the organization, human resources must be willing to take action. This value-added mentality is
evident throughout each of the four steps. The planning step looked at what is and what is not
working by documenting, measuring and analyzing human resource processes. The research step
provided the opportunity to identify benchmarking sources. The third step involved analysis of
real-world examples of processes, methods, and measures of results, activities and techniques that
resulted in effective performance. Benchmarking is key to developing clearly defined measures of
competency and performance in human resources. Numbers lend credibility to the human
resource function. Data supports comparisons, and provides a way to gauge progress. In step four,
communication and action must follow that benchmarking effort.
Implementation Tips and Strategies
Communicate Findings to Top Management
Present findings as bullet points
Display results of data in graphic form (bar charts, pie charts)
Identify opportunities for improvement
Gain commitment and support from top management
Establish goals
Develop measurable objectives (desired outcomes) Example: Within three months after the
implementation, the total number of serious accidents will decrease by 20% over a comparable
period a year earlier.
Achieve "buy-in" by involving key people in the implementation efforts
Implement specific changes
Communicate
Monitor progress
To remain current, redefine benchmarks and review processes every two-three years.
References and Suggested Readings
American Productivity and Quality Center (APQC) [Online] http://www.apqc.org/
Fitz-Enz, J. How to Measure Human Resource Management. New York: McGraw-Hill, 1995.
Gray, David A. (1997) 360 Analysis of How HR Adds Value to an Organization. SHRM/CCH
Survey.
Grossman, Robert J. (2000). Measuring Up. HR Magazine, January, 2000 p.29-35.
Hennessey, H.W. (1998) Simple Descriptive Statistics for HR Manager, SHRM Management
Practices White Paper. Society for Human Resource Management, Alexandria, VA. .
Hennessey, H.W. (1997) Measuring Added Value and Effectiveness, Effective Human Resources
Measurement Techniques: A Handbook for Practitioners. Society for Human Resource
Management, Alexandria, VA.
Phillips, J.J. Accountability in Human Resource Management. Houston, Texas: Gulf Publishing
Company, 1996.
Rothwell, W.J., Prescott, R. K., & Taylor, M.W. Strategic Human Resource Leader. Palo Alto,
CA: Davies-Black Publishing, 1998.
Swist, J. (1997) Benchmarking in Human Resources. SHRM Management Practices White Paper.
Society for Human Resource Management, Alexandria, VA.
The Benchmarking Exchange [Online] http://www.benchnet.com
Glossary
Benchmarking: APQC defines benchmarking as the process of identifying, learning, and
adapting outstanding practices and processes from any organization, anywhere in the world, to
help an organization improve its performance. Benchmarking gathers the tacit knowledge - the
know-how, judgments, and enablers-that explicit knowledge often misses.
Best practice: There is no single "best practice" because best is not best for everyone. Every
organization is different in some way --different missions, cultures, environments, and
technologies. What is meant by "best" are those practices that have been shown to produce
superior results; selected by a systematic process; and judged as exemplary, good, or successfully
demonstrated. Best practices are then adapted to fit a particular organization (APQC).
Continuous process: Ongoing improvement of business processes in terms of quality,
improvement, or cycle time (APQC).
Critical success factors: Quantitative measures for effectiveness, economy, and efficiency;
those few areas where satisfactory performance is essential in order for a business to succeed;
characteristics, conditions, or variables that have a direct influence on a customer's satisfaction
with a specific business process; the set of things that must be done right if a vision is to be
achieved (APCQ).