Q: How do I know whether I need an official human resources department or if I can do everything myself? Is it a matter of company size? At what point do you need to have an HR department within your company?
Jesse Harrison
A: Although I would love to be able to give you a definitive answer, a review of the research indicates that there isn't one. On the one hand, the 2015 Bloomberg's HR Department Benchmarks and Analysis report found that the median ratio of HR staff to total employee head count is 1.1 full-time HR staff members for every 100 employees served by the department. This ratio declines steadily as the employee population rises. On the other hand, a TSG report from 2012-2014 found an average ratio of about 1.8. In addition, another study found that some industries have a higher HR-to-employee ratio, while others (e.g., retail, health services) have a lower ratio.
As a result, it really comes down to you and your ability to complete all of the necessary HR activities, including recruitment, selection, training, compensation, labor law compliance, etc. If you feel like your company is falling short in any of these areas, then it might be time to start thinking about getting some HR assistance. It could also be that you're able to keep up with all of these activities, but doing them is taking time away from other important things (like building customer relationships or developing your company's strategy). Again, this would suggest that you should hire HR help sooner rather than later.
There is another option to consider. In the Bloomberg report noted above, 65 percent of companies outsourced at least one HR activity, primarily to get access to "greater expertise" and improve service quality. Outsourcing can be a lot of work, as it takes time to find a high-quality firm and ensure it is clear on what you want. I would encourage you to do your homework if you decide to go this route. It will take some time and effort, but if it frees you up to spend more time growing your business, then it could be worth it in the long run.
Kevin Henderson is an associate professor of management at the University of St. Thomas Opus College of Business.
