HR PERFORMANCE AND BENCHMARKING

 

When information on HR performance has been gathered, it must be comparedto a standard. A standard is a model or measure against which something is compared to determine its performance. For example, it is meaningless to know that organizational turnover rate is 75% if it is not known what the turnover rates at comparable organizations might be. One approach to assessing HR effectiveness is benchmarking, which compares specific measures of performance against data on those measures in other “best practices” organizations.

HR professionals attempting to benchmark try to locate organizations that do certain activities very well and thus become the “benchmarks.” One means for obtaining benchmarking data is through telephone calls, which then may be followed up with questionnaires and site visits to benchmarking partners. The most commonly benchmarked performance measures in HR management are:

-Total compensation as a percentage of net income before taxes

-Percent of management positions filled internally

-Dollar sales per employee

-Benefits as a percentage of payroll cost HR specialists can gain information and insights from managers and specialists in other organizations by participating in professional groups. The most prominent professional organizations are the Society for Human Resource Management (SHRM) and the International Personnel Management Association (IPMA). These organizations publish professional journals and newsletters, conduct annual meetings and conferences, and offer many other services, often through local chapters. SHRM is composed primarily of private-sector HR professionals, whereas members of IPMA primarily are HR managers from local, state, and federal government agencies.

Professional HR journals and publications of professional organizations are a useful communication link among managers, HR specialists, researchers, and other practitioners.

Surveys done by various professional organizations can also provide useful perspectives. Some organizations, such as the Bureau of National Affairs and the Conference Board, sponsor surveys on HR practices in various communities,

states, and regions. The results are distributed to participating organizations.

Finally, private management consulting firms and local colleges and universities can assist in HR research. These outside researchers may be more knowledgeable and unbiased than people inside the organization. Consultants skilled in questionnaire design and data analysis can give expert advice on HR research.

Doing the Benchmarking Analysis

A useful way to analyze HR involves calculating ratios. The ratios can be calculated and compared from year to year, providing information about changes in HR operations..

Effectiveness is best determined by comparing ratio measures with benchmarked national statistics. The comparisons should be tracked internally over time. For instance, the Society for Human Resource Management (SHRM) and the Saratoga Institute have developed benchmarks based on data from over 500. companies, presented by industry and by organizational size. The Saratoga Institute in Santa Clara, California, surveys employers annually and compiles information that allows individual employers to compare HR costs against national figures

UTILITY OR COST/BENEFIT ANALYSES In utility analysis, economic or other statistical models are built to identify the costs and benefits associated with specific HR activities. These models generally contain equations that identify the relevant factors influencing the HR activity under study. According to Jac Fitz-Enz—a pioneer in measuring HR effectiveness—formulas and measures should be derived from a listing of activities and the variables associated with those activities. An example that quantifies selection interviewing costs follows. Continuing efforts to cost-justify expenditures will require HR professionals to be versed in research and assessment approaches and methods. To face the challenges outlined throughout this text, effective HR management will be essential in organizations both in the United States and globally.