Benchmarking the workforce of a software company is often a difficult and uncertain task. We wrote this handbook to simplify the process for professionals - Including the five key metrics for any software company, best practices, and the tools often used in successful benchmarking exercises. The full list of topics that we will cover include:
Our goal is that beginners, professionals, and everyone in between can understand the key components required for workforce benchmarking in the software industry. Let’s get started by explaining what we mean by workforce benchmarking.
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Workforce benchmarking involves comparing a company's staffing ratios with those of similar organizations or industry standards. This process is used to identify areas for improvement, establish performance baselines, and set targets for the future state of a business. With software companies, this means assessing aspects such as productivity, employee satisfaction, turnover rates, and skill development to get ahead of the competition.
Benchmarking operates on two levels: internal and external. Internal benchmarking compares performance across different departments or teams within the same organization, while external benchmarking evaluates metrics against other companies or industry averages. Both approaches provide valuable insights, enabling software companies to optimize their human capital and achieve their goals.
We recommend using both internal and external benchmarks to perform a complete assessment of any workforce in the software industry. For trusted external benchmarks, consider using CompanySights, which are a specialist workforce benchmarking data provider in the software industry – Learn more here.
Functional Ratios: Evaluates the efficiency of headcount by function in the business. For example, Revenue per Function Employee is an appropriate metric to measure the workforce efficiency in the commercial functions, such as Sales, Marketing, and Customer Success. Meanwhile the metric Function Employees as % of Total Employees is often used to measure all other functions within a Software company.
Compare your functional ratios to the software industry – Get benchmarks
Activity Ratios: These vary based on the activity that is being measured. For example, the productivity of software engineers can be measured by tracking Specific Lines of Code (LOC) per Engineer within a specific timeframe. While not a definitive measure of quality, it provides a baseline for productivity comparisons amongst the engineers.
Employee Net Promoter Score (eNPS): Gauges employee loyalty and satisfaction by asking how likely they are to recommend the company as a place to work. This is often implemented by part of the HR team and then answers are refreshed annually to track the latest employee sentiment.
Engagement Surveys: Regularly conducted surveys that assess employees' emotional commitment and involvement in their work. These can be in the form of one question sent out weekly, all the way to a compulsory detailed survey. We have found that a weekly “pulse survey” with one question often to be very effective.
Turnover Rate: This refers to the percentage of employees who leave the company both voluntarily and involuntarily. High turnover can indicate dissatisfaction and can be costly due to recruitment and training expenses required to attract new employees.
Employee Tenure: Tracks the length of time that employees are at your company. In general, the longer the tenure the happier the workforce. However, a workforce with no turnover can be a bad thing, as it usually leads to a lack of innovation within the business.
Benchmark your employee turnover and tenure for the software industry – Search here
Training Hours per Employee: Measures the average number of hours dedicated to training and development. Continuous skill enhancement is crucial in the fast-evolving software industry. Most of the leading software companies will track this ratio for the career development and progression of their employees.
Certification and Skill Advancement: Tracks the number of employees earning relevant certifications or completing advanced training programs. This is another common initiative that exists at larger software companies. Establishing a culture of continuous improvement and learning usually leads to a more productive and happier workforce.
Diversity Ratios: Measures the representation of different demographic groups within the workforce. While it is an important social issue now - From a productivity point of view, diverse teams are often more innovative and better at problem-solving.
Inclusion Index: Assesses how inclusive the company culture is, ensuring all employees feel valued and respected. This is hard to measure so it is typically more qualitative in nature. For example, you could review and update company policies to ensure that the language used is neutral.
Effective benchmarking relies on robust tools that facilitate data collection, analysis, and comparison. Here are some popular benchmarking tools in the software industry:
Tools like SAP SuccessFactors, Workday, and Oracle HCM Cloud provide users with comprehensive analytics on employee performance, satisfaction, and other key metrics. Of those mentioned above, Workday is a market leader, being the software of choice for many HR professionals.
JIRA, Asana, and Trello help track project progress, feature completion rates, and team productivity, offering valuable data for benchmarking. Some of these tools have in built analytics, while others do not and require further analytical work by users to track and measure trends.
Platforms like SurveyMonkey, Qualtrics, and Officevibe enable companies to conduct employee engagement and satisfaction surveys, gathering essential feedback. If you are looking to create your first survey, then we recommend trying out the free version of SurveyMonkey.
Tools like Benchmarking Pro and Mercer’s benchmarking database offer access to general industry data, allowing companies to compare their metrics against broader standards. But for company-specific workforce benchmarking data in the software industry, CompanySights is the go-to data provider – Learn more here.
Solutions like Tableau and Power BI, enhanced with AI capabilities, provide advanced data visualization and predictive analytics, aiding in deeper benchmarking insights. These rely on large data sets to power them in the background, such as an API into your company ERP software.
Many professionals have different views on how to use benchmarking data effectively. In our opinion, benchmarking is a very useful exercise that can be performed in many scenarios. But there are limitations to their effectiveness, so we have outlined the best practices that we follow here:
First and foremost, you must establish what you aim to achieve with benchmarking. Whether it’s improving productivity, reducing turnover, or enhancing skill development – Set a clear goal to get started on the right foot.
Choose metrics that align with your objectives and industry standards. Focus on a mix of quantitative and qualitative measures to gain a holistic view. Refer to the section above where we outline the top five metrics for benchmarking your workforce in the software industry.
Ensure the accuracy and reliability of your data. Use multiple sources and cross-verify information to avoid skewed results. The quickest way to do this is to use a reliable benchmarking partner, such as CompanySights for software workforce data.
Conduct benchmarking at regular intervals to track progress and identify trends. Change is the one constant in every company, so continuous assessment is important. Automating the fetching of data for the key ratios that you are tracking is an easy way to achieve this. Partnering with a benchmarking data provider who regularly updates their data is also an important factor when benchmarking regularly.
Involve key stakeholders in the benchmarking process. Their “buy-in” is crucial for the successful implementation of benchmarking insights. From this whole guide, this is the most important action to remember if you want to benchmark successfully. In many benchmarking exercises, stakeholders are not involved enough and ultimately discard benchmark findings.
Use the benchmark findings to drive actionable changes. Implement best practices, address weaknesses, and celebrate strengths to foster a culture of continuous improvement. Per above, this is much easier when you engage stakeholders. With wider involvement there will be more of an appetite to act on the benchmarking insights.
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Google, renowned for its innovative culture, implemented extensive benchmarking to enhance employee engagement. By regularly surveying employees and comparing results with industry leaders, Google identified areas for improvement.
In 2024, CEO Sundar Pichai stated that initiatives like flexible work arrangements, extensive training programs, and a focus on diversity and inclusion have all resulted in higher engagement scores and reduced turnover rates.
Kevin Scott, Chief Technology Officer at Microsoft, leveraged productivity metrics to streamline the company’s software development processes. By benchmarking against other big players in the tech space and software industry standards, Microsoft were able to identify inefficiencies in its project management.
It’s understood that by implementing agile methodologies and continuous integration practices, there was a significant increase in feature completion rates and overall productivity across the software development team.
Salesforce committed to becoming one of the most inclusive companies in tech. Through benchmarking diversity ratios and inclusion indices against competitors, Salesforce identified gaps and implemented targeted hiring practices, inclusive policies, and employee resource groups.
This resulted in improved diversity metrics and a stronger, more innovative workforce. Such metrics include having a global workforce where 36% of employees identify as women or non-binary in 2022 (up from 32% in 2018). This is trending in the right direction with a goal of 45% by 2030.
The future of workforce benchmarking in the tech industry is poised to be heavily impacted by advancements in artificial intelligence (AI). Here’s how we expect AI to shape the landscape:
AI-driven tools are set to revolutionize workforce management by automating repetitive tasks, enabling employees to focus on higher-value activities. This will boost overall efficiency and productivity across the workforce, but could be particularly impactful in the core product and engineering functions. The metric to track is revenue per employee, which we expect to trend upwards as the years of AI go on.
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AI will enhance predictive analytics capabilities, allowing companies to foresee trends, employee turnover, and skill gaps. This foresight will enable proactive measures, ensuring a more resilient workforce.
Personalized training and development programs using AI are the future, tailoring content to individual employee needs. This will accelerate skill acquisition and ensure a highly competent workforce. Again, we think that this will be recognized by tracking the revenue per employee of software companies.
Software companies usually have lots of data. The challenge for many has been how they can use this data to their advantage. We think that AI will provide deeper insights into employee performance and engagement, facilitating data-driven decision-making.
AI will improve collaboration tools, making it easier for remote and hybrid teams to work together. We expect that enhanced communication and project management capabilities will drive better outcomes in the next five years and beyond.
Learn more about workforce benchmarking here
Workforce benchmarking is a powerful tool for software companies who care about their workforce. By systematically comparing key metrics, leveraging advanced tools, and adhering to best practices, organizations can unlock significant improvements in productivity, employee satisfaction, and overall performance.
Case studies illustrate the transformative impact of benchmarking in big tech, while future trends highlight the potential of AI to further enhance workforce management. Embracing benchmarking not only ensures competitiveness, but also fosters a culture of continuous improvement, essential for thriving in the dynamic software industry of today.
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