Strategy

How Do Your HR Metrics Compare to Your Competitors’?

CFOs may get a chance to find out later this year by consulting a benchmarking product that’s currently under development.
David McCannMay 3, 2012

Spurred by the newly proposed standard for the disclosure of human-capital metrics, Automatic Data Processing (ADP) is gearing up to provide clients with something they’ve been requesting for years: benchmark information on its huge customer base.

The human-resources outsourcing provider’s plan could provide a big boost to companies’ intelligence about their HR strengths and weaknesses. ADP has HR data on 590,000 client organizations, the vast majority of which it expects will allow their information to be included in the benchmarking database. Clients will be able to get aggregate comparative data broken down by industry, company size, and geographical location, says Don Weinstein, the firm’s senior vice president of product management.

ADP hasn’t finalized its product strategy yet but expects to offer different levels of service. Some will be free, while others with more advanced features would carry an extra fee, according to Weinstein.

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“Our clients have been asking us for a long time to provide information on what other companies are doing and how they compare in terms of HR performance,” says Weinstein. “But in order to drive those comparisons, there have to be standards around what to measure and how to measure it. That’s why it’s so great that [the Society for Human Resource Management and the American National Standards Institute] are going down that path.” The benchmarking product will be available shortly after the ANSI’s expected approval of the standard late this year, he adds.

It may not yet be clear, though, whether the metrics calculations specified in the SHRM’s proposed standard, which is drawing mixed reviews from CFOs and investment advisers, are sufficient to enable a fair degree of comparability from company to company.

For example, “human-capital spending” is defined as the sum of three expense categories, each with various subcategories. “Direct costs of employees” include salaries, incentive payments, commissions, stock options, retirement-plan costs, overtime, payroll taxes, health and other insurance, and wellness programs. “Costs in support of employees” include overhead expenses for the tools and equipment employees need to do their work: communications, supplies, information technology, transportation, and housing. “Costs in lieu of employees” include costs for temporary workers, independent contractors, and outsourcing.

The proposed standard does not, however, provide instructions on what to include in or how to calculate any of the subcategories. The SHRM has said it realizes that the first incarnation of the standard is not perfect but also believes it is a good start toward the goal of providing investors with HR metrics, and a foundation for incremental improvements.

For its part, ADP has, Weinstein says, performed a detailed mapping of the proposed standard and verified that it has most of the specified data elements for most of its clients. It is building a tool to let clients virtually input data elements that are not housed within ADP products.