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Updated Apr 18, 2024

Why HR’s Organizational Structure Matters

The organizational structure of your HR team can make a big difference in the efficiency and effectiveness of your business. Learn what these structure characteristics are and why they matter.

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Skye Schooley, Senior Lead Analyst & Expert on Business Operations
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When getting started, a key responsibility of many small business owners is handling the organization’s HR responsibilities. However, it will likely become too much of a burden as you grow. Workforce planning, job evaluation, recruiting, compensation, benefits administration, employee engagement, performance management, safety and compliance are just a few of the many essential areas of focus for HR.

Since HR is responsible for many functions, you may need one or more employees to manage it. There are many ways to structure the hierarchy of those workers. Learn why finding the right HR organizational structure matters for your business.

Editor’s note: Looking for the right HR software for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

What is an organizational structure?

An organizational structure is the framework of a company or department. It lays out and defines priorities through positions with generalist and/or specialist roles, indicating who reports to whom and how each person fits into the big picture. It also establishes decision-making as centralized or decentralized.

An effective organizational structure can lay a foundation for positive impacts on the business. It flows with the company culture and is designed to attract and retain high-performing people by creating positions that leverage their highest skills and provide development and growth. This ensures meaningful work and a sense of purpose that carries into the future.

FYIDid you know
While a centralized, hierarchical structure is the traditional way to structure an organization, many businesses are finding success with a flat organizational structure.

What is HR’s role in organizational structure?

Your HR team is responsible for helping maintain an effective organizational structure by hiring the right employees for each open position, nurturing an environment of growth and guiding employees through their life cycles with your business. To best help your company perpetuate its organizational structure, your HR team must have an organizational structure of its own.

HR’s organizational structure matters because it provides the framework to align resources with the priorities defined in your business strategy and to embody the organization’s culture. The structure directly impacts the company’s ability to attract, engage and retain top HR talent. Subsequently, the work that HR staff does will impact business success in the future. Its effects go beyond HR function itself.

Here are some common business functions your HR staff can fulfill by maintaining an organizational structure:

TipBottom line
HR professionals are a vital part of any organization. If you don't have an HR team yet, check out these critical signs that it's time to consider hiring your first HR professional.

Types of HR organizational structures

Several organizational structures are typical in today’s HR departments; some are simple and others are complex. How can leaders determine which structure will have the most positive impact on the business? How can HR employees and job candidates determine which structure will best enable them to achieve their career goals? The best type of HR organizational structure for your business will depend on your specific needs.

At a basic level, you must decide what type of HR staff you need. For example, one business may need to hire only one HR professional, whereas another business may need to expand to an entire HR department. Either way, your HR organizational structure should account for each HR member you hire. Let’s look at the differences between some typical organizational charts.

Some popular HR organization structures have the following structural characteristics:

  • Shared services supported by technology
  • Centers of expertise/excellence and embedded business partners
  • Generalists under the leadership of HR managers, directors and VPs
  • Corporate HR functions that push initiatives down and across through each division’s HR team
  • Matrix environments
  • Centralized decision-making
  • Decentralized decision-making

Positions to consider in your HR department

Not all HR personnel will have the same strengths and weaknesses. If you have a midsize or large company, you’ll need to fill at least a few different roles to support your employees adequately.

Here are a few of the positions you should consider hiring for within your HR department:

Chief HR Officer

A chief human resources officer (CHRO) or vice president of HR is a C-suite-level HR team member whom you will often find in midsize to large businesses. This person reports directly to the CEO and oversees the entire HR department. Since the field of HR has had a more significant focus on “people” in recent years, you may also hear this referred to as a chief people officer.

HR manager / HR director

Every strong department needs a manager, and HR is no different. For large companies, this person reports to the CHRO, but for smaller companies, this will often be the top HR position in the company. They organize the department to field complaints and institute office policies that support a healthy work environment.

Recruiter

A recruiter is vital to finding new talent. It’s helpful if your recruiters have an HR background. Understanding the office culture and how different personalities interact is an excellent quality for someone in charge of hiring. Recruiters should take direction from the HR department to find candidates who are not only qualified but will succeed in the workplace. Recruiters also work closely with hiring managers during the recruitment process.

If your company is large enough, you may also want to hire recruiting coordinators, which are essentially administrative-focused recruitment personnel who report to senior recruiters.

Specialists

As a business grows, hiring HR specialists who focus on specific elements of HR is often beneficial. For example, you may employ specialists who focus on payroll, benefits administration, HR information, training and development, and diversity and inclusion.

HR admin assistant

Depending on the size of your company, it may be a good idea to hire an administrative assistant specifically for HR. They can organize complaints and keep a detailed record of events that transpire in the office. That will be helpful if there is a dispute or a need to analyze daily office activity.

These are just some of the most common HR roles you may need to fill. Keep in mind, your HR team will depend on your specific needs, goals and budget.

Did You Know?Did you know
In 2017, the HR Department Benchmarks and Analysis 2017 report issued by Bloomberg and the Bureau of National Affairs, found that the average ratio was 1.4 HR professionals for every 100 workers. However, as organizations have placed a greater importance on HR in recent years, the average ratio is now closer to 2.5, according to Indeed. Small businesses should aim to have even higher ratios, averaging around three HR professionals for every 100 employees.

How HR software can help your organizational structure

Regardless of how many HR professionals you have on your team, there is a good chance that you – like 3.2 million other SMBs – will also need some form of HR software to help automate your HR processes and keep all your HR documents in one streamlined platform.

In our recent HR management survey of SMBs, we found that HR software is most commonly used for reporting and analytics (71 percent), payroll and accounting (68 percent), employee benefits and time management (59 percent), compliance and risk management (41 percent), workforce surveys (39 percent), talent development (36 percent), and recruiting and onboarding (32 percent).

By managing these HR functions digitally with HR software, SMBs and their org structures found tremendous benefits.

  • 69 percent said HR software reduced their payroll processing time
  • 38 percent said it increased team member satisfaction
  • 25 percent said it improved their legal compliance
  • 22 percent saw a boost in employee retention
  • 21 percent said it helped them find higher-quality candidates and improve employee skills
  • 15 percent saw a decrease in employee tardiness and absenteeism

If you are looking to reap these same rewards with software, several highly rated HR software solutions are available. Here are some of the most popular options on the market today: 

  • Bambee: This is an excellent option for employers that need help mitigating HR risks. Bambee is more than just HR software. It is also an HR outsourcing solution, so employers can expect a hands-on approach when creating and managing HR policies. This is especially ideal for small businesses that don’t have enough HR employees in-house. Read our Bambee review to learn more.
  • Gusto: Payroll is a time-sucker for most HR professionals. If you want to automate this process with comprehensive payroll features, check out Gusto. It offers full-service payroll, automatic payroll tax filing, built-in benefits administration and more. Our review of Gusto goes into more detail about this HR software.
  • Rippling: Rippling is king when it comes to HR automation. This intuitive platform lets you create customized workflows to automate virtually any HR process. This is a great way to take tedious processes off your HR professionals’ plates, giving them more time to focus on other projects. To learn more about how this software can streamline your HR.
  • Paycor: One of the most sought-after HR software features is reporting and analytics, and Paycor does a great job with this. With an intuitive analytics dashboard, it can provide valuable insights to help your HR team make educated business decisions. Read our Paycor review to learn more.
  • Paychex: It can be challenging for your HR staff to manage employees remotely, but Paychex can help with this. The software includes a comprehensive mobile app and an easy-to-use dashboard with several employee self-service features. Read our review of Paychex to learn more.

These are just a few popular platforms that can help your HR team manage your HR functions. The best one for your business will depend on your specific needs.

author image
Skye Schooley, Senior Lead Analyst & Expert on Business Operations
Skye Schooley is a dedicated business professional who is especially passionate about human resources and digital marketing. For more than a decade, she has helped clients navigate the employee recruitment and customer acquisition processes, ensuring small business owners have the knowledge they need to succeed and grow their companies. In recent years, Schooley has enjoyed evaluating and comparing HR software and other human resources solutions to help businesses find the tools and services that best suit their needs. With a degree in business communications, she excels at simplifying complicated subjects and interviewing business vendors and entrepreneurs to gain new insights. Her guidance spans various formats, including newsletters, long-form videos and YouTube Shorts, reflecting her commitment to providing valuable expertise in accessible ways.
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