Do external HR benchmarks have value?

One of the most visited pages on our website talks about HR benchmarks, so we know it’s a popular topic.

Do external HR benchmarks have value? Yes, and No – they’re not an answer in themselves. We dig into that in this article – HR benchmarks – what can you learn from them?

Yes, they’re useful as a general guide, and we’ve collected the latest research data for you in the article. No, they fail to take into account the potential impact of differences such as sector, leadership maturity, business context or strategic goals such as scaling.

In addition, the breadth of HR’s role varies enormously in different organisations.

HR benchmarks reveal costs and ratios, but they don’t measure impact. A low-cost HR function might sound efficient, but if business leaders feel HR isn’t meeting their needs, for example in leadership development, succession planning, or data-driven insight – then the function is underpowered. The real question is about value as well as cost.

Take Netflix, who’ve increased investment in HR by 47% more than the rest of the organisation – because they’re treating HR as a performance enabler rather than a cost centre.

So, how can you build a picture of HR’s value that’s more informative – and build a business case for appropriate investment in HR?

The notion of value is driven by business leaders’ perception of HR’s contribution to business success. That isn’t about external benchmarks, it’s about creating explicit links between HR’s work and business outcomes.

If your CEO is taking HR benchmarks seriously as a measure of your HR function, it may indicate that the CPO needs to advocate more strongly for HR’s value. That might mean building the analytics that will prove HR’s impact. CEOs love numbers, but they’ll find internal data about HR’s ROI more compelling than any external benchmark.

Contact me if you’d like to explore this in an informal chat.