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HR Administration

Benchmarking: The Compass to Navigate the Future of Work

By integrating benchmarks into everyday tasks, HR leaders can make informed decisions based on data-driven HCM metrics.
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By integrating benchmarks into everyday tasks, HR leaders can make informed decisions based on data-driven HCM metrics. Illustration by Jakub Jirsák

Providing the right mix of competitive rewards to attract and retain talented employees can be like shooting arrows in the dark: You try to take aim but can easily miss your target.

Unfortunately, this metaphor applies to many of today’s HR practitioners, who still rely on educated guesses and trial-and-error methods to build and engage a high-performing workforce. Benchmarking can improve your HR aim. It can be a compass that shows business leaders how their company’s offerings — to the market and to employees — compare to competitors and the industry.

Timely benchmarks have historically been hard to find and limited in scope due to practical and technological limitations. As a result, HR leaders have underutilized benchmarks to guide decision-making. Fortunately, that’s changing. With the rise of big data and HR analytical tools that transform information into actionable insights, benchmarking now is a strategic asset for workforce management.

Big data is improving benchmarking by providing more relevant, recent and reliable information that can help HR professionals better understand their organization’s competitive positioning externally. It also can help them compare metrics among different business units and teams internally. Before advancements in data aggregation, benchmarking typically involved fielding surveys that could take months to plan, execute and validate.

Today, data aggregation involves massive volumes of data that — when analyzed — support a broader spectrum of human capital management activities. Using data science can make it cheaper and easier to generate and use benchmark data. As a result, HR leaders have greater access to high-quality benchmarking data they can use to guide their team’s daily work.

One increasingly popular use of benchmarks: using it to address high employee turnover rates. For example, analysis of workforce data may reveal that a company is experiencing high turnover rates for certain functions and that the root cause for many may be their search for higher compensation.

Here’s the good news: New data visualization tools and enhanced graphic user experiences make benchmarks more approachable and intuitive to the average HR user than ever before. With simple data visuals, HR practitioners can more accurately interpret the results of benchmark analysis.

A merger or acquisition is a prime example of how workforce management benchmarks can impact cross-functional business activities and give an employer a competitive advantage. Given that employee compensation is one of the biggest expenses for most organizations, benchmarks can provide clarity on what competitive compensation levels look like for hiring and paying employees in new or unfamiliar markets. HR leaders can use those benchmarks to rationalize and standardize compensation strategies for the newly combined company.

Beyond compensation, mergers and acquisitions also open up other opportunities to leverage benchmarks as strategic guides. Benchmarks can help establish criteria, such as rates of high absenteeism, to help identify employees who may leave a company after the transition. In addition, HR leaders can leverage benchmarks to compare a company’s post-merger turnover rate with competitors to gain insights that will help refine their talent retention strategies. Another example is ratios of support staff to lines of business and spans of control benchmarks that can help optimize a post-merger business structure. These types of benchmarks provide guides on how the organization can lead sizing efforts.

Business leaders look to HR to deliver strategic insights that assess workforce conditions and inform forward planning. By integrating benchmarks into everyday tasks, HR leaders can make informed decisions based on data-driven HCM metrics. In an evolving and competitive recruitment market, benchmarks can provide important guides to help companies seek and build a high-performing workforce that will drive long-term growth.

Modern data science and HR analytics tools can help companies take more accurate aim at the available talent pool and, potentially, increase the number of times they hit the target.

David Turetsky is vice president of ADP DataCloud product management.

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