Employee Benchmarking: Tips, Strategies, and Best Practices in 2024

Introduction

Employee benchmarking is an activity that companies (usually their HR team or external consultants) do to assess and optimize their biggest asset - People. It has emerged as a powerful tool for organizations toassess their performance, identify areas for improvement, and set realistic goals. In this guide we'll look at all things about employee benchmarking, including:

• What is Employee Benchmarking?
• Five Reasons Why Professionals (such as HR teamsand Consultants) use Employee Benchmarks
• Where can I find Employee Benchmarks?
• 10 Tips, Strategies and Best Practices forBenchmarking in 2024
• Conclusion

What is Employee Benchmarking?

Employee benchmarking involves comparing an organization's performance metrics, processes, and practices against those of its peers or industry standards. It provides valuable insights into how well a company is performing relative to others in its industry, highlighting areas of strength and also those areas needing improvement.

Benchmarking comes in many shapes and sizes – You can literally benchmark anything. Here we will look at the various types of benchmarking for employee performance and organizational effectiveness, including:

Productivity

Comparing productivity metrics such as output per employee, units produced per hour, or revenue per employee (note: get free company-specific revenue per employee data here).

Efficiency

Analyzing processes and workflows to identify inefficiencies and streamline operations. Functional benchmarking is common method to assess employee efficiency with metrics like revenue per functional employee or the % of employees in a specific function (note: get functional benchmarks here).

Employee Satisfaction

Assessing employee engagement, retention rates, and satisfaction levels compared to industry benchmarks. Companies typically use surveys to measure employee engagement and external benchmarks (note: get employee turnover and tenure benchmarks here).

Cost-effectiveness

Evaluating costs related tohiring, training, and retaining employees. This is a key activity for HR teams to perform and manage. This usually involves monitoring these metrics on a quarterly basis, in order to make sure that the right cost controls are in place.

Skills and Competencies

Comparing the skill sets and competencies of employees with those of competitors to identify skill gaps and areas for development. This is an important exercise whenever there is a strategic review or major shift in the mission of the business in order to prepare the workforce for the future.

By benchmarking these areas, organizations gain actionable insights that enable them to make informed decisions, drive performance improvements, and stay ahead of the competition.

Five Reasons Why Professionals (such as HR teams and Consultants) use Employee Benchmarks

Professionals, including HR teams and consultants, leverage employee benchmarking for various purposes, including:

1. Performance Improvement: Identifying best practices and performance gaps to enhance productivity, efficiency, and overall performance of an organization. This is usually an area where consultants are engaged, who use benchmarking to evaluate the current performance of the business.
2. Strategic Planning: Benchmarking can help to inform strategic decisions by understanding industry trends, competitor performance, and market dynamics. They can also help management to understand the number and type of resources required to implement their strategic plan.
3. Talent Management: Developing targeted recruitment, retention, and talent development strategies based on industry benchmarks and competitor practices. Assessing how efficiently you recruit and retain your employees can have a significant impact on costs, which in turn impacts the overall performance of the company.
4. Budgeting and Resource Allocation: People are usually both the biggest asset and cost of a company. Benchmarking human resources (a.k.a. employees) to identify areas for cost reduction happens from time to time in most companies, especially when times are tough such as in 2023.
5. Employee Development: Tailoring learning and development programs to address skill gaps and enhance employee competencies. Benchmarking the investment in your people can also help to align the skills development initiatives to those expected in your industry. This can also show up in other employee metrics like turnover and tenure.

Overall, employee benchmarking is a useful tool for professionals to evaluate and improve organizational performance, and to ultimately achieve their business goals.

Where can I find Employee Benchmarks?

Accessing reliable employee benchmarking data is crucial for a successful benchmarking exercise. There are several sources where organizations can find relevant benchmarking data, as follows:

Industry Associations

Many industry associations and trade organizations compile and publish benchmarking data specific to their industry. These benchmarks often provide valuable insights into industry norms, trends, and best practices. However, a limitation to these industry reports is that they may not necessarily be relevant to the size or specific geography of your organization.

Consulting Firms

Consulting firms specializing in HR, management, or industry-specific domains often conduct benchmarking studies and provide access to benchmarking data and reports. One key constraint with consulting firms is that they usually are quite expensive to engage for a benchmarking exercise.

Online Databases

Online platforms and databases dedicated to benchmarking provide access to a wide range of benchmarking data, metrics, and industry comparisons. One such provider is CompanySights, who specialize in providing employee benchmarking data for HR teams and consultants.

It's essential to ensure the credibility, relevance, and accuracy of benchmarking data obtained from these sources to derive meaningful insights that are trusted by all stakeholders involved. Without company-specific data, people will shrug off the benchmarks as “not relevant to our organization”.

10 Tips, Strategies, and Best Practices for Benchmarking in 2024

As companies try to gain a competitive advantage in their industry, one such tool to being successful with this is to employ effective benchmarking techniques. Here are some tips, strategies, and best practices for successful benchmarking in 2024:

1. Define Clear Objectives: Clearly define the objectives and scope of your benchmarking initiative. Identify the key performance metrics, areas of focus, and desired outcomes to guide your benchmarking efforts effectively.
2. Select Appropriate Benchmarks: Choose benchmarks that are relevant, comparable, and aligned with your organization's goals, industry, and operating context. Consider factors such as size, industry sector, geographic location, and organizational structure when selecting benchmarks.‍
3. Collect Quality Data: Ensure the quality and accuracy of benchmarking data by using reliable sources, standardized metrics, and consistent data collection methods. Validate data integrity and relevance to ensure meaningful comparisons and insights. (pro tip: use a third-party provider that does this like CompanySights).
4. Engage Stakeholders: Involve key stakeholders, including senior leadership, department heads, and frontline employees, in the benchmarking process. Foster collaboration, transparency, and buy-in to ensure alignment and ownership of benchmarking initiatives. This is absolutely critical to the success of any benchmarking exercise.‍
5. Analyze and Interpret Data: Conduct thorough analysis and interpretation of benchmarking data to identify trends, patterns, and insights. Look beyond surface-level     comparisons to understand underlying factors and drivers of performance differences. Remember that benchmarks don’t give you the answer, they steer you in the direction of the answer.
6. Identify Best Practices: Identify best practices and success factors from benchmarking comparisons and industry peers. Analyze what top-performing organizations are doing differently and explore opportunities for emulation and adaptation.‍
7. Set Realistic Targets: Set realistic and achievable performance targets based on benchmarking insights and organizational capabilities. Establish milestones, timelines,     and accountability mechanisms to track progress and ensure continuous improvement.‍
8. Implement Actionable Strategies: Develop actionable strategies and initiatives based on benchmark findings to address performance gaps, capitalize on strengths, and drive organizational improvement. Prioritize initiatives, allocate resources effectively, and monitor implementation progress.‍
9. Monitor and Review Progress: Establish a robust monitoring and review process to track progress, measure outcomes, and adapt strategies as needed. Regularly revisit benchmarks, reassess goals, and update strategies to stay responsive to changing dynamics. For most businesses, benchmarking employee metrics on a quarterly basis is best practice, but this can be more or less frequently depending on the size and volatility of your organization.‍
10. Foster a Culture of Continuous Improvement: Cultivate a culture of continuous improvement and learning within the organization. Encourage feedback, innovation, and knowledge sharing to drive ongoing performance enhancements and organizational resilience.

By following these tips and best practices, organizations can leverage employee benchmarking as a strategic tool for driving performance excellence, fostering innovation, and achieving sustainable growth in 2024 and beyond.

Looking for trusted employee benchmarks? Search here

Conclusion

Employee benchmarking is a tool that many forward-thinking companies employ to improve their performance and get ahead of their competition. It plays a pivotal role in helping organizations understand their performance relative to industry peers, identify areas for improvement, and drive strategic decision-making.

As we look beyond 2024, we think that leveraging data for insights through employee benchmarking will not just remain, but become an increasingly critical tool for organizations to boost employee performance and productivity.