Pilar Rojo and Maria Adelaida Londoño. Professors. IE Business School
5 September 2006
Benchmarking has long been used in human resource management as a way to develop, retain and encourage loyalty in people, thus helping make companies more competitive.
On an international level, benchmarking has become in recent decades one of the most widely used tools in the comparative study of corporate economics. It involves the use of objective indicators to identify management excellence, as well as the events and transactions that lead to this success.
According to the APQC (American Productivity & Quality Center), benchmarking is a “process for the identification, learning and adaptation of outstanding processes and practices in any organisation, anywhere in the world, to help another organisation improve its processes and, consequently, its performance. It is the comparison with, and measurement against, another organisation to discover the philosophies, policies, practices and indicators that make it stand out.”
How to measure and compare human resources management
It is important to answer questions such as how your company obtains good returns from the money it invests in recruitment, selection, performance appraisal, and whether or not the processes implemented by your human resources department contribute to achieving your company´s objectives. Those questions make it crucial to quantify human resource activity in organisations and its impact on the business results. Once we compare the measurements of different companies, we can clearly identify the organisations with the most effective and efficient practices. These practices set the targets for other companies that are seeking to identify processes that can be improved in their own organisations, thus making it possible to increase competitiveness and the quality of their human resources management.
Benchmarking is applied in various stages: First, understanding the processes; secondly, analysing outside processes; thirdly, comparing the performance of one’s own organisation with that of others; and lastly, implementing the steps required to narrow the gap with the most outstanding companies.
This measurement and comparison process is based on human- resource indicators that quantify the features of the people in organisations (attitudes, skills, knowledge, behaviour, salary, policies, productivity, etc.) and the impact they may have on business results.
In human resources, benchmarking has two components: quantity and quality, which interact to achieve the optimum result. Quantity includes the performance metrics, ratios and indicators that are used for comparative purposes with regard to the typical needs of organisations of the same sector. Quality encompasses the processes, procedures and practices that are associated with the performance metrics used to identify best practices.
Measuring, comparing and improving constitute among the best combinations for enhancing competitiveness in human resource management and, in this way develop, to retain and create loyalty in people and talent in an enterprise.