What is benchmarking? Everything people leaders should know

26 Feb 24 | Blog

Benchmarking is about making comparisons. You can compare your organisation’s metrics against an industry benchmark, use a competitor as a benchmark, or even benchmark your organisation’s current performance against how it performed in the past. 

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What is benchmarking in business?

Benchmarking in business can involve measuring efficiency, performance, profitability, or any other business metric. It also includes HR benchmarking, which focuses on measures like attrition rate or employee engagement. Whatever you’re measuring, benchmarking is a powerful way of understanding how well you’re performing in the wider scheme of things.  

What is benchmarking in simple terms?

Benchmarking, in simple terms, is about making comparisons. Imagine a “you must be this tall to ride” sign at a fun fair – in that scenario, you’re stretching to reach a particular height that gives you permission to ride a roller coaster. Metaphorically, it’s about ‘measuring up’ to where you need to be. Because benchmarks are something to aim for. 

Why is benchmarking important?

Benchmarking is important because it puts your organisational metrics into perspective. How long is a piece of string? It really depends. That’s why you need something to measure against – and that’s the only way to stop yourself being complacent about your performance, or to know when you’re actually doing better than expected.

What is benchmarking data?

Benchmarking data differs depending on what you’re measuring. Sometimes it will be the average attrition rate for your industry – for example. And in other scenarios, it might be customer response time, where your employees are trying to match a certain figure. Whatever you’re measuring, benchmark data should be as relevant to you as possible – and, crucially, from a trustworthy source. 

What are the disadvantages of benchmarking?

There are several potential disadvantages to benchmarking. It takes time and money, as you need to acquire relevant data and spend time comparing it to your own metrics. It also focuses on past data, so may not be an accurate representation of the future (those are problems our free benchmarking tool helps you avoid, by the way). 

There’s also a risk of assuming you don’t have anything to improve, if the benchmark is less flattering than your own metrics. And that’s why we’d recommend benchmarking your people metrics as the first step of a longer process.

Ways to benchmark your HR data: by industry, team, or historically

What is HR benchmarking?

We’ve spoken about the different types of business benchmark data, but now our focus is on answering this question: what is benchmarking in HR all about? 

What is employee benchmarking?

Employee benchmarking, or HR benchmarking, is about comparing the metrics that matter about your employees – from attrition and absence rate, to organisational gender ratio and engagement rate. 

Why is benchmarking used in HR?

Benchmarking is used in HR because it helps you identify problem areas, and learn how to prioritise your talent management initiatives. Because different industries face different challenges, as do different job functions and demographics, it allows you to make relevant comparisons, and understand why to investigate further.  

What is an example of benchmarking in HR?

Here’s an example of benchmarking in HR. The average attrition rate in the UK was 11.1% in 2022, but in the Real Estate it was 7.2%. If you were a Real Estate organisation with an attrition rate of 10%, you might feel pretty happy – especially if you compare yourself to the UK total. 

But 10% is a decent proportion higher than 7.2% – so through relevant HR benchmark data, that organisation can identify that improvement is needed. And say they then compare different departments and demographics, and find that rate is spiking among women working in the sales department. Through further analysis, they can identify A) that there’s a problem, B) where the problem is located, and C) how to start addressing it. 

What are the top HR metrics?

There’s a lot of HR metrics that are worth tracking but here’s a few we think are particularly important: turnover and attrition rate, organisation composition, employee engagement, and absence rate. We cover all of those in specific detail in our benchmarking platform

What HR benchmarking metrics matter, and why?

  • Attrition: when employees leave, it has a big impact on budgets, morale, and productivity – to name just a few things! Understanding how your attrition rate has changed, and where it’s heading, is crucial. It’s also important to recognise attrition trends in different demographics or departments.

  • Organisation composition: when you’re looking at your organisation, you need to understand the make-up of your teams. Gender, age, ethnicity, and other demographic details all need to be considered – so you can champion diversity, and create HR initiatives that respond to everyone’s different needs.

  • Absence: lost days cost your business money. And a rise in sick leave can also be a sign of an organisational issue – as it was in our Virgin Media case study. Measuring and comparing absence rates is a helpful way of keeping on top of this.

  • Engagement: employee engagement matters, we all know that. It’s a metric worth keeping on top of – and in this case, it is particularly relevant for benchmarking against yourself so you can see the outcomes of your engagement-boosting activities.

What’s the best business benchmark tool?

Business benchmarking often comes in the form of pdf reports, or consultancy-built spreadsheets. But we think HR benchmark data should never be a static thing – HR benchmarking should be dynamic, relevant, and accurate. 

Our free benchmarking tool was built for that reason. It pulls your HR data and compares it to industry benchmark data, letting you also see the trends and risks in your own metrics. You can look through the lens that matters to you – whether it’s attrition or something else – and understand quickly where you need to focus.

It’s free to sign up, easy to integrate your HR data, and quick to get started. Because HR benchmarking matters – to everyone.

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Anne Therese Bogen, Head of HR, Thommessen

"Qlearsite’s platform is a really helpful tool to push through OKRs – it’s easier when you have statistics and concrete evidence to back up initiatives."