The HR Ratio Or "How Many Employees Does It Take to Screw Up an HR Department?"

Ok, ok, I know this title made some of you bristle with outrage. But calm down, it was more to get your attention. What is the proper HR-to-Employee Ratio is a question frequently asked by people new to HR. Sometimes it is even asked by people not so new to HR. And if you ever get it asked by your CEO you had better know the answer.

This is the calculation. Though it is seldom expressed in terms of this calculation. It is generally experessed in terms of 1:100 or 1:250 or 1:400..... you  get the idea.

But knowing that calculation is not the answer to the question. Because the answer is "It depends." But if the CEO is asking you the question that is not what you say. Because you should know what the "DEPENDS" factors are for your company, your company size, your leadership, your industry and your sophistication. For example in The HR Scorecard: Linking People, Strategy, and Performance authors Becker, Huselid and Ulrich talk about research that shows that companies that had low quality of HR leadership had a ratio of 1:253.88. Companies that had high quality HR leadership had a ratio of 1:139.51. Research as also shown that the ratio also depends on these following factors:

• Company size. Smaller companies may actually have a smaller ratio because much of the process are not automated and therefore require more people to get them done. (Either that or the person works themselves to death. A situation often expressed to me.)
• Sophistication. Companies that are technologically adept may have smaller ratios due to automation, such as self-enrollment or online performance evaluation.
• Level of Outsourcing. Obviously the more funtions of HR you have outsourced the fewer HR people you need on staff.
• Service model. Your model for delivering HR services to your "customer" base will require different levels of staffing and hence a different ratio. A company I once worked for had 30 HR members for 1000 employees. A ratio of 3:100. That was because we had a "high touch" service model. The more complex or sophisticated your employee perhaps the higher the ratio.
• Dispersion of the employees. If you have a decentralized structure and want to have a decentralized HR department you will probably have a larger ratio than will a centralized structure.

You do have to be careful, regardless of the reason, to not have HR people for the sake of having HR people. You must remember that there needs to be an appropriate Return-on-Investment (ROI) for the number of HR people you have on staff. So that requires you to be able to determine what that ROI is and if it is desirable in your organization.

So gather your information. One source of information, and the inspiration for this post, was SHRM's benchmarking reports . They are available to both members and nonmembers. (I get no compensation for suggesting them.)

If you want to read another blog post that does an excellent job of talking about this subject click on HR Ratio versus HR Contribution. This is a well written post by Magdelena Meller of breakpoint HR from about a year ago.

By the way, the answer to the question of "How many employees does it take to screw up an HR department?" is "IT DEPENDS." It is your call.

What Is The Right Ratio? Is This The Right Question?

I was on a flight Wednesday evening. As we were preparing to take off I was chatting with the guy sitting in my aisle. Turns out he is an HR Manager. So before settling down to our individual work we talked "shop." I was floored when he told me that the company he works for has 8000 employees in 80 different locations and he was one of THREE HR managers they have in the company. That is a ratio of 1:2667. His comment to my amazement was "Well obviously we have decided we are not a strategic partner." For the most part they fly around the country putting out harassment and discrimination "fires." He had resigned himself to being the HR detective.

That got me to thinking were things stood on the WHAT IS THE RIGHT RATIO question. Common opinion has mostly been that the "correct" ratio is 1:100, that is 1 HR person for every 100 employees. And I run into this quite often. I have also run into situations of 1:250 and occassionally even larger ratios. The problem with this is that there is no single answer. The answer depends on many factors, such as the nature of the work, nature of the business, philosophy of service delivery, dispersion of employee base, upper management's view of the HR function and how much automation exists in the various HR areas. The nature of the economy also has some influence. As cutbacks occur we see HR departments having to do "more with less" and thus the HR ratio has expanded. I am sure there are other factors that play into this as well.

I am not even sure that the size of the HR department is the proper question. Since there are many ways to "skin the cat" of HR ratio perhaps a better measure(s) would be HR EFFECTIVENESS. What can HR contribute and what is the best way that can be done? Once that is determined then proper staffing can be determined. Here is an interesting discussion on this topic from last year on a blog post at breakpoint HR.

Tell me your story. What is your ratio and what is your contribution? Are you strategic?