Feature

How big should be your HR department?

Vinutha V analyses the desired employee to HR professional ratio in an IT organisation

A highly competitive business environment has made IT organisations aware of the critical role of HR as a strategic function. This has resulted in the changing role of HR professionals in the organisation, who are no longer record-keepers or policy handlers, but partners in strategic planning and decision-making. Companies are consequently focussing on the ratio of HR personnel to employees, to ascertain the number that works out the best. This in itself is a tough task considering the fact that there is no id-eal employee to HR staff ratio or proven examples to follow.

Historically, the HR ratio was not an issue that organisations thought much about but now companies are seriously looking at it. Being a people-intensive knowledge industry, the success of any IT enterprise rests on its ability to attract and retain talent. Increasingly, the contribution of employees accounts for an organisation’s ability to compete, grow and produce value. Given the growing dominance of IT and the resulting dearth of talent, people functions or HR functions have now mov-ed beyond the traditional plane. It is now focussed on proactive talent engagement, which encompasses a gamut of employee well-being aspects. This calls for having more number of touch points or interface with the employees as well having a personalised touch to the employee relationship—this is why HR functions are evolving. Therefore, it is logical for companies to improve the ratio of HR staff to employees, otherwise they cannot effectively service HR issues and people problems. People function has now evolved as a strategic function, where it directly impacts the bottom line.

HR ratio depends on industry standards

"An exact HR ratio generally results in greater consistency in the application of HR policies and processes, with focus on continuous improvement in services" - Prashanth L J Associate Vice-President and Global Head Marketing Infinite Computer Solutions

HR ratios are based on business requirements and in some cases it can be benchmarked as per the prevalent industry standards. The ratio is generally based on minimum staffing requirements to fulfil the basic HR needs of an organisation. Prashanth L J, Associate Vice-president and Global Head Marketing, Infinite Computer Solutions, says, “It assumes factors such as fully qualified and trained HR staff professionals, performing at the level of an average competent employee. The actual ratio can vary depending on centralisation or decentralisation of the HR function, the geographic distribution of the employees served, the amount of automation utilised, the relative complexity of the strategic mission and objectives for the HR function.”

"The number of HR professionals depends on the rate of attrition in the organisation and the domain in which the company operates " - Harish Bhattiprolu Director-Sales Kenexa Technologies India

Voicing similar thoughts, Harish Bhattiprolu, Director-Sales, Kenexa Technologies India, adds, “The number of HR professionals depends on the rate of attrition in the organisation and the domain in which the company operates. Additionally, the availability of the required talent pool to suit the job description depends on the skills required in the company.” The last key variable affecting the staffing ratio is the expected level of service and support to be provided by the HR department.

Automation can bring down the HR ratio

There is no fixed or ideal HR ratio, it depends on the type of organisation, nature of business and employee profile. Depending on the business needs and prevalent HR challenges, companies fix their HR ratio. In a small to medium size company, where HR processes are not fully automated and it is still a evolving function, the ratio of HR staff to employees is 1:100. However, in large organisations which have stability and process maturity, and where HR is an evolved function and the degree of automation is high, the ratio could be 1:250.

"Symptoms of improper HR investment will be seen in terms of low morale, high attrition and absenteeism, lower productivity and commitment" - Ajay Prabhu Chief Operating Officer QuEST

As companies grow and bring in few standards and processes in place, the HR ratio also can get affected. Fast growing companies, large or small, require flexible software to integrate their HR functions, and Human Resource Management System (HRMS) application to address its needs. This results in reducing the ratio. Ajay Prabhu, Chief Operating Officer, QuEST, says “Currently we have an HR to employee ratio of 14 to 800. Being a company in the growth phase, we are investing in a larger HR team. We are working on a war footing to bring in industry best practices such as PCMM compliance at a rapid pace. As the company grows towards our targetted 2,000 employee strength, we expect to have a ratio of 1:100.” Many industry experts albeit believe that companies with a strength ranging from 500 to 2,000 should have a ratio of about 1:50, while those with more than 2,000 employees should have a ratio of at least 1:100.

Setting clear expectations

An exact HR ratio will help in increasing the overall value that HR provides to the business through greater focus on strategic people development initiatives in support of the overall employee experience at the workplace. “An exact HR ratio generally results in greater consistency in the application of HR policies and processes, with focus on continuous improvement in services,” adds Prashanth. It makes planning processes easier and enables clarity of expectations by the senior management and the HR department. “This in turn shows a clear growth and development path for the HR team members. In addition to an effective workforce planning, hiring fulfillment in time and cost restraints can be attained. Also, preparing metrics for the future efforts in hiring are some of the advantages of accurate HR ratios,” informs Bhattiprolu.

Adverse impact of improper ratio

Improper HR ratio can have an adverse effect on employee morale, as they will perceive the organisation as non-employee friendly. On the business front it can lead to an increase in attrition because of dissatisfaction and non-redressal of employee grievances and issues. “Improper investments in HR will have a detrimental effect on the growth of the organisation. In the knowledge-based industry that we are in, managing the sensitivities and aspirations of young talented engineers is critical to the success of the organisation. Symptoms of improper HR investment will be seen in terms of low morale, high attrition and absenteeism, lower productivity and commitment,” warns Prabhu. In fact, QuEST has managed to achieve above 80 percent employee satisfaction scores consistently over the last two years and the company is happy about the investments that it has been making in HR. Bhattiprolu reminds that improper HR ratio can also lead to financial impact on the increased cost per hire due to lack of adequate hiring manpower.

Woes of HR

It is unfortunate that most organisations find the need for HR personnel only at the time of recruitment, particularly when they are hiring a large number of people, quickly. “Organisations should understand the importance of HR, both for recruitment and employee relations aspects. On the other hand, companies fail to understand the HR workforce requirement after the recruitment process, which is a very significant phase. This may also result in a higher attrition rate,” states Nirupama V G, Associate Director of TeamLease Services.

The HR department is involved in every aspect of employee development in the company, right from the selection process to induction, training, compensation to HR policies and aspects like desk support, organisation development and knowledge management. In order to lower the exiting of HR personnel, Nirupama suggests that organisations need to be clear about their roles. After the recruitment process, by giving them employee relationship roles, companies can be successful in retaining their people management workforce.

A debatable issue

It is true that the HR to employee ratio remains a debatable issue in most organisations. Much depends on the HR vision of the organisation. One of the key factors is to ensure that the ambition and vision should not be out of sync with the ground realities of resources needed to realise the vision. Companies with ambition and vision that also know how to make it real will invariably spend more on HR and have higher ratio. Additionally, companies in the growth phase have fewer bureaucratic controls and processes; thus they do not need as many support personnel. Software firms typically have an employee self-service attitude, thus reducing the number of support staff. Software firms have a tendency to use partners or outsource non-essential functions. For example, the administrative HR functions (payroll, benefits, and training) are outsourced and technology partners provide the recruiting and staffing activities. These tactics dramatically reduce the number of support personnel required in the HR function alone.

The Indian IT sector has started realising the benefits of tracking HR efforts and tying them to get results. However, it is pertinent that more metrics and appropriate measurements must be additionally instituted. It is not enough to have generic ratios over large volumes. In order to make the efforts more specific, decomposition of those ratios is required.

vinutha@expresscomputeronline.com