What is the ratio of HR people to employees?
The ratio of HR people to employees can be a useful measure of efficiency and effectiveness in your organisation and key performance indicators can be built around it. Most HR directors will look at this ratio and compare it with other companies in your industry or similar organisations in other sectors.
Knowing this ratio will help you to understand the efficiency of your own department, and to analyse that efficiency compared to other units in the company or other organisations within your sector. It is worth bearing in mind however, that this ratio will change dramatically depending on how HR is structured within your organisation and what HR functions are in-sourced or outsourced.
To make comparisons effectively you need to ensure you are comparing like with like. For example, the definition of employees as well as the definition of HR should be the same across the business – for instance, does this definition include the same functions, such as payroll staff, or are functions outsourced in some areas and not in others?
This ratio will also change depending on the needs of your business.
If you are in a start-up company or one going through intensive change – perhaps a restructure or a period of rapid growth – then there is likely to be a need for a larger number of HR people per head than there will be in a mature organisation, or a company that is going about business as usual. As a result there is no absolute answer as to what the ratio should be and it is important to measure it with the unique needs of your business in mind.
Therefore, as well as knowing what the ratio is, it is important to understand why it is at its current level, how it might change over time, what factors might cause this, and whether these changes are justified by the needs of the business.
It can also be useful to understand how the ratio varies between different business units within your organisation. You can use this information to develop a model for your business that indicates the optimum target ratio in different circumstances. If you measure the change in the ratio across the business you will be able to determine whether HR is being squeezed and whether that might affect the quality of the service you can give to your clients.
Ultimately, understanding these ratios, what affects them, and how they change will help you to determine how efficiently you are performing and the effectiveness of your service. It will help you to establish whether you can offer and deliver greater benefit to your client base.
Jan Hills, director, HR with Guts