Organizations ask the Davidson Group team this question often. The answer is it depends. Smaller organizations tend to have administrative employees that wear several hats. So if an office manager spends 80% of his/her time performing accounting tasks (including payroll) and 20% of his/her time dealing with employee issues, that company has 1/5th of a Human Resources (HR) person.
The standard benchmarking practice is to exclude dedicated payroll and training/development people from the HR-per-100 employee ratio calculation. The rule-of-thumb metric is 1 HR person per 100 employees. So, in the example above, the office manager can probably effectively provide HR services to up to 20 employees, assuming he/she knows anything about HR compliance and HR best practices. If that organization has 40 employees, their HR is probably suffering because the accounting is always going to get done first.
But the 1-to-100 ratio can be misleading. According to benchmarking surveys conducted by the Society for Human Resource Management, companies with 250 and fewer employees have a ratio closer to 2-per-100 on average. Organizations with 250+ employees often have fewer than 1-per-100 due to efficiencies due to their size.
When speaking with organizations with 100 or fewer employees, there are some important things to consider.
1. How does your company beat its competitors?
2. What is your employee turnover rate?
3. How effective is your owner/president at assessing talent, developing talent and getting the right people in the right seats?
Café du Monde is a famous restaurant in New Orleans, right in the heart of the French Quarter. It does a booming business because of its ideal location. Many reviews rate the service below average at best. Café du Monde does not need a lot of HR people because its people aren’t critical to its success. A restaurant in a less desirable location that depends on its great service reputation to be successful will likely benefit from a higher HR ratio than Café du Monde needs.
Likewise, an organization that is in a very stable industry, doesn’t have many competitors trying to pilfer its employees and generally treats its people well won’t need as much HR as a company in a high turnover, highly volatile industry where employees have lots of options.
Some owners are good with people. People like working for them, they listen well and have a knack for positioning people to be successful. Others understand the technical aspects of their business but are terrible with employees. This second type of owner needs more HR help – to protect themselves from themselves.
Contact the Davidson Group to ensure your organization has the right HR function for success. We offer HR expertise on a part-time and fractional basis, so you get what you need at an affordable price. We can also do work on a project basis.
