“Often I’m being asked by CEOs, ‘When should we be bringing on a new HR person?’ or ‘When should we bring on an HR person?’ One of the challenges is with the HR to head-count ratio.
“That’s an area where a lot of companies get it really wrong and the poor HR person ends up being over-burdened, over-stretched because somebody has set the HR to head-count ratio incorrectly.
“It’s usually because CEOs might networking with other CEOs or small company founders and they’ll say, ‘We brought an HR person on when we got to 150 people’ or ‘We got extra HR people when we hit 100 people’. Going by that ratio is not an effective way because companies are expanding at different rates. There are all different reasons. You can’t just look at expanding the HR department based solely on the HR to head-count ratio.”
Other factors should play a part in determining the number of HR professionals in an organization, such as the kind of technology the company is using.
“In larger companies, if they have a high level of automation, then you can have a higher head-count to HR ratio. But if you don’t have automation, if you don’t have contemporary HR technology systems, you can’t use the same ratio because the HR person is over-burdened.”
It also depends on how experienced the leadership and line management are at managing staff, how leadership development is managed in the organization, the average age within the organization and how stable the company is in terms of growth, says Orrock.
“Using the number of staff head-count alone as a decision point is a bit like pinning the tail on the donkey in approach.”
She says a lot of companies who are parented by US or UK and European head offices find that they are bound by what the current HR to head-count ratio is in head office, even though they may be more developed in infrastructure and have better access to resources and training for managers.
“It becomes a struggle for HR in the Australian subsidiary to manage, especially if they are responsible a broader region like Asia-Pacific that has multiple countries and multiple employment legislation, requirements, standards and customs. Quite often head offices don't factor that in.”
Does your company have the ratio right?
There’s more to determining the size of a HR department than simply relying on a HR to head-count ratio, says Corporate Canary HR Consulting director Anne-Marie Orrock.