When you stop to think about it, staffing should be pretty easy -- establish appropriate production standards or benchmarks, track the key volumes in the department, and calculate the number of full-time equivalent staff required. Then you get the approval of the department or division manager, forward the request to Human Resources, and presto -- a staffing plan. There's the advertising, testing, background checking, interviewing, deciding, offering, and hiring -- but then we're done and off to face the next challenge.

But what if the function we're staffing is the Human Resources (HR) function itself? HR is not a production-oriented department. They don't create things like new products, product reports, or any of the tasks that drive staffing requirements in other areas of your company. So, what do you measure? How do you know how many people you need? How do you deal with the intangible aspects of effective HR management?

HR Staffing Ratios
The general rule of thumb that most of us have heard through the years is one HR person for every 100 employees. Comprehensive industry surveys report that 1 to 100 is the most common ratio of full-time professional HR staff to every 100 employees served by the HR Department, however, it is not as commonly recognized that the ratio does vary somewhat by industry. Results from a March 2000 survey conducted jointly by the Society of Human Resources Managers and the Bureau of National Affairs indicate that the average for all companies (all industries, all sizes) is 0.9 to 100.

The rule of thumb ratio is used for estimating a minimum staffing requirement to fulfill the basic HR needs of an organization within the following constraints: It assumes the entity employs fully qualified and trained HR staff professionals, performing at the level of the average competent employee. It is also important to note that full-time equivalency is not applicable when discussing HR staffing ratios; a part-time employee may require the same basic HR support as a full-time employee. 

Critical Variables Affecting the Ratios

While the 1:100 ratio is a useful guideline, the actual ratio can vary depending upon the following factors unique to each business entity:

• Centralization or decentralization of the HR function 
• The number of locations 
• The geographic distribution of the employees served 
• Any services that are outsourced 
• The amount of automation utilized 
• The relative sophistication of the employees 
• The relative complexity of the strategic mission and objectives for the HR function

The relative level of revenue and size: Larger, more prominent employers are often perceived as "deep pockets" employers. Such companies typically employ a significant number of people and the risk of employment liability increases with asset size and the number of employees. Banks tend to be perceived of as prominent employers, seemingly without much regard to actual asset size.

There are also industry considerations. Certain industries require a higher level of HR support relative to others. Variables include such factors as:

• The level of regulatory oversight 
• The type, extent, and frequency of required training 
• The type and extent of required record keeping and reporting

HR Service Expectations

The last key variable affecting the staffing ratio is the expected level of service and support to be provided by the HR Department. This is where we begin to discuss the relationship between how a business addresses the more intangible aspects of HR management, and the subsequent affect on staffing.

To provide a relative context for the discussion we have defined two levels of HR service: maintenance and full-range. 

Maintenance Level

At this level, the HR department is primarily concerned with maintenance, compliance, and administrative tasks. HR is reactive, responding upon demand to legal changes and management and employee needs, but seldom initiating activity.

At this level, core functions should be handled efficiently and effectively, meet state and federal employment regulations, and be designed to minimize liability for the company. 

The HR Department is expected to provide administrative support for management and employees and provide some counsel to management in appropriate personnel actions. This assumes timely response to employee requests for information, and prompt filing of documents and preparation of various HR reports.

Typical HR maintenance activities include:

• Interpreting policy and answering employee questions or concerns regarding benefits, payroll, etc. 
• Administering employee benefits and insurance 
• Processing new hires and terminations 
• Maintaining employee files 
• Tracking basic personnel data such as vacation, leave of absence, etc. 
• Preparing government required reports and distribution of personnel related memorandum 
• Conducting some activities to minimize risk to the organization, and initiating performance improvement activities to a limited extent 
• Administering a salary program 
• Providing basic counsel to individual managers and supervisors about performance related issues among their subordinates 
• Screening and reference checking employment candidates

Full Range HR Management

At the full range level, HR activities broaden to include development and implementation of programs to support the overall growth of the organization, productivity improvement, and employee relations. The HR department proactively initiates activities to minimize risk to the organization and it drives a range of performance improvement activities.

Typical full range activities include:

• Participating in business planning activities; providing "what-if" assessments on various scenarios, e.g., growth or merger 
• Coordinating and/or conducting management and supervisory skills training as well as technical training 
• Designing and implementing employee performance improvement and communications programs 
• Initiating organizational development activities such as career planning and succession charting 
• Providing in-depth counsel to managers and supervisors regarding subordinate performance problems 
• Providing statistical and other data to determine trends and identify problems as they emerge among the employee population

Staffing Progression in the Human Resources Department

Our discussion so far has addressed general factors that influence the size of the HR staff, but we've not yet talked about the structure of the department and how that typically progresses as the organization grows. 

While businesses of different sizes will have different needs and different budgetary capabilities, typically in a small company the first HR positions within the department would include the following. These positions and the progression that follows assume a Full Range approach.

As the company continues to grow, the next positions to be added would likely be the following, plus appropriate levels of administrative support.  The addition of these positions tends to be incremental and varies depending upon the order in which the need becomes apparent. 

As the department grows, the HR Director's position assumes incrementally greater focus on the strategic and tactical aspects of HR management, and less on personal performance of day-to-day administrative tasks. 

The final positions to be added to round out the HR function would include:

Impact of a Growth by Acquisition Strategy on HR Staffing 

Yet another factor to be considered in determining the company's HR staffing strategy is its propensity for growth by acquisition. Buying a company assumes purchasing the staff along with the other assets. This strategy creates two simultaneous HR impacts. First HR must fully integrate the existing employees, administratively and culturally. For example, no matter what the acquiring company's HR level of service strategy is, it is usually HR's task to educate new employees so they understand the company's essential mission and objectives for customer service.

Second, as a "rule of thumb," nearly all (95% to 97%) of employees acquired in a merger or acquisition leave within the first year, or at the termination of their incentive compensation agreement, if there were financial advantages for them to agree to stay for a designed period of time.  These employees must be replaced, and the new ones must be integrated into the system. The search process is usually very time intensive.

Thus, if the company has a strategy of growth by acquisition, it is important to recognize that following an acquisition, there will be an impact on current HR programs and services because maintenance level HR activities increase exponentially, albeit temporarily.  One approach is toconsider the impact and either bring in outside HR assistance, suspend some "non-essential" activities, or otherwise plan for the unavoidable impact on HR staff.

However, if the company is going to be acquiring on a fairly regular basis, every year or two, it makes sense to selectively add staff in HR to ensure that there is sufficient support to regularly maintain the desired HR service level -- and -- to efficiently assimilate the newly acquired employees into the bank.

Because every company has its own growth strategy, desired HR service level, and unique employee programs and services, each company's approach will be slightly different. Nonetheless, the above guidelines can help you think broadly and strategically, and help ensure your HR function truly meets your needs and expectations today and in the future.