Information technology, business services and other similar sectors, which are heavily dependent on knowledge and continuous innovation, have higher human resource ratios in India. On the other hand, in the Indian retail and hospitality space, where specialised skills are not required, the HR ratios are low. Before we delve deep into this, we must understand what the human resource ratio is. It is the number of human resource personnel that exist in an organisation for every 100 employees*. The higher the number of HR personnel per 100 employees, the better will be the management of human resources, and the more efficient will be the strategic planning. Naturally, the positive effects will reflect in the form of better financial management, more effective resource allocation and scalability.
According to a study by greytHR, the HR ratio is lower in routine and operational industries and much higher in innovative and knowledge-driven businesses. Let us look at the data that supports this finding.
For instance, in the information technology (IT) and information technology-enable services space, there are 3.91 HR personnel per 100 employees. In the business services space, there are 3.69 HR people per 100 employees. The HR ratios are lower in the realty, energy, media and advertising, and healthcare and life sciences spaces, with 1.97, 1.71, 1.39 and 1.30, respectively. The ratio is low for telecom, FMCG, transportation and logistics, manufacturing, and even education and financial services. The ratio is lowest for food and agriculture (0.97) and retail (with 0.89). The lowest is for the hospitality industry, with only 0.87 HR people per 100 employees.
This is because organisations operating in the retail and hospitality space do not really require talent with specialised skills. The jobs in this space involve more standardised tasks and activities. In terms of daily operations, these jobs are not that demanding, and therefore, intervention from HR is not needed much. The focus is more on maintaining efficiency in routine tasks and less on HR initiatives. In the knowledge-intensive businesses or organisations, the role of HR personnel is crucial. They have to hire the right talent, with ace-quality skills. Their work doesn’t stop there either. They also have to ensure that their professional development keeps on happening continuously. In such organisations, success comes from innovation. The HR here has to do much more than just support daily operations. With the members of the workforce in such businesses being dynamic, the HR needs to be on its toes to ensure that these organisations keep on adapting and growing and leading as innovators.
The HR ratio varies with the size of the company too.
In smaller companies (with fewer than 250 employees), the HR ratio is high and goes up to 4.43. This is because HR personnel in these organisations are the ones that establish strong foundational practices, managing more than just talent. They actually help shape the culture of the organisation, ensure compliance, and come up with the strategies for internal growth. The HR ratio was found to be 2.95 for organisations with 251 to 500 employees and 2.60 for organisations with 501 to 1000 employees.
The HR ratio is lowest for organisations with 1,000 to 9,999 employees—only 1.34. The reason is that when organisations grow, expand and thrive, they tend to resort to automation. They embrace HR technologies making it possible for a small HR team to manage a huge workforce. Therefore, they are able to function with a low HR-to-employee ratio.
On the occasion of International Human Resource Day, the pertinent questions that organisations need to ask are: Is the prevailing HR ratio in alignment with industry norms and the size of the company? Are we leveraging HR data analytics to improve efficiency in operations and for better decision making? Do we have the right strategies to smoothly and seamlessly switch from traditional HR roles to more tech-driven ones? How can HR tech and AI be embraced to become more efficient and innovative?
*The HR ratio is calculated by dividing the number of HR personnel by the total number of employees and multiplying the result by 100.