It’s more than likely that you have an HR organization structure and chart in place for your HR department. If not, then it’s time to have one drawn up.
People in the HR industry are no strangers to change, and with 75% of Senior HR Managers believing that new management and communication styles will affect their profession, a cohesive HR organization chart and structure is paramount to employee and business success.
But do you know how to make sure your organizational chart is efficient and ready for the long haul? Read on to find out everything you need to know about organization charts and structures – from their benefits to their types.
What is a Human Resources Organization Chart?
An HR organization chart visually represents a company's human resources department. The chart shows the hierarchy of the HR department and other key positions within the department – who is responsible for what in the area of human resources.
It helps employees understand and navigate the company's HR department and the chain of command for any problems or questions they may have.
Since an HR organization chart engenders a well-structured HR department, defines each role clearly, and provides contact details for each employee, it can also help limit internal conflicts or miscommunications.
Jennifer Hartman, the HR Expert at Fit Small Business, remarked on the importance of a well-organized HR department,
“For a company to be successful, it is important to have a well-organized and structured human resources department. The HR department is responsible for many essential tasks, such as recruiting new employees, training staff, and ensuring that employees follow company policies.
If the HR department is not well-organized, it can lead to chaos in the company and decreased productivity. A structured HR department can help ensure that all tasks are carried out efficiently and effectively.”
Types of Organization Structures
1. Hierarchical Structure
The most common type of organizational structure is a hierarchical structure, which includes several levels of management and employees. Each hierarchical level has different responsibilities and control over the lower level.
It is a pyramid-shaped organizational structure – and the decision-making process flows from the top down. This implies the hierarchical organization structure consists of a singular or group of authority at the top with succeeding levels of power beneath them.
For example, the CEO or general manager could be at the top of a hierarchical organizational structure. The CEO oversees the work of senior directors or vice presidents, who in turn oversee the work of directors or managers, who then oversee the work of supervisors and team leaders.
Each management level within this structure has an array of employees reporting directly to them.
- There is a clear chain of command and each level of management has clearly defined roles and responsibilities. This makes it easy for employees to know whom to consult for specific questions or problems
- A clear flowchart also helps when there is confusion about who has authority over what decisions
- It makes growing the company easier as new employees can be slotted into existing positions without much difficulty
- It is easier for managers to monitor employee performance and productivity
- Fosters friendship between employees in the same department
- Increased bureaucracy
- Employees may feel underutilized because they can only do one thing at a time
- Lower-level employees have less ownership and aren’t often given a chance to express their ideas
- Lack of creativity and innovation in the company. Projects and ideas have to be approved by a manager, which doesn’t leave enough time to innovate
Ideal For: Businesses of all sizes, particularly large businesses.
As Max Benz, Founder and CEO at remote-job.net puts it,
“A hierarchical structure is ideal for businesses of all sizes.
In a hierarchical organization, employees are divided into layers, with each layer having a specific set of responsibilities. This type of structure ensures that employees clearly understand their role within the company and what is expected of them. It also allows for easy communication and collaboration between employees.
And, because it is scalable, larger businesses can also adopt it when necessary.”
2. Divisional Structure
The divisional organization structure separates the company into autonomous divisions. It’s similar to a hierarchical structure that demarcates the company based on specialty, region, product, market, or brand.
The divisions are typically led by a general manager who reports directly to the CEO or president of the company. The HR creates, manages, and implements policies and procedures in each division.
Each division is self-contained and runs like its own business with full autonomy and includes all functional areas (e.g., marketing, finance, and operations). They also have their own profit-and-loss statements and other financial documents separate from the rest of the company's books.
The goal is to be adept in each division and respond to each market segment’s unique needs.
A divisional organizational structure is especially effective in achieving continual business growth.
Case in point: Toyota’s shift from a centralized global hierarchy to a divisional organizational structure.
Earlier all important decisions came from the company’s headquarters in Japan. However, after the company received wide criticisms for slow response times while addressing safety issues, it reorganized the structure in 2013.
Toyota’s new organizational structure has geographic divisions and product-based divisions though the company still maintains its global hierarchy.
The regional and business unit heads now have more decision-making power, resulting in more flexibility, business resilience, and continual growth.
- Divisions can work autonomously
- More freedom in decision-making while still being part of the company
- Easier to identify opportunities and threats within the market
- It allows companies to respond quickly to changing market conditions since decision-making can occur at a lower level
- The decision-making is decentralized
- There may be duplication of services across various divisions like HR or IT, leading to higher costs as multiple teams complete the same work
- Miscommunication between divisions because they are acting like their own companies that do not share information
- It can be expensive to manage if the company is large or operates in multiple industries
Ideal For: Large companies operating in different geographic areas or with their own separate smaller companies.
Divisional organization structure is a common type of business organization structure among large companies like Coca-Cola, IBM, and Apple.
3. Functional Structure
In a functional organization structure, different functions of a company (such as accounting or marketing) are organized into divisions based on their specialization.
This is similar to divisional organization structure except that in a functional structure, the divisions report to a single head instead of having different reporting relationships for each division.
This is the most common type of structure used by organizations where they are grouped according to their specialization or expertise.
For example, a company might have a marketing department, an engineering department, a sales department, etc. Independent managers – with authority over the members in their domain – rule these departments.
- Employees get proficient in one thing since they work closely with other employees who do similar work
- Employees can focus solely on their roles
- Improved performance and productivity
- Departments can become silos where communication breakdowns occur
- Obstructs interdepartmental communication
- Limits collaboration and innovation
- The focus on one function can lead to conflicts between departments because each is focused on their priorities rather than the company's overall goals
Ideal For: Larger companies with multiple employees with similar roles.
4. Matrix Organizational Structure
In a matrix organizational structure, people with similar skills are grouped to form teams. These teams report to two different bosses – one functional boss and one project/product boss.
The structure was developed because functional managers have limited authority over resources that belong to other functions. For example, in manufacturing, the purchasing department may have control over the materials used to produce goods. As a result, there is often conflict between departments over who controls what resources.
Matrix organizational structures address this problem by allowing the authority to flow across functional and product lines. This results in an organizational structure where employees are grouped by both function and product.
In other words, each employee belongs to two bosses – one within their function (i.e., sales) and one for their product (i.e., accounting software).
Naturally, the Matrix structure is prevalent in companies where a functional center of excellence needs to work in tandem with business-specific departments and processes.
In fact, in a Gallup survey covering nearly 4,000 professionals in the US – 84% of respondents claimed they were at least slightly matrixed.
However, for all its virtues, the matrix organizational structure is still one of the most complicated reporting structures a company can implement, as employees report to more than one boss.
- It allows for interdepartmental communication and a flexible work environment
- It promotes open communication and shared resources
- Useful for projects with multiple teams working together on a single project
- It can cause conflicts between department managers and project managers
- Since employees report to multiple managers, it may lead to confusion and weaken employee loyalty
Ideal For: Large, multinational organizations
For instance, Syngenta, a leading plant science business that focuses on advancing sustainable agriculture via innovative research and tech, leverages the matrix structure to empower its staff.
With over 24,000 employees in more than 90 countries, Syngenta’s team leaders administer specific tasks and projects. Each team has members from diverse departments – with specialists and experts in subjects related to the project.
This organizational structure is foundational in fostering collaboration, empowering employees, and ensuring the project has all that it takes to achieve its target.
It makes sure that all the functional areas add to the wide range of projects, though they are all managed independently. Moreover, it enhances communication and sees that problems are understood and solved swiftly.
5. Horizontal or Flat Organizational Structure
A horizontal organizational structure, also called a flat organization, has few or no levels of middle management between executives and staff.
Employees typically work in small, cross-functional teams. This differs from a vertical structure, where employees often specialize in one area and managers oversee large groups of people.
Organizations with a horizontal or flat structure generally have an informal communication network. This is due to the lack of hierarchy and the proximity of all employees to each other.
As a result, employees are often on a first-name basis, can talk freely among themselves, and tend to be less formal when it comes to dressing code. They also tend to have fewer rules and regulations of conduct than those that are strictly hierarchically structured.
While it may seem more suitable for small businesses and startups, the success of W.L. Gore narrates a different story.
Gore is one of the most successful firms globally and employs over 10,000 people. There is the CEO (elected democratically), some functional heads, and the rest of the employees.
A self-managed team of 8-12 people is responsible for all the decision-making, including hiring, pay, projects to work on, among everything.
However, rather than implementing the command-and-control structure typical of large organizations, now retired CEO Terri Kelly claimed,
“It’s far better to rely upon a broad base of individuals and leaders who share a common set of values and feel personal ownership for the organization's overall success.”
- More agile and able to respond quickly to customer needs
- It puts decision-making power in the hands of employees instead of managers
- Fewer management layers, giving employees more opportunities for advancement
- Less expensive because they have fewer people in management positions
- Lack of direction for some employees, especially those who don't work well without supervision
- Employees at all levels, including managers, tend to be overworked due to the lack of hierarchy
Ideal For: Small companies and startups.
6. Network Organization Structure
The network, or virtual, organizational structure is the least structured form of all the structures described here. It has no hierarchy or vertical lines of control and no horizontal cross-functional teams. Instead, it has a small core group that manages the work through a network of outside vendors, partners, consultants, and contract workers.
The core group focuses on strategic tasks while outside specialists take care of the tactical and operational work. In some cases, members of the core group are also considered part-time members of other organizations within the network.
This type of structure is most common in industries where companies don't need to work together to achieve their goals — for example, in the agricultural industry, where farms are spread out over large areas.
John P. Kotter, a best-selling author, and award-winning business and management thought leader, believes that while more traditional, hierarchical structures have their place in the industry – the relatively egalitarian and adaptable network structure is “where big changes happen.”
“My idea of the Network is a system of teams with representatives from all divisions and all levels, who leave formal titles at the door to participate in a decidedly anti-hierarchical forum.
With this Network, potential opportunities and changes are identified, urgency around tomorrow’s possibilities is fostered and maintained, strategies for organization-wide changes are formed, barriers are identified and addressed, and change is achieved.”
- It allows you to reduce costs by sharing resources across the network
- Each business in the network contributes something unique to the whole, and they all benefit from having access to each other's resources if they need them
- It increases flexibility, allowing you to move resources between different companies in the network based on where you need them most
- Less rigid in terms of working hours and roles
- Opens new markets and customer bases for every company involved
- Coordination may be difficult among employees
- Employees may not even know who their supervisor is because they may report to more than one person depending on their current task assignment
- The more separate companies there are in your network, the harder it is to keep track of everything going on
Ideal For: Large companies spanning across multiple cities.
If you look at sportswear companies like Nike, it follows a network-based structure where partners integrate their best practices and core competencies to attain the highest competitiveness of the structure altogether.
It often focuses on building brand value via widespread marketing efforts and exercising control over its suppliers instead of producing its own clothing frequently.
Examples of HR Organizational Chart
1. Human Resource Organization Chart for Small Businesses or Startups
Employees: 100 employees or fewer
In a small business or startup, the HR department comprises a handful of roles and responsibilities.
The four major roles are:
- HR Director / HR Manager
- HR Specialist
- Recruiting Coordinator
HR Director - An HR director is a top-level human resource professional who oversees an organization's overall human resources strategy, including policy formulation, recruiting and hiring practices, training and benefits administration, and compliance with employment laws and regulations.
In addition to overseeing other HR employees, the HR director may also be responsible for all the human resource activities of an organization or a specific unit within an organization.
At a small business, the HR director typically has a small staff and may report directly to the CEO.
HR Manager - The HR manager's role is akin to that of any other manager – to plan, organize, lead and control. However, the specific functions of an HR manager vary according to the needs of the company and its stage of growth. It could be compensation, handling employee relations, recruiting, and more.
HR Specialist - HR specialists oversee employee relations, new hires, benefits and payroll, training, and employment laws.
Many small businesses may outsource their payroll functions rather than hiring an in-house HR specialist.
Recruiting Coordinator - The recruiting coordinator is the front line for job postings and responds to job inquiries. The coordinator schedules interviews and may follow up with candidates to inform them about their status.
If your company does not offer an employee referral program, the recruiting coordinator may also be involved in sourcing new hires.
2. HR Organization Chart for Mid-Sized Businesses
Employees: 100-999 employees
When you're ready to bring on a full-fledged HR team, start by identifying your own needs and filling those roles first.
For example, if your most significant problem is high employee turnover, your first hire should be someone who can work with managers to keep your best employees engaged and happy at work.
Here are common roles you might find in an HR department of a mid-sized business:
- Chief Human Resources Officer (CHRO) - The CHRO must work closely with other members of senior management for an organization's people strategy to be effective. According to Imercer.com, 7 out of 10 times, i.e., 69% of the CHRO report to the CEO.
- HR Director - The responsibilities of an HR Director vary depending on the number of employees and industry but typically include managing all aspects of human resources, including hiring, training, performance management, compensation, benefits administration, payroll administration, and more.
- Recruiting Director - Reports to the CHRO or VP of HR and is responsible for overseeing the company's recruitment efforts. This includes conducting interviews, reviewing resumes, budget allocation, and helping to determine if applicants are qualified for the position.
- HR Director - Handles annual budgets and decisions on buying software systems and negotiating benefits for the organization.
Then you have Recruiting Coordinators who report to the Recruiting Director; HR Managers who report to the HR Director; and the Compensation Benefits Manager who, in turn, reports to the HR manager.
Finally, HR Managers would be in charge of the HR Generalist, HR Specialist, and Payroll Specialist.
3. HR Organization Chart for Large Companies
Employees: 1000+ employees
The structure at a large company would be somewhat similar to that of a small company, barring a few additions.
Large companies usually have a Chief Diversity Officer who helps recruit and retain diverse workers, manage diversity initiatives and create policies to protect them from discrimination. They may also be responsible for monitoring staff compliance with government regulations and industry best practices.
The Chief Diversity Officer reports to the CHRO, who usually reports to the CEO.
Next is the VP of HR who manages:
- HR Director
- Recruiting Director
- HRIS (Human Resource Information Specialist) – Oversees and maintains HR and recruiting technologies.
The Vice President of HR also reports to the CHRO and oversees financial documents, and understands the strategies and services that drive revenue. They also focus on business metrics, reporting, and analytics.
Other additional HR roles in a large company may include:
- Compensation Benefits Manager - Reports to the HR Director and prepares pay structures within predetermined budgets, manages core HR software systems and ensures error-free payroll runs.
- Training Director - Responsible for developing and implementing training programs for all employees at our company. They will work with a trainer and report to the HR Director.
Why Structuring the HR Department Is Important
The HR department is responsible for many different tasks, so it needs to be well-structured to ensure nothing falls through the cracks and employees are seen and taken care of.
Here are some of the most important reasons why you should structure your HR department:
1. Facilitate continual growth
An HR structure enables businesses to optimize their resources by increasing productivity levels and ensuring that employees are working at maximum capacity.
It also establishes policies that help managers achieve their goals efficiently by deploying the appropriate human resources required for each project or task.
In a nutshell, here’s how an HR department structure can help your business grow:
- Provides organizational structure to the hiring process
- Acts as a mediator between the company and employees
- Finds new talent for your company
- Transfers knowledge from one employee to another
- Helps employees understand the company culture
2. Improve flexibility and responsiveness
A good HR structure improves the quality of all your HR processes. It helps you streamline recruitment, identify learning and development needs, improve flexibility and responsiveness in an organization, and all the other processes that are vital to a successful business.
For example, when there is a restructuring of departments or acquisitions, a structured HR department will take the lead in making sure all employees are informed of the changes and their new roles within the company. This naturally results in improved flexibility and responsiveness.
However, the traditional hierarchical structure, where decisions come from the top, can slow down responses to problems. This ushered in a need for a more flexible approach.
Take Google’s structure, for instance.
In their book “How Google Works,” Eric Schmidt & Jonathan Rosenberg – seasoned Google executives – hint at Google’s structure having some degree of cross-functional (matrix), flat, functional, and hierarchical elements.
Schmidt and Rosenberg suggest,
“We have formal organization charts, but the rule (which is really more of a guideline since there are exceptions) forces flatter charts with less managerial oversight and more employee freedom.”
Eric Schmidt & Jonathan Rosenberg further alluded that, at the same time, they believe in “staying functionally organized – with separate departments such as engineering, products, finance, and sales reporting directly to the CEO.”
This organizational structure of Google has many advantages. For example, it permits faster decision-making due to its fewer management tiers while, at the same time, allowing each employee job flexibility.
Having numerous communication channels (different channels for different departments) also helps Google improve teamwork and collaboration among the workforce, thus enhancing customer satisfaction and productivity.
Employees usually have a broader viewpoint of the goals and objectives – fostering teamwork and collaboration. Moreover, the flat elements eliminate bureaucracy and structural inflexibilities, contributing to speedy decision-making.
Google’s organizational structure has a significant role in the attainment of the company’s goals and objectives as well.
3. Empower your staff and make specific responsibilities clear
When you have a clear HR structure, your staff will know where they fit in the organization and what their roles are.
This eliminates any confusion, and it also empowers them to do the best that they can do. It shows them that there is room for advancement when they see the different levels of management in each department.
Maciek Kubiak, Head of People at PhotoAiD, suggests,
A well-organized HR department is critical to the success of any company. With a clear structure chart, everyone knows their specific responsibilities and can work more efficiently together. This also helps to ensure that no one person is overworked and that all employees are treated fairly and equitably.
4. Identify workforce deficits
One of the main reasons organizations must structure their HR departments is that it helps them identify workforce deficits. In other words, companies can see where they need more talent or different skill sets.
For example, suppose a company is planning on expanding into a new market segment or moving into a new geographic area. In that case, it may need to hire additional staff with specific skill sets or experience to meet these new demands.
And with automation and digitization in full swing, it is more important now than ever to identify opportunities to fill potential gaps in the workforce.
According to a survey by McKinsey, 66% of executives consider addressing potential skills gaps related to automation/digitization within their workforces as at least a top-ten priority.
John Tian, Co-Founder of Mobitrix, also stresses the importance of a company structure chart to help the HR department identify workforce deficits and help with talent shifts.
“In an organization’s daily management, it is easy to lose sight of employees regarding their specialist skills and experience. A company structure chart helps our HR department map out individual workers, and it is ideal for keeping an eye on teams and individual attributes and skills.
That way, we only keep the right talent on board and figure out whenever skill gaps crop up. We now have the chance to kick off the hiring process and get replacements timely.”
5. Increase productivity
Daniel Markovitz, the president of Markovitz Consulting, argues that productivity improvements are about your system, not the individual. Markovitz says, “Personal solutions can be useful, but the most effective antidote to low productivity and inefficiency must be implemented at the system level, not the individual level.”
Naturally, if your HR department is appropriately structured, employees will be able to quickly figure out who is in charge of what and where they are expected to go if they need help with something. This saves valuable time and increases productivity levels across the board.
Pro Tip: With work divided based on specializations, the functional organization structure is one of the best systems to increase productivity.
6. Connect remote workers
How can you connect with remote employees and make them feel valued? How can you keep them on track and ensure they’re feeling engaged? Because, let’s face it, remote employees are more likely to quit than their counterparts who work in offices.
According to Harvard Business Review, 52% of 1,153 surveyed remote employees felt mistreated and excluded at work.
One workaround to this problem is structuring the HR department in a way that allows it to connect with other employees. After all, if your HR team is struggling to communicate with these workers, how can they possibly be expected to feel motivated and connected?
Due to having fewer face-to-face meetings, it is vital to have the HR department act as the mediator between workers and management.
The company should structure the department so that HR can liaise with remote workers to ensure they understand their job responsibilities and feel comfortable with the company culture.
Tasia Duske, CEO of Museum Hack, who helms a fully remote team, suggests,
“For a fully remote company like mine, having an updated organizational chart is essential. Many work-from-home employees interact with coworkers on a limited basis. Virtual teammates can go months or years before becoming aware of each other's existence.
These maps give remote workers an idea of the extent of the company and can provide a stronger sense of being part of a team. These directories can make remote workers more likely to seek help from colleagues or socialize with peers.”
7. Solve the problem of the lack of resources
The most successful companies are those with a well-structured HR department organization.
A well-organized HR department will help you to get the right employee for the job. This is vital for a small business because replacing employees is expensive and time-consuming. You want to make sure the person you hire will be happy and stay with your company long term.
A good HR department will know how to find, interview and hire qualified employees who are a good fit for your company's culture. They'll also know how to retain these employees by providing adequate benefits and compensation that motivate them to work hard and stay with your company long term.
Human resource managers are also trained to ensure that they stick to the schedule, budget, and guidelines that were initially outlined.
This way, they can prevent the organization from wasting resources, ensuring that there is enough money to pay employees, purchase office necessities and more.
Furthermore, the HR department structure of the company determines how the departments work together and how accessible they are to one another. It also affects how quickly and efficiently the business can respond to changes in the external environment.
Tips and Best Practices for Structuring Your HR Department
HR expert Nora Jenkins Townson says that businesses must start setting up HR structures the moment they reach 30 employees.
Here's a quick overview of how these structures differ in small, medium, and large businesses.
For Small Businesses
If you're a small business owner, odds are you don't have an HR department, to begin with. Here are some tips for setting one up:
1. Identify skill gaps
After establishing a structure, you need to conduct an audit to ensure you have the right skills to execute all HR operations. You can upskill existing employees or recruit professionals. However, remember that an HR professional should be well-versed with existing workplace laws.
Key HR operations include:
- Compensation and benefits
- Training and development
- Safety and risk management
- Recruitment and selection.
Based on the audit, you can identify whether you need to hire HR professionals or not.
2. Build a structure
40% of small business owners handle HR themselves due to the lack of resources. But you need to hire HR professionals within a sound structure to ensure HR compliance.
If you're a small business with few employees, it may make more sense to outsource certain elements of HR to a third-party provider rather than hiring a full-time employee.
Purchasing a software product that provides payroll and benefits administration services may be more cost-effective than hiring someone to handle those tasks in-house.
If you do decide to create an HR department, the first step is to hire an HR director or manager who will oversee the department and create an internal structure. This can be based on the types of functions that need to be performed: recruiting, training, employee relations, compliance issues, and so on.
And if you do not have the budget to invest in more people, upscale yourself by taking courses, enrolling in webinars or becoming a member of SHRM, and networking with like-minded entrepreneurs.
3. Plan HR processes
Before you commence on your hiring journey, plan a set of processes to attract, onboard, retain and train the right talent. Here are some tips for doing so:
Attracting top talent:
- Simplify the job application process - According to CareerBuilder, up to 60% of job seekers quit online job applications if they are too lengthy or complex. On the other hand, 87% of job applicants claim that a positive interview process changes their outlook on the company and the role for good.
- Encourage employee referrals - Your current employees know what kind of person would be the right fit for your organization and can refer people who might not otherwise have applied for the position.
- Make use of budget-friendly HR software - There are several HR tech tools that are designed with small businesses in mind. They pack helpful features to automate tedious processes such as candidate sourcing, applicant tracking, recruiting, and more, without breaking the bank. Check our guide on the best HR software for small businesses to learn more.
- Create a strong employer value proposition (EVP) - The EVP is about defining your business culture, identifying the type of person most likely to fit into that culture, and then demonstrating why working for you would be lucrative and fulfilling.
Onboarding top talent:
- Create a comprehensive orientation program for onboarding new hires - The orientation program should include training on company culture, goals, and policies such as anti-harassment and diversity training.
Training top talent:
- Start with an assessment - How well trained do you need your HR leader to be?
- Identify what skills are important - Make sure you identify the specific skills you want your HR leader to have or acquire over their first few months.
- Set clear expectations - When new employees start working at your company, it's important that they know what is expected of them.
- Focus on soft skills - HR professionals need strong soft skills, such as communication, emotional intelligence, and conflict resolution.
- Partner with an expert - The effectiveness of your training will depend largely on its quality and relevance, which is why it makes sense to work with an outside provider.
Retaining top talent:
- Set up employee reviews - You can set up quarterly or annual reviews to check in with each employee and see what they think about the job so far.
- Provide benefits - It can be health insurance and some type of retirement savings plan. Beyond that, unique benefits like flexible work schedules or telecommuting may make your business stand out against competitors’ offers.
- Understand what your employees value - Talk to your employees early on in their careers about things that matter to them. While you cannot fulfill all their desires, it is important to understand what they want and work towards making it happen.
- Develop a culture of appreciation - Appreciate your employees and show them how much they mean to you by introducing company-wide awards and incentive programs.
- Make work fun and exciting - This can be achieved in several ways – from celebrating birthdays every month, creating a healthy competition among teams, or simply having casual Fridays.
4. Create a long-term HR staffing plan
Having an HR staffing plan while your small business continues to grow is important, as it allows your organization to break down its key functions and the people needed to perform those functions.
An HR staffing plan includes information on the type of employee needed, their responsibilities, and their skills to perform the job.
Here are six things to keep in mind as you develop your first HR staffing plan:
- Develop objectives
- Do a needs analysis
- Forecast the demand for staff and their skills
- Develop a Screening Process
- Streamline Your Interviews
- Make it Easy to Apply
However, hiring an experienced HR professional might not be affordable for a small business. In that case, you can hire:
- An external recruiter
- HR consultant
- Third-party HR outsourcing service providers to help staff the HR department
5. Offer competitive pay and benefit plans
Employee pay at any organization typically includes paid holidays or other paid time off (PTO), e.g. vacation time, sick days, etc, but employees need more than that.
Valuable benefits come in the form of health insurance, including individual and family, life insurance, reimbursements, employee assistance programs, and pension and retirement plan options.
A Zenefits survey found that 70% of employees agree that fringe benefits are a major consideration in evaluating future job opportunities.
6. Be compliant with tax regulations
Safety, employee welfare, diversity inclusion, and payroll are some of the labor laws you might need to check if you have employees.
There are also taxation issues to consider, such as paying payroll taxes, unemployment taxes, and workers' compensation insurance.
The IRS also requires businesses to withhold federal income tax, Social Security and Medicare taxes from each employee's paycheck; in addition, some states may require withholding of state income taxes as well. The employer is then required to pay these amounts over to the government on behalf of its employees.
To deal with these taxation issues, make sure to:
- Have an accounting system or hire an accountant
- Follow IRS guidelines
- Keep up with local regulations
7. Establish HR KPIs
Small or big, it is essential to measure success and identify areas for improvement. Track KPIs like employee satisfaction, productivity, absenteeism, talent acquisition and retention, and the average time it takes to hire an employee.
For Medium-Sized Businesses
In a mid-sized business with 100 to 999 employees, here are some tips for structuring your HR department.
1. Finetune your recruitment process
For every mid-sized business, there is a lot that goes into recruitment and on-boarding, which includes:
- Identifying platforms for posting job advertisements with a compelling description
- Targeting the suitable candidates
- Structuring the on-boarding process with a competitive offer
According to a CareerBuilder survey, the average cost of a bad hire is $17,000 annually in lost productivity, time, and cost of hiring and training a replacement. This implies the importance of a good strategy around hiring and recruiting HR employees.
In addition to the tips mentioned earlier, consider the following hiring and recruitment strategy tips to help your HR department thrive:
- Consider implementing programs that allow for flexible schedules or telecommuting. These options can attract top candidates and increase employee satisfaction, meaning less turnover. (It can also save your company money).
- If you’re planning on hiring more employees in the future, you may want to consider setting up a retirement plan now. Employees will appreciate it, and it will attract good talent.
- Create a clear career path for all employees, not just those within management positions. This will give them something to strive for and make them feel valued by your company.
In addition, mid-sized businesses should create and maintain the necessary employee files with a clear record of employee information on hand. It can help avoid disputes about hours worked, vacation days taken, or pay rates. It also allows you to effectively track the progress of your employees and ensure compliance with government regulations.
In particular, maintain the following employee files:
- Employee I-9 form: Used by the US government, the I-9 form, officially called the Employment Eligibility Verification form, verifies the identity and employment authorization of anyone hired to work for an organization.
- Personnel files - This file will include resumes, applications, offer letters, employment contracts, disciplinary action documents, training verification, performance evaluations, payroll details, termination document, and exit interviews.
- Medical files - This will contain any information related to an employee's health or medical issues, including insurance, notes from doctors, disability information, and any medical examination information.
2. Craft a robust onboarding process
Recruitment is a costly process, making it important to put effort into crafting a seamless onboarding process.
Case in point: Netflix
The OTP giant boasts an 11% employee turnover rate, which is better than Google, Amazon, and Facebook.
New hires are given a deck of slides when they start, giving them information about Netflix’s culture and technology stack. These slides also highlight what to expect on the job.
It goes to show how innovative ideas can help new hires assimilate into the company and become acclimated to the work environment.
3. Establish a rigorous performance management process
Provide regular feedback to your employees to help them understand what they have achieved and what needs to be improved. Let managers play the role of mentors and coaches.
4. Invest in training and development
Setting aside some funds for training and development will enhance your employees’ productivity and improve their overall motivation levels. You can collaborate with exclusive coaching platforms or invest in external training tools. Hire a training manager for better execution of such programs.
As a matter of fact, 66% of L&D professionals claim that learning and development have become a more strategic part of their organization.
5. Automate or outsource payroll
Payroll processing is another time-consuming task that involves a lot of calculations, deductions, taxes, and compliance with various state and federal regulations.
Either outsourcing to third-party administrators for payroll and related tax duties or having payroll software would help busy employers meet filing deadlines and deposit requirements.
6. Collect Feedback
Make use of employee listener tools like surveys, town halls, suggestion boxes, and performance reviews to build a better employee experience.
7. Performance evaluation process
Conducting a quarterly or annual reward and performance appraisal system through formal feedback and continuous informal feedback will have a strong impact on employee engagement and morale.
For Large Businesses
While the core needs and requirements of large organizations are the same as mid-size organizations, some processes still vary.
Large businesses set aside huge budgets for human resource teams – and have formal and rigid structures in place.
Large businesses have recruitment specialists for all verticals. Some of these companies run ads, others use internal job postings, and some have referral schemes to find suitable candidates within the organization.
Furthermore, they have tried and tested hiring processes. There are multiple rounds of interviews, tests, and reference checks to ensure the candidate fits the role.
Another way to recruit good talent is to outsource the process – either partially or completely.
3. Level of responsibility
Large organizations hire specialized people for specific job roles. For example – a Payroll Specialist for payroll management.
Here is an overview of how the hierarchy looks in large organizations:
- Chief Human Resources Officer (CHRO)
- Vice President of HR
- Chief Diversity Officer
- HR Business Partner (HRBP)
- Recruiting Director
- HR director
- Compensation and benefits manager
- HR specialist
- HR generalist
- Human resource information specialist
- Recruiting coordinator
- HR coordinator
And lastly, they heavily invest in HR software to streamline their processes and manage thousands of employees simultaneously.
Best Tools for Creating HR Organization Chart
There are many ways to create an organization chart, and you can use several different kinds of software to do so.
Here are some of the best tools for creating an HR Organization Chart:
Creately Pricing: Freemium (then starts at $4/month)
Creately is a cloud-based application for creating, sharing, brainstorming, and collaborating on organizational charts and diagrams with your team. You can choose from a wide variety of templates available in the template library and customize the shapes and lines according to your requirements.
There are thousands of templates for different use cases, organizations, departments, and more.
Alternatively, the drag-and-drop functionality makes it easy to add shapes and create your HR organization chart from scratch.
You can also use smart connectors that automatically adjust the line based on the position of the shape. Creately figures out what you want to add next, making the entire process faster.
The best part? Creately enables real-time collaboration with other users while creating charts.
For example, if you need to create an organizational chart with information from various departments, such as Human Resources, Marketing, etc., each department can add their relevant input into their respective sections of the diagram.
Other key features include:
- Custom databases
- Kanban boards to track candidates and progress
- Data-driven docs with @mentions
- Visual modeling with multi-perspective analysis and planning
Ryan Yount, COO at LuckLuckGo, rates Creately as one of the best tools for creating an organizational chart.
According to Ryan,
“The best tool for creating an organizational chart, in my experience, is Creately. That’s because it provides multiple frameworks and templates and advanced styling and color options setting clear boundaries.
The software also assists in the visualization of OKRs and enables connecting with KPIs to better coordinate efforts. Further, the tool facilitates having all your stakeholders on the same page using a shared workspace to make collective decisions.”
2. Microsoft Visio
Microsoft Visio Pricing: Starts at $5/month/user
Microsoft Visio makes it possible to visualize and create HR organization charts with shapes, styles, and effects.
It has many pre-designed templates and shapes to get you started, so even first-time users won’t have a hard time.
According to Mukul Kumar, Worldwide Marketing Manager for Microsoft Visio,
“At its core, Visio is about visualizing ideas and connecting things together on a canvas.”
You can pick any template you like, and if you want to add more steps, simply drag and drop pre-designed elements from the sidebar, label them, and create the relationships based on where it fits in the process.
Microsoft Visio also enables real-time collaboration, so you can work with your team to create and edit organization charts simultaneously.
All editions of Visio feature the same general functionality as Microsoft Word and Excel. For example, all versions allow users to select text and color choices. Furthermore, Visio can accept data feeds directly from Excel files or Access databases.
Pricing: 21-day free trial, then starts at $1 per employee + $59.99 platform fee per month
Freshteam is a cloud-based software suite that helps businesses manage recruitment, onboarding, and human resources processes. While creating organization charts isn’t its primary function, Freshteam does help you auto-generate organization charts.
You can create a visual employee database and update their Reporting Manager and role. And every time you add a new employee, Freshteam will automatically add them as part of the Org Tree under the respective position.
Aside from the employee’s role, you can also add information like email and phone number.
Other key features include:
- Managing interview processes
- Integration with third-party video apps
- Creating a custom hiring process across all branches of HR
- Custom calendars to track absent days
However, you might find it lacking in sophisticated features similar to its counterparts. For instance, Freshteam doesn’t provide organization charts based on departments and teams.
Pricing: Freemium plan (paid plans start at $11.93)
Lucidchart is a cloud-based application that offers pre-built templates and drag-and-drop functionality, so you can create and modify your own HR organization chart.
With Lucidchart, you can create organization charts that define job roles, responsibilities, and reporting relationships. You can also use it to define your company's information technology architecture or to communicate a new marketing strategy.
Positioning of objects and coordinates through page settings is also straightforward inside the dashboard.
Additionally, modify the shapes and sizes of the organization chart of your own volition – from the shape library.
Other key features include:
- Create rules or use conditional formatting
- Apply rules for conditional checking
- Collaborate in real-time using chat and comment features
While HR organization structures vary from one another, one thing remains true, they’re necessary to have in an organization. When creating an HR organization structure, always keep your objectives and long-term goals in mind so it can serve you accordingly.
It's very similar to placing a jigsaw together or assembling anything based on detailed instructions. If you fit the wrong piece in the wrong place, the whole thing can be ruined or not work as intended.
And as always, we are big proponents of utilizing software to streamline HR processes, including the development of HR structure and charts. If you're not sure where to start, check out our guide on the best HR Org Chart Software.