HR Cost Benchmarking & Efficiency Analysis
Are we spending too much on HR—or not enough? Benchmarking helps HR leaders move from opinions to facts, and from defense to strategy.
Why Benchmark HR Costs?
Every HR leader eventually faces the question: “How do we compare?” Whether it’s a CFO asking about HR cost per employee or a CEO looking for leaner operations, benchmarking provides the external context needed to evaluate internal efficiency.
Common Benchmarked Metrics
- HR cost per FTE
- HR staff ratio (e.g., 1 HR per 75 employees)
- HR tech spend per employee
- Time to hire
- Employee-to-recruiter ratio
- Learning investment per employee
Types of Benchmarking
1. External Benchmarking
Compare your metrics to those of similar companies (industry, region, size).
2. Internal Benchmarking
Compare performance across departments, geographies, or time periods.
3. Best-in-Class Benchmarking
Compare with high performers regardless of industry—to inspire transformation.
Going Beyond Cost: Measuring Efficiency
Efficiency isn’t just spending less—it’s spending better. To assess HR efficiency:
- Combine cost data with outcome metrics (e.g., cost per hire + quality of hire)
- Track productivity indicators (e.g., time to resolve HR inquiries)
- Measure service level agreements (SLAs) and response times
Benchmarking Best Practices
- Use apples-to-apples comparisons—standardized definitions are key
- Focus on trends and direction, not isolated snapshots
- Involve finance and operations to validate assumptions
- Use benchmarks as a conversation starter—not a judgment
Pitfalls to Avoid
Benchmarking is not about shame—it’s about sharpening your strategic edge. When HR leaders know where they stand, they can move forward with clarity, confidence, and credibility.