Given HR's growing complexity, what's the ideal HR to employee ratio?
As a business grows, the pressure builds for HR managers to accommodate individual needs.
Trying to handle all the pressures of job descriptions, employment law, new employees, performance reviews, internal meetings, as well as managing your own department, is not an easy task.
It begs the question; how big should a human resources department be? What are the metrics (if any) for the ratio of human resource personnel to staff numbers?
“Today’s people and culture teams are faced with an interesting juxtaposition of putting people first whilst balancing business interests to increase bottom line results and maximise shareholder returns,” Sam DeGuara, founder and director of Mind The Gap Consulting, said.
“Chief people officers are continually debating with executive leadership teams to justify the return on investment, as well as protect the most valuable asset of any organisation – its people.”
The ideal formula
According to formulas calculated by the Society for Human Resource Management and Bloomberg Law, for small to medium-sized enterprises with fewer than 199 employees, the human resource staff ratio should 2.57 human resource full-time team members to service 100 employees.
For organisations with 200 employees or more, the ratio should be 15 full-time human resource staff per 1,000 employees.
“Bear in mind that these ratios are recommended as the minimum number of human resource employees to deliver the core human resource services; however, the actual ratio is at an all-time high,” DeGuara said.
“The reasons for the rapid rise include the disruption to workplace cultures and increased demands from both leaders and employees caused by the pandemic has put more pressure on people and culture teams to consistently role model workplace behaviours; be available 24/7 and fix all people and workplace issues.”
Of course, every company is different and will operating under various management structures. Some will have a flat management structure, while others will embed a strict hierarchical structure giving clear paths to the top.
Smaller organizations
The way a business values the human resources will impact greatly upon the numbers in the department.
“Smaller organisations will tend to have a higher ratio of human resource representatives to employees,” Athena Chintis, head of people and culture at Cliftons Event Solutions, said.
“This is because it takes a minimum number of human resources employees to manage core and cyclical services effectively such as recruitment, benefits, policy interpretation, performance management and reviews. In larger organisations, it is likely to be fewer human resource employees to overall employees – as there are efficiencies gained through economies of scale.”
The level of human resource technology investment also plays a role, she said, as there are systems that can automate many of the manual processes such as onboarding, contract generation, workflows, recognition awards.
“This is also the self-service options such human resource reporting and looking up policy guidelines, thereby freeing up human resource employees to provide advice to the business leaders and managers they support.”
Dividing up the work
Once a human resources department is up and running, it is then the work allocation within the department that takes priority in order to assist the smooth running of the organisation.
“As organisations expand, the human resource team is likely to have human resource business partners, who are aligned to business lines, working in conjunction with specialist human resource professionals who focus on talent acquisition, learning and development, remuneration and benefits,” Chintis said.
“They will be supported by a human resource shared service team who manage the operational requirements. If it is in a high-growth phase, there may be more specialist recruiters in the team to assist in finding and securing the best available people. If it is in a heavily regulated industry, there is likely to be an employee relations specialist. Smaller organisations will tend to have fewer specialists and engage external consultants when it is required.”
Mental health considerations
But again, each business will have its own way of getting the most out of the human resources department and deciding what its priorities should be.
“Post-pandemic, human resources work has become infinitely more complex,” Désirée Pascual, chief people officer for Headspace App, said. “An example is the need to address the mental health crisis, highlighted by the onset of the worldwide pandemic and perpetuated by a global economic downturn.
“Human resource leaders should take the initiative to create sub functions that clearly outline areas of focus such as recruiting, employee relations, and talent development, while also fostering a highly collaborative culture that emphasizes cross sub-functional communication, so that the team can grow together.
“Clear focus areas and goals are also important, and a mechanism by how work gets prioritized, given the unpredictability of people's work in general, but particularly in the current Australian and global-climate setting.”
