Back to Basics with Benchmarking
With terms like “quiet quitting”, the “great resignation”, and “burnout” becoming regularly intertwined in our vernacular, attracting and retaining key talent has never been more nuanced. Since benefits priorities and expectations are constantly shifting, validating the benefit offerings through competitive benchmarking may be the most important tool in an employer’s arsenal.
At its core, benchmarking is a process of measuring or comparing against certain indicators, industry standards, or best practices. It is used to evaluate various aspects of the program and develop plans to improve upon the current state. Benchmarking can yield actionable insights, enhance your metrics standards (e.g., what constitutes success), enable you to build a business case for change, or defend the current process and programs available.
Types of Benchmarking
Performance benchmarking, one of two main types of benchmarking, uses quantitative data and measures to inform decision-making and business cases for change. Practice benchmarking, the other main type, is more qualitative in nature. It focuses on how an activity is conducted through people, processes and technology and provides insight into gaps and best practices that could be applied. Both play a critical role in comparing employee benefit programs and should be used in tandem.
Each of these can involve internal benchmarking, where the comparison is made against your own data over time, either in the aggregate or by different business units, product lines, departments, programs, geographies, and the like. They can also entail external benchmarking, where metrics or practices of your company are compared to one or many other companies. This involves external sources or custom surveys and provides an objective understanding of current state. External benchmarks are necessary to validate your offering remains competitive in the market; however, internal benchmarks are imperative to track against previously set metrics and targets.
The good news is that you may be better positioned to begin benchmarking than you think.
We recommend the following roadmap for effective benchmarking:
- Define Your Objectives
- Roles and responsibilities
- Metrics for success
- Determine Your Data Gathering Strategy
- Understand definitions and what you are trying to measure
- Identify Data and Tools You Have Available
- What tracking tools are at your disposal in-house or through partners
- What data is available internally
- Consider supplemental sources of information
- Insurance carriers
- Third party administrators
- Brokers, Consultants and Advisors
- Benefit associations
- Research firms
- Organize Results Into Actionable Reports
- Identify areas where change is needed
- Use results to provide support in business case to C-suite / upper management
- Continually Monitor
- Benchmarking is most successful when it is not a one-and-done activity, but rather a regular business activity, as the benefits landscape is always changing. Further, if your benchmarking results bring about a change in policy or protocol, you want to be sure you are prepared to measure whether that change yields the intended result.
There are many different areas of benefits an organization can benchmark, from health plan design to retirement benefits and disability insurance. If you are unclear about where to start, consider where your biggest pain points exist and consider those the highest priorities. If significant pain points do not exist, benefit plan design is usually an optimal place to begin benchmarking as process details hinge on plan design.