Long reads

How big should an HR team be?

24 Sep 2020 By Rob Gray

Widespread restructuring and redundancies are keeping people professionals in jobs for now, but have thrown up questions around the optimum employee-to-HR-ratio

For many in HR, recent months have been among the busiest of their working lives. Lockdown pushed people issues to the fore like never before, and the crisis has undoubtedly increased the standing of the function in many quarters and respect for the expertise found within. 

Indeed a survey by People Management in April found the majority of HR functions had not furloughed those within their ranks. The reasons were clear: staff wellbeing issues were, and continue to be, high on the agenda, and many firms are in the midst of difficult restructuring and redundancy decisions, which call for top-notch HR support and insight. 

With that in mind, a lot of HR teams will hope to remain immune from headcount cuts for the foreseeable future. But there have been some HR redundancies – predominantly in sectors ravaged by the economic downturn. And while it’s not something many will have to contend with for some time, the question will eventually arise of whether newly leaner organisations will need less HR resource once redundancies have been made. Which shines fresh light on fascinating questions, pertinent long before Covid struck, around just how big an HR/L&D team should be. Is there such a thing as a ‘right’ size and structure? Is there anything to be said for pursuing a workforce-to-HR-staff ratio, or does it all depend on context? 

It’s a series of questions with few straightforward answers. Martin Tiplady, managing director of Chameleon People Solutions and former HR director, asserts there is “no real commonly accepted optimum figure” given HR functions are so varied. Nevertheless, when carrying out HR value assessments he takes the stance that 1:150 is a good standard to work back from in an effort to understand why a ratio would be more or less. “I have measured one HR function with a ratio of 1:25 – truly bonkers in my view  – and another at 1:900 – equally bonkers and not really an HR function,” says Tiplady. “Most settle at around the 1:100 or 1:125 level, but it depends on so many things.”

 Dan Caro, managing director of executive search firm Strategic Dimensions, agrees that with so many factors at play it is impossible to set a hard and fast golden ratio. Even so, many businesses have tried: “One large global business I know did a best in class benchmarking exercise a few years ago. Even with this relatively sophisticated approach, they spent hours arguing about what was appropriate for their industry. It never really scratched the itch. They got to around 1:110 at one point but it varied a lot; clearly a ‘blue collar’ unionised division versus an R&D lab required different kinds and levels of support.”

The number of such variables affecting these calculations seemingly proliferates the more thought is given to the matter. What, for instance, should be included in the people team? Training, health and safety? Should L&D and OD sit as part of HR, within other departments or as totally separate entities? Further, some types of business – in the financial services and tech fields, for example – may have an apparently disproportionate number of HR people because they are involved in line management, freeing up traders and engineers to focus on what they need to deliver for the organisation. Other factors include corporate philosophy and whether the business is mature or fast-growing, faces complex change, or is a knowledge business or capital intensive. 

Financial Ombudsman Service HRD Caroline Nugent says “even the old adage” of headcount to payroll numbers is not as simple as it might appear, as “you could have 2,000 earning the same every month with one payroll manager, whereas others might have to determine overtime, supplements etc, so need two for 1,000 people”. She adds: “We are still seeing larger organisations with a typical Ulrich-type HR set-up, which will require at least a number of bespoke roles.” 

Cultural variations can also make a big difference. As Caro observes, while a UK business might have a 1:120 ratio, in Singapore, “where the culture is much more subservient and directive”, a typical ratio might be more like 1:400.  

Even this UK figure is a fair distance from the five-year findings of an XpertHR survey, which shows the median number of employees covered by an HR practitioner in the UK is 63. In the private sector the median is 56, while in the public sector it’s 75. For useful context, XpertHR data also found that, over the past two years, the number of HR staff increased in 40.4 per cent of organisations, remained the same at 49.6 per cent and decreased in 10 per cent. Growing HR workload was the main driver for this trend, although one in six respondents indicated that more HR staff were required as a result of previously outsourced functions being brought back in-house.  

CIPD senior stakeholder lead Katie Jacobs says the often touted ratio is 1:100. This is predicated on the assumption that organisations now outsource lots of their people services. But she too is “wary” of citing a golden ratio. “While having an idea of common ratios is useful for benchmarking, I think the more appropriate and useful question is how effective and value-adding your HR team is, whatever its size,” says Jacobs. “Having a big or small team is not necessarily a reflection of how well that team is performing, although a small team could become overworked and burned out without sufficient investment and resources. 

“Instead, look for measures of value-add that are evidence based and based on outcomes rather than inputs. How many people there are in the team is an input; the quality of their performance is your output.” 

Angela O’Connor, CEO of The HR Lounge, agrees. “Ratios also do not differentiate between entry-level HR staff who require support and development and long-established, experienced HR experts. The outcomes delivered by different levels of staff will inevitably be very different,” she says. Other variables that work against a standard measure, says O’Connor, are the quality of current systems and processes, the degree of transformation required and how devolved people decisions are, together with the competence of the managers who make them. 

Take logistics firm Wincanton, which has circa 220 HR/L&D team members across its 19,000 employee population. While this may sound a lot, says group HR director Sally Austin, 80 per cent of the team are field-based and shaped by customer demand; some customers prefer greater field HR support than others. HQ, meanwhile, is home to “a very lean team” for corporate HR, L&D, reward, EDI, occupational health and central HR services. “A one-size-fits-all approach to defining HRM capability wouldn’t be helpful to us,” explains Austin. “Instead we measure on a case-by-case basis, carefully considering the complexity of each contract, ER/IR environment and the people agenda associated with each customer strategy.”  

Wincanton’s operational HR team size remained broadly the same during the pandemic, primarily because most customers still needed services. While the firm furloughed some L&D colleagues at the height of lockdown, all are now “back to work as we rescope our L&D priorities and drive the vital agenda forward again”, with no plans to reduce HR headcount in the short or medium term. 

Other HR leaders might not enjoy quite such enviable positions when it comes to the long-term value of HR being appreciated, however. So – in the absence of a magic, definitive people team-size number for their organisational context – how can they make the case for maintaining a certain level of resource and capability as times become tough over the coming months and years?

Indeed, while many employers have for now largely sustained HR headcount, the HR jobs market remains far from buoyant. Derek Jenkins, general manager for jobs board Monster UKIE, says his company’s market analysis highlights a steeper than average drop in the volume of HR roles advertised during the pandemic, hitting a 12-month low in May. HR vacancies then increased during the summer, but this remains far from pre-pandemic levels. “We see under 10,000 HR jobs currently in the market – compare that to more than 25,000 in February,” says Jenkins. “Searches for such roles have seen a small increase on the site, but nothing like that seen across other back-office functions, with sales and IT searches being most voluminous.” 

In demonstrating the ongoing critical value of HR, HCM Metrics chairman David Simmonds echoes the importance of moving from a resources and input model to one founded squarely on outcomes and effectiveness. One option in evidencing this effectiveness is the new international standard, ISO 30414 – HR reporting, which offers “robust, objective, comparative metrics across the whole HR function” that provide deep insight, he says. “Now is the time for HR to really show its true worth so that when we inevitability at some point, probably in a minimum of a year, have to downsize as a function too, there is no argument that key HR requirements can add value and profit to the bottom line and the cuts could be lower,” says Nugent. “By that time we should be able to show it’s not around comparing the numbers.”

Hopefully, then, the undeniable value HR has demonstrated this year will put the profession in good stead in justifying its existence in the months to come – more so than defaulting to a certain elusive golden ratio. “HR has been so central during the Covid pandemic and teams have really stepped up to the plate, with the HR director often leading the organisational response to the crisis,” says Jacobs. 

“The scope of HR and people responsibilities has been huge: supporting en-masse home working, making workplaces Covid secure and undertaking health and safety risk assessments, managing leadership communications during turbulent times and supporting employee health and wellbeing, particularly mental health. This has been an opportunity for HR teams to prove their organisational worth. And in many cases they have done this in spades.”

Read more about People Management's survey of HR team sizes: Exclusive HR team-size data: how does yours compare?


How big are other HR teams? (And why?)

Creditsafe

Business intelligence firm Creditsafe employs around 1,200 people in 23 offices across 13 countries. Its HRM team is 30-strong, and capacity is dictated by the projected workload regarding change/advancement versus ‘business as usual’, explains chief HR officer Gareth Way. This is reviewed every three months and takes into account resource that is available from within the business on a project or transient basis.

The current ratio of HRM to non-HRM staff is approximately 1:40 – although Way says he does not use the ratio as a measure to determine capacity or requirement. Throughout lockdown, the HRM team remained constant and there are no plans for that to change in the short to medium term. “The major issue for Creditsafe throughout the crisis has been the forced shift from office-based working to home working,” says Way. “This issue presented the company with the challenge of continuing to offer the same focus on employee health and wellbeing that is so evident within our offices. 

"To this end, the way the Creditsafe population stepped up to look out for each other – ensuring regular Zoom check-ins, organising virtual social meetings and quizzes, and generally caring about one another – took the HRM team, it could be argued, up to 1,200!”

Enterprise Rent-A-Car

Enterprise Rent-A-Car’s vice president for HR, UK and Ireland, Leigh Lafever-Ayer, feels HR team size is a question each organisation must answer for itself: “We do everything in-house, from recruiting talent to onboarding and developing staff all through the employee life cycle. Whereas some firms will outsource many HR functions.”

Currently, Enterprise has around 125 employees per HR professional in the UK for generalist and L&D functions. That hasn’t changed drastically despite the business launching a new HR system and other efficiency measures last year. Early in the pandemic, Enterprise shifted many of its talent acquisition and L&D people, who were not as busy, to generalist roles: “This not only helped us meet the demands of our business partners, but helped these professionals develop new skills.” But now L&D is picking back up as new ways to develop staff through technology emerge, alongside the adaptation of traditional learning experiences. 

As the pandemic progressed, HR’s workload has increased, particularly in employee wellbeing: “We also continued to add to our diversity and inclusion business strategy, so now is not the time for us to downsize HR teams, especially as we don’t know what will happen in the next six or 12 months.”


How big is the average HR team?

Data from People Management survey of 735 employers, September 2020

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