To grow and succeed in a competitive industry, companies must look carefully at their operations and performance and how they stack up against similar businesses. Benchmarking is a valuable tool that allows companies to compare products, policies, and services. What is benchmarking for human services, exactly? It is a process of measuring and comparing human resources (HR) policies and practices with those of other organizations. By measuring various areas of business, such as recruitment and employee retention, companies can better gauge where they stand compared to their competitors and where they can improve.
Internal benchmarking occurs when a company looks at its inner operations to determine the best practices or policies for conducting a specific task. Ideally, businesses want to complete a job using as few resources as possible. For example, a company may compare the cost and efficiency of shipping products from one warehouse to shipping from a different warehouse in another location. Internal benchmarking can also help businesses better measure the performance of individuals within a workplace to determine if performance is living up to expectations.
While internal benchmarking consists of companies looking within their own business, external benchmarking involves comparing a business and its performance to other companies in the same industry. By comparing your business to similar businesses, you can see where your company falls short and what areas of performance could benefit from improvements. External benchmarking requires some research and effort as businesses must collect benchmarking data from other companies. This may mean having to create alliances with other companies or hunting down public financial filings. This can be tricky and often requires the assistance of an HR benchmarking expert.
Benefits of Benchmarking
Benchmarking is a common practice among companies and organizations in all industries. HR benchmarking is an effective way for businesses to identify opportunities for improvement and to develop a competitive environment that puts their business in front of the competition. It is an excellent way to define success and pinpoint shortcomings, encouraging businesses to find solutions to areas in which they may fall short. This can provide companies with an independent perspective of how they perform compared to others and what performance gaps need to be remedied. In addition, benchmarking puts businesses in the mindset for continuous improvement.
Human resources benchmarking can provide companies with countless benefits, including lowered labor costs. Lowering costs can help businesses save money, which can then be used for other purposes, such as new opportunities that help grow the business. For example, a company may choose to set up a robot phone answering service instead of paying more humans to answer phone calls. This can save a substantial amount of money over time. Benchmarking can also be useful for improving product quality. When businesses are able to compare their products to similar products from other companies, they can see how their goods perform in comparison.
Benchmarking is also an effective way to increase sales and profits. When a business takes advantage of benchmarking to improve its operations, products, and services, they will often find that the process improves their ability to create sales. Combine this with the ability to lower labor costs and businesses can see a major upswing in profits. Benchmarking can be highly useful across all departments within a business and can encourage positive change. However, the benchmarking process does have its limits. While benchmarking can tell you a lot about how your business is performing, business leaders must make the initiative to introduce changes in the workplace.
When going through the benchmarking process, it is important to maintain certain practices to ensure that your results are satisfactory. Before undergoing data collection for the purpose of business comparison, take the time to determine what you are looking to learn from the information you obtain. Having an abundance of research can be useless if you do not know what you are looking for. In addition, choose your sources of comparison wisely. If you are a small business, you do not want to compare your company with one that is much larger and has much more experience.
HR Benchmarking Tips
There are many steps in the HR benchmarking process that must be followed to avoid getting off track with your primary mission. In addition to outlining what you want to learn from the process and what type of businesses to use for comparison, you will also want to determine what benchmarks to set. What units of measurements will you use to ensure that you are meeting your objectives in a timely manner? Over time, it is important to make sure that you are completing these objectives. If you fall behind, either modify your plan or make an effort to catch up.
Goal setting is an important component of the benchmarking process for human resources. However, there is a right way and a wrong way to approach goal setting. You do not want to simply set goals and step away from the situation. Little progress will be made. Instead, you want to share your goals with staff and stakeholders and take the proper steps to make your goals a reality. Set a specific timeframe that you want to follow and choose smaller objectives to meet along the way. Toward the end of the process, create a report that outlines your benchmarking results.
Where to Learn More
Staying ahead of the competition in a highly competitive industry is no easy feat, especially for businesses who fail to use the tools and resources needed to grow their company. Knowing how your business compares to others in the same industry can be invaluable when you are trying to make your company stand out from countless others. Benchmarking for human resources allow businesses to compare their practices and policies internally and externally to bring light to where they shine or where they need to make changes. For more information or for assistance on HR benchmarking, contact the Business Benefits Group.