More HR Staffing Differences? Industry and Phase

As we discussed in the last post, there are a variety of factors that impact the size of the HR staff.   We focused on service offering and level, degree of automation, and organizational size as factors that play a key role in the size and composition of the HR staff.  Another important element to consider is industry.  Major industry groups allocate resources to human resources differently. One of the most important reasons for the differential is the relative emphasis placed on the HR function.  Although that may sound counter-intuitive to the common assumption that all human resource functions are inherently the same, philosophical view of human resources does vary.

Figure 1: HR Ratio by Sector and Size

What are  the differences across sectors? Figure 1 summarizes HR Ratio data collected by HCS from 400 organizations across the public, private, and non-profit sectors.  Obviously, the concerns with the HR Ratio apply here, so the metric is used just to provide a basic indication of variation. Public and non-profit possess a higher HR Ratio than private regardless of the size of the organization.  This is not surprising given the greater concentration of technology and manager-centered approaches to HR in the private sector.  More surprising is the same metric with the private sector divided by major industry group.

Figure 2 captures the breakdown by industry from the same HCS survey, Human Resource Staff and Composition Survey (2011). The finance industry is the highest in all size categories except 500-999 employees where high technology firms have a higher ratio.  These results indicate that higher numbers of knowledge workers and more market competition necessitate more HR staff.  One explanation is that these industries are more dependent on single individuals or small teams that can make big differences.  These critical workers need more recruiting, talent management, and compensation support than other types of workers.

Figure 2: HR Ratio by Industry and Size

Increasingly, scholars and practitioners alike argue that the biggest influence on HR staff size is the specific evolution of the HR function.  Most agree that as an organization evolves, its HR function transforms to better match the needs of the organization.  Three general categories are normally utilized to describe the linear progression:

  • Transactional
  • Organizational Partner
  • Strategic Leader

Transactional

Most organizations have transactional HR functions that deal with employee record keeping, federal and state compliance, compensation, benefits, labor relations, and leave and attendance.  HR serves as a record keeper, transaction agent, and compliance officer.  This level of service gains the most from automation, manager empowerment, and employee self-service.

Organizational Partner

During the last two decades, numerous articles and presentations have addressed the need to accept HR as a business partner.  Conventional business wisdom has accepted that HR can contribute much more to an organization than simple compliance and processing transactions.  In many ways, during this phase HR has a “seat at the table” and possesses the similar weight to other operational areas.  However, many organizations struggled to define the breadth of the role it wanted to grant HR.   Some of the most popular, new functions adopted during this category include organizational design, targeted recruiting, training and development, and total compensation management.

Strategic Leader

The future of HR is to play more of a leadership role.  As more professionalization, education, and automation has transformed perceptions to and practice of HR alike, more organizations are realizing that not only should HR be involved in decisions, but should be an equal partner in setting the direction of the organization.  If an organization wants to truly reach its full potential, a strong and well equipped HR function is necessary.  The critical tasks and tools that need to be employed include talent management, performance management, competency management, and succession planning.

Obviously, each category or phase necessitates different staffing levels and composition.  Different industries possess different levels of maturity, but would have some in each category of development.  Consequently, it might be safe to assume that industry and category are two additional factors and less deterministic indicators.