What Is HR Benchmarking?
HR benchmarking is the process of comparing your organization's HR metrics, practices, and outcomes against external standards, typically industry averages, best-in-class organizations, or competitors. This comparison provides context for internal data, identifies areas where the organization leads or lags, and highlights opportunities for improvement. The SHRM Body of Applied Skills and Knowledge (BASK) includes benchmarking as a component of the Business Acumen and Critical Evaluation competencies.
Without benchmarking, internal metrics exist in a vacuum. A 12% voluntary turnover rate might sound concerning, but if the industry average is 18%, that same number reflects a competitive advantage. Benchmarking transforms raw numbers into actionable intelligence.
Types of HR Benchmarking
Competitive Benchmarking
Competitive benchmarking compares your organization against direct competitors for talent. This is particularly relevant for compensation, benefits, and employer branding.
Industry Benchmarking
Industry benchmarking compares your organization against the broader industry or sector. SHRM publishes annual benchmarking data that allows HR professionals to compare their organizations against industry medians and quartiles.
Best-in-Class Benchmarking
Best-in-class benchmarking compares your organization against the highest performers regardless of industry. This approach is useful when your goal is excellence rather than parity.
Internal Benchmarking
Internal benchmarking compares metrics across different departments, locations, or business units within the same organization. This approach is useful for identifying internal best practices and understanding performance variation.
Commonly Benchmarked HR Metrics
- Turnover rate: Voluntary, involuntary, and total turnover rates by industry, region, and job level
- Cost per hire: Total recruitment costs divided by number of hires
- Time to fill: Average days to fill positions, benchmarked by role type and industry
- Compensation levels: Base pay, total cash compensation, and total rewards compared to market
- Benefits offerings: Health plan design, retirement plan features, paid time off policies
- HR-to-employee ratio: The number of HR FTEs per 100 employees
- Training investment: Training spend per employee and training hours per employee
- Engagement scores: Employee engagement survey results compared to vendor-provided norms
- Revenue per employee: A measure of workforce productivity benchmarked against industry peers
For more on these metrics, see our guide to HR metrics and KPIs.
How to Conduct an HR Benchmarking Study
Step 1: Define what to benchmark. Start with a clear question. A focused benchmarking study produces more actionable results than trying to benchmark everything at once.
Step 2: Select benchmark sources. Choose data sources that are relevant to your organization's size, industry, geography, and competitive market. Common sources include SHRM annual surveys, industry-specific compensation surveys, Bureau of Labor Statistics data, industry association publications, and peer organization exchanges.
Step 3: Ensure comparability. Verify that your calculation methodology matches the benchmark source's methodology.
Step 4: Analyze the gaps. Compare your data against the benchmarks and identify meaningful gaps, both positive and negative.
Step 5: Develop action plans. For gaps that represent strategic concerns, develop specific action plans to close them.
Step 6: Monitor and reassess. Benchmarking is not a one-time exercise. Regular benchmarking ensures that your practices remain competitive.
Benchmarking Pitfalls to Avoid
- Comparing dissimilar organizations. Benchmarking a 50-person startup against Fortune 500 companies produces misleading comparisons.
- Treating benchmarks as targets. Benchmarks provide context, not goals. Matching the industry average on every metric should not be the objective.
- Ignoring context. Numbers without context are dangerous. Always consider the full context when interpreting benchmark comparisons.
- Using outdated data. Benchmark data becomes stale quickly, particularly in dynamic labor markets.
- Benchmarking inputs rather than outcomes. Benchmark outcomes (performance improvement, retention impact) whenever possible, not just inputs (dollars spent).
Test your knowledge of benchmarking concepts with our diagnostic assessment.
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