Everything you need to know about HR department structures

HR is a cornerstone of organizational success and bears the responsibility of looking after an organization’s most valuable asset: its people. 

Because HR takes care of something so crucial to the success of a company, the structure of the HR department and how well it functions directly impact the entire organization.

In this piece, we’ll delve into the intricacies of the HR department and its structures. We’ll uncover effective strategies for building, evaluating, and optimizing an HR setup, helping you drive success within your organization.

What is an HR department?

The HR department is in charge of looking after an organization’s people. It’s the nerve center responsible for managing every aspect of a professional’s journey within the company—from recruiting and onboarding through to offboarding. 

What does an HR department do?

The role of HR goes beyond just hiring and firing. The HR department shapes the company’s culture, ensures compliance with employment laws, encourages team members’ growth, manages disputes, and puts strategic initiatives in place to boost people’s performance.

HR department roles and responsibilities

The HR department is made up of a variety of different roles, including: 

• HR managers. At the helm of the HR department stands the HR manager or director, who oversees the entire operation. They develop a company’s HR strategy, establish initiatives that look after people, and align with company objectives.
• HR generalists. These are versatile professionals who handle a wide variety of HR tasks. Their responsibilities include employee relations, benefits administration, and tracking professional engagement and performance. 
• Recruiters. Recruiters manage the hiring process, identifying the right people to bring into an organization. They ensure new hires meet the skill requirements of a role and fit in with the company culture. 
• People data analysts. They transform raw data into actionable insights and can predict future trends, helping the HR department make effective strategic decisions. 
• Compensation and benefits administrators. These administrators manage payroll, oversee benefits programs, and analyze compensation trends to help the company maintain equitable pay structures and stay competitive.
• Learning and development specialists. Learning and development specialists design training programs, identify skills gaps, and provide professional development opportunities for people. 
• HRIS specialists. Experts in human resources information systems (HRIS), HRIS specialists manage the HR software and technology that contribute to effective human capital management (HCM) and smooth and efficient HR processes.

Common HR department structures

Here are some of the typical HR department structures, with their advantages and disadvantages:

Hierarchical

The hierarchical structure follows a pyramid-like setup with a clear chain of command—from an HR manager at the top to HR assistants at the bottom of the pyramid. 

A department with this clear HR hierarchy has well-defined roles where it’s evident who team members should report to. 

Advantages:

• Role clarity
• Controlled decision-making
• Clear reporting lines

Disadvantages:

• Bureaucracy
• Limited flexibility
• Limited collaboration and communication

Flat

In a flat structure, roles are mostly on equal footing. Titles may be less defined, and all team members, regardless of level, contribute to decisions around HR initiatives. 

The flat structure nurtures a collaborative environment and promotes open communication across different HR functions within the department. 

Advantages:

• Greater communication
• Flexibility and adaptability
• Empowers team members

Disadvantages:

• Lack of clear roles and responsibilities with the potential for conflict

Matrix

The matrix structure combines elements of both hierarchical and flat structures. 

There’s less of a hierarchy, like the flat structure. However, people report to both functional managers and project managers. This reporting system promotes flexibility, collaboration, and efficient resource allocation. 

Advantages:

• Greater collaboration
• Better decision-making
• Improved communication

Disadvantages:

• Confusion over roles and responsibilities
• Potential for conflict between functional managers and project managers
• Effective coordination between different teams may prove difficult

Divisional

This structure organizes people into teams (or divisions) that focus on a specific aspect of the organization, such as geographical region.

For example, there may be an HR director who oversees the company’s global HR operations, with managers leading autonomous human resources divisions for each region around the world.

Advantages:

• Addresses the unique needs of each division
• Greater autonomy among teams

Disadvantages:

• It’s complicated to coordinate the different divisions
• Less collaboration due to divisions becoming isolated

Functional

Similar to the divisional structure, the functional structure divides HR teams into specialized units that focus on a particular function such as recruitment, training, or compensation. 

Advantages:

• Allows for specialized expertise in each function
• Increases efficiency in each HR process
• Can improve outcomes in specific HR areas

Disadvantages:

• Less collaboration between units
• Difficult to align units with an overarching HR strategy

Outsourced

An outsourced structure is where a company hires an external provider to carry out certain HR processes. This may be a useful option for small companies, growing organizations that need extra support, or new organizations that are still setting up their HR infrastructure. 

Advantages:

• Saves money
• Access to HR expertise and greater resources
• More time to focus on long-term strategy

Disadvantages:

• Less control
• Greater risk of data breach
• Lack of a personal touch which can affect company culture

Building your HR department: Positions to consider

What positions you’ll require when building your HR department depends on the size and goals of your organization. However, there are some key roles that will help your organization’s HR processes run smoothly:

• HR manager. It’s helpful to have a leader who oversees the HR team, guides your HR processes, and ensures compliance.
• HR generalist. Generalists can adapt to a variety of responsibilities for the day-to-day functioning of your HR department.
• Compensation and benefits administrators. It’s essential that people receive their compensation without issues to keep your organization running smoothly.
• Recruiter. If you have ambitions for growing the company, a recruiter can be a useful addition to your team to bring in the right talent.

What is the ideal size of an HR department?

The ideal size of an HR department depends on the overall company size, goals, and HR initiatives you want to put in place. 

Smaller companies usually need a greater HR-to-person ratio than large organizations. This is because the essential HR processes require a minimum number of HR professionals to be able to carry out their objectives effectively. However, organizations that wish to focus on particular functions of HR—such as talent management, succession planning, or learning and development—may increase the proportion of relevant HR team members.

How to evaluate your HR department structure

Regularly evaluating your HR department structure and functions ensures the department runs at its best. 

Here are some key steps for the evaluation process:

1. Identify and assess KPIs. Consider metrics that align with your organization’s goals, such as turnover rates, engagement, and operational costs. Investigate their trends over time for more accurate results.
2. Conduct an HR audit. Assess your HR department’s existing policies, procedures, and practices. Assess whether the way it functions meets your company’s goals, legal requirements, and your people’s needs. 
3. Gather feedback. Seek and consider suggestions from HR team members, managers, and executives.
4. Compare. Compare your HR department structure to industry best practices and competitors. This will help you identify opportunities for adopting more innovative HR strategies.
5. Develop an implementation plan. Based on your evaluation’s findings, consider which department structure best meets the needs of your organization and develop an implementation plan.

HR department structure challenges and solutions

The truth is that there is no ideal HR department structure. Each comes with its advantages and disadvantages. 

Let’s take a look at the common challenges that these structures present, and possible solutions to them: 

Siloed operations

Divisional and functional structures can isolate people, creating siloed operations that hinder collaboration and communication between teams.

You can encourage collaboration and communication through shared projects, regular meetings, and job rotations. 

Limited flexibility

Hierarchical structures are rigid and limit the ability to adapt quickly to changes in the business environment, address issues within the department, and innovate. 

This is a flaw that’s inherent within the structure. It’s worth considering changing the structure a little to allow for much-needed flexibility. A hybrid matrix model that combines the best of both hierarchical and flat structures could be a good option for addressing this.

Coordination complexity

The more flexible divisional and functional structures make it difficult to coordinate different teams and carry out overarching company strategies. 

With these structures, it’s important to establish clear reporting lines and communication guidelines. Make sure each division has a leader and that they report directly to the organization’s HR manager.

This way, there’ll be greater communication between the different branches of the HR department. Each division can communicate their needs and carry out the organization’s HR initiatives. 

Resistance to change

Implementing structural changes might face resistance from team members. 

If that’s the case, it’s important to share the rationale behind these structural changes and provide support during the transition. 

The foundation for success

By understanding the common types of HR organizational structures, along with their advantages and challenges, you’re better equipped to build an HR department that’s able to do what it does best: Help your people reach their full potential. 

With a solid HR department that looks after your team, you’ll have laid the foundation for a truly successful organization.