Benchmarking is a business process that involves a systematic assessment of the competitor’s best practices in terms of cost, time, and quality, and further using the findings of the assessment as the basis for improving performance through such ways as making processes more efficient, cheaper, and faster. This paper discusses the benefits and limitations of benchmarking human resource management, how to select comparison organizations, and whether an organization should consider obtaining the services of a benchmarking organization.
One of the most important benefits of benchmarking for HR is that it helps reveal employee performance gaps and how such gaps can be closed. When used to assess employee performance therefore, benchmarking can be an effective tool for improving performance. Benchmarking also helps an organization to assess how it is delivering HR practices and in so doing identify areas that need improvement. Further to this, benchmarking for HR can be used as a means to creating a continuous improvement mentality within an organization (Hiltrop & Despres, 1994). In this regard, benchmarking for HR provides motivation to change among employees.
Benchmarking for HR further provides an opportunity for reviewing HR objectives. Through benchmarking, HR is able to compare its objectives with those of the competitor. Allowing employees to access benchmarking data on, for instance, the reward statements of other companies in the industry can serve to motivate them especially when an organization provides better rewards for its benefits. Providing this kind of data assures employees that the organization is offering the perfect benefits for them. This promotes not only improved productivity but also job retention.
A major limitation of benchmarking for HR is that although it enables an organization to assess the HR standards reached by the competitor, it hardly reflects on the circumstances under which these standards were attained. In order to achieve a high standard of employee engagement for instance, the competitor may have been compelled to temporarily adjust organizational goals and visions. When another organization benchmarks such standards, there is the risk that trying to adopt them may lead to extremely flawed standards. Another limitation of benchmarking for HR is that it may lead to complacency and arrogance of the HR once the department attains the standards of the competitor. While benchmarking for HR may help an organization become the industry leader in terms of HR standards, there is always the danger of complacency even when there is room for much more improvement. Overall, the benefits of benchmarking for HR outweigh the limitations. According to the findings of the 2008 Global Benchmarking Network survey, most organizations regard benchmarking as the most effective performance analysis tool.
When selecting a comparison organization, it is important to first identify opportunities and prioritize. HR should evaluate the organization’s current processes and identify those that are critical to the department’s success. A top down approach may be used to select these processes. This is then followed by the actual selection of the comparison organization. An important factor to consider at this point is that some organizations, especially direct competitors, may be not be readily available for this process. Further to this, even some indirect competitors may be unwilling to release some of their data. Several organizations should be identified and information from them gathered. It is from this pool of organizations that the most suitable organization is chosen. The selected organization should not only be easily accessible but also have comparable processes.
Conclusively, benchmarking for HR can be beneficial when used in accordance to the organization vision and goals. It is critical however to acknowledge that benchmarking can only be regarded as a means to end in the sense that upon comparing with the industry’s best, HR should ensure that conclusions drawn from the benchmarking process are implemented. An organization may also consider obtaining the services of a benchmarking organization. One of the benefits of using the services of these organizations is that an organization can maximize on the productivity of the process in a cost-effective manner.
Hiltrop, J. & Despres, C. (1994). Benchmarking the performance of Human Resource Management. Long Range Planning, 27(6): 43-57.
The Hackett Group. (2015). About the Hackett Group. Retrieved from http://www.thehackettgroup.com/about/