How Many HR Employees Do You Have - and Should You Have - In Your Organization?

The "how many" type of question is often the bane of my colleagues' existence, as i4cp members want to know if their benchmarks for time, cost, personnel, and so on, are within the norm. One of the more interesting, and somewhat incendiary, "how many" questions comes from our recently-completed Future of HR Survey (conducted on behalf of the Center for Effective Organizations) in which we polled over 850 organizations on myriad issues including the size of their organization and the number of full-time equivalent employees that are part of the HR function. By looking at these two measures across multiple organizations we can determine the normative ratio of HR FTE to number of workers.

How we determine performance
The i4cp Market Performance Index Score (MPI) is based on self-reported ratings to four questions about a company's current performance in the areas of revenue growth, market share, profitability and customer satisfaction as they compare to the company's performance five years ago. The average of these four responses determines a company's MPI score.

Our findings - how to use the Interactive Data

The interactive data below shows responses from higher and lower-performing organizations that participated in the survey. We've removed responses from mid-range organizations so we can better focus on the differences between higher and lower performers.

One size does not fit all

If we focus on the "Ratio" section of the chart, we'll see that the ratio for all types and sizes of higher-performing organizations is 1.97 HR FTEs per 100 workers, and the ratio for all types and sizes of lower-performing organization is 1.81 HR FTEs per 100 workers. While an interesting statistic, this really isn't all that illuminating as the ratios change dramatically as the size and type of organization changes.

To see just how significant size and type is, let's take advantage of i4cp's Interactive Data and just focus on one size and type of organization. For example, if you change the Industry Type to "Commercial" (so as to remove results from government, education and not-for-profit organizations) and the Organization Size to 50,000 or more workers, the ratio for higher performers is 0.70 FTEs per 100 workers and 1.06 FTEs per 100 workers for lower performers, as shown below.

HR FTE ratios for commercial organizations with 50,000 or more workers

Likewise, if we focus on the other end of the scale and look at organizations with 1 to 99 workers, the ratios change to 5.71 and 4.18 respectively. So yes, size does matter.

Understanding the trends - what the dots and lines mean

While the ratio calculator is a very useful tool to see if your organization is within the norm, exploring the individual dots and the trend lines shows a very clear relationship among organization size, number of FTEs and the performance score of the organization.

Let's start by drilling down on a particular dot. If we reset the filters so that we are again seeing responses from all organizations, you will notice a blue dot in the upper right corner of the scatterplot. If you hover over this dot you'll see the underlying survey response, as shown below.

You can see information about an item by hovering over that item. This organization has 310,000 workers and 2,500 HR HTEs, resulting in a ration of .81 FTEs for every 100 workers.

The dark red and dark blue lines represent linear regression trend lines for lower and higher performers (if you are a statistics geek you can hover over one of the lines and see the derived equation). So, what do the lines mean? There are several important results we can http://www.i4cp.com/zG8L80

• As the organization size increases, so does the number of HR FTEs.
• The steeper slope of the dark red line indicates a greater rate of increase for lower performers than for higher performers.
• For organizations with fewer than 10,000 workers, there are typically more HR FTEs per 100 workers. For organizations with 10,000 or more workers, there are typically less HR FTEs per 100 workers.

How to draw your own conclusions - and learn a lot more

If you're organization is "above the line" then your ratio is higher than most; below the line and it's lower than most. I would not fret about either finding unless your organization is significantly above or below the line (i.e., more than one standard deviation higher or lower). And just what are these limits? A discussion is beyond the scope of this blog post, but if you want to know, just contact i4cp.

About the study and the Center for Effective Organizations (CEO)

The Center for Effective Organizations' 2010 survey on the future of HR is the sixth in a triennial series of surveys. It is designed to measure the changes that are taking place in the HR function and what makes HR effective. The results of the surveys can be found in "Achieving Excellence in Human Resources Management" by Ed Lawler and John Boudreau (Stanford U. Press, 2009). Drs. Lawler and Boudreau are also authors of several books, a couple to note http://www.i4cp.com/NouWvI "Talent, Making People Your Competitive Advantage" by Ed Lawler (Wiley, 2008); and "Beyond HR" by John Boudreau and Pete Ramstad (Harvard Business School Press, 2007). Boudreau is also releasing a new book this summer, “Retooling HR” (Harvard Business Publishing, June 2010). CEO is a research and educational center of the Marshall School of Business at the University of Southern California. Further information about CEO can be found at http://www.i4cp.com/EPWtlC.