Doing more with less: a guide to structuring your HR department (+ a free checklist!)

The workplace is evolving rapidly, presenting new challenges for HR leaders.

Half of HR leaders have faced budget cuts in the past year, and over one-third experienced hiring freezes, promotion halts, layoffs, or resignations.* These pressures demand agility and strategic thinking, and outdated organizational models simply won’t cut it. In today’s environment, structuring your HR department effectively is mission-critical.

However, restructuring HR departments is far from easy: Less than a quarter of restructuring efforts improve performance, often due to mismatches with company goals and scale. In fact, McKinsey research suggests that “small structural changes or off-the-shelf approaches for delayering rarely result in lasting value.”**

To succeed, HR leaders need tailored strategies that align with their organization’s unique needs. This guide offers a step-by-step process to help you design an HR structure that drives impact — featuring expert-backed insights and a free, downloadable checklist. 

🤝 Your customizable HR department blueprint awaits

Building a human resources department that can adapt and grow with your organization is no small feat. Our checklist can help you get it right.

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*Leapsome Workforce Trends Report, 2024
**McKinsey & Co, 2023
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Why your HR structure matters more than ever [+ free guide to structuring a people-centered HR department]

Today’s HR departments are expected to achieve more with fewer resources. According to our research, 70% of HR leaders say the current business climate is increasingly challenging. So, if you want to structure an HR division that supports and empowers employees across your organization, consider how you can minimize disruption and maximize impact with limited resources.

Julia Reis, Founder and Chief Consultant at Julia Reis Consulting, puts it succinctly: “HR might have seemed like the ‘winner’ during the pandemic’s workplace shifts — but with budgets tightening again, the focus has shifted to efficiency.”

Efficiency, however, doesn’t mean sacrificing impact. It means adopting a holistic approach to HR department structuring that considers everything from company size and geographic spread to budget and business goals.

Weighing all these different factors can overwhelm even seasoned People professionals. But we’ve got you covered with this free, downloadable checklist to help you structure your HR department — even as you grow and evolve.

🚀 Structure your HR department for success

Discover how to align your HR structure with business goals.

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6 actionable steps to structure your HR department

Developing a human resources team structure that aligns with your organization’s cultural and business goals is a complex task. Many HR departments develop in response to immediate demands or external pressures, which can lead to confusion around roles and responsibilities in the long term.

It’s important to step back, take stock, and apply a strategic approach to ensure your department is well-positioned to meet your organization’s current and future needs. 

Whether you’re starting from scratch or looking to adapt your current setup, these steps will help you create an HR division that runs seamlessly and positively impacts your organization at all levels.
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1. Evaluate your department’s current structure

McKinsey research suggests that future-ready companies know who they are, how they operate, and how they grow. 

So, before making changes, assess your HR department’s strengths and gaps. What tasks is your team responsible for? Are workflows streamlined or bogged down by bottlenecks?

Start by creating an inventory of your HR functions and roles. Include every task your department is responsible for, including managing core HR and administrative tasks, time tracking, payroll, and employee engagement initiatives. 

Use org charts and process maps to visualize reporting lines and dependencies. Complement this with a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis to uncover improvement areas by asking questions like:

• Is the department hitting KPIs like time-to-hire, employee satisfaction scores, or low turnover rates?
  
• Does the department currently support and contribute to overarching company goals?
  
• Are lines of communication clear and open within the HR department and between human resources and other departments?
  
• Is the general workflow streamlined, or are there bottlenecks and/or repeated hand-offs that could be eliminated?
  
• Are processes quick and efficient, or are key functions like onboarding and performance reviews taking too much time?
  
• Does the department promote a culture of continuous improvement and performance management?
  
• How does the current department structure compare with competitors and industry best practices?

Gather feedback from your HR team and other departments through surveys and open-ended discussions. Anonymized responses often yield the most candid insights.

Tools like Leapsome Surveys can help you create and send out questionnaires. Our platform also enables you to quickly personalize surveys from expert-verified templates and use artificial intelligence to analyze responses and get actionable recommendations.

💡 Making surveys anonymous and offering opportunities for ad hoc feedback like suggestion boxes can ensure you get the complete, honest picture.

2. Sync HR functions with company goals 

HR’s structure should directly support organizational objectives. For example, if your company aims to double product launches this year, HR can prioritize hiring top-tier R&D talent and fostering innovation through training programs.

Talent strategist Yvette Kennedy highlights how critical it is to structure HR around capabilities that drive talent development and business growth. “Broader structures that include people analytics, employee experience, and total rewards have specific capabilities that need depth to accelerate the impact.”

To that end, start by defining, exploring, and discussing overall company objectives. Work with senior leadership to ensure that the HR department interprets the organization’s short- and long-term goals in the same way and understands how they connect with human resources objectives.

Then, using the inventory of tasks you created in the previous step, explicitly connect HR functions and goals with company objectives, setting actionable, measurable goals and tracking progress along the way. 

💡 Consider this example: If your organization plans to launch at least two new products annually, identify the functions that support that.

If you don’t have the right talent on the team at that moment, you may want to set a goal to hire a top-tier engineer or designer that quarter. Or perhaps you want to focus on people enablement and fostering employee innovation with dedicated training and development programs.

Goal-setting software like Leapsome Goals can help align HR objectives with broader company aims by visualizing goal trees and enabling cross-departmental collaboration. You can also set up cascading goals to translate high-level objectives across the organization.
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3. Set up effective technology

Using the right digital tools empowers the HR department to make data-driven decisions, improving its effectiveness and adaptability — and our 2024 Workforce Trends Report found that 98% of companies already invest in HR tech.

Once you’ve determined your optimal department structure, empower your People team with software that can help streamline HR processes and enrich organizational culture.

Platforms like Leapsome streamline administrative tasks while enhancing strategic initiatives like performance management and employee engagement.

For instance, People professionals can use Leapsome to streamline administrative HR tasks like absence management, time tracking, and payroll. But it doesn’t stop there — our HRIS & People enablement platform can also help HR hold more effective meetings, set up clear compensation strategies, and improve the employee experience with surveys, feedback tools, and impactful, growth-oriented reviews.

🦾 Empower your HR department with Leapsome 

Streamline processes and elevate the employee experience — all in one platform.

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4. Assess your department and company size

Striking the right balance in HR team size is crucial; a mismatch between department size and structure can hinder your ability to scale and adapt with the company. If you create a department that’s too small to meet organizational needs, your team can become overworked and overwhelmed. 

According to SHRM, the average HR-to-employee ratio is 1.7 HR per 100 staff members, though this could increase to 4.5 for some businesses. Smaller organizations tend to have higher HR-to-employee ratios (3.4 HR professionals per 100 staff members) due to higher demands for hands-on support.

Consider your company’s current size and growth trajectory. For example:

• Startups may benefit from HR generalists who wear multiple hats
  
  
• Mid-sized companies might need specialized roles in talent acquisition or employee experience.
  
  
• Larger enterprises often scale with leaner HR-to-employee ratios but invest in strategic roles like DEIB managers

However, Hannah Keal, former Chief People Officer at Unleashed, reminds HR leaders that determining the right department size and structure ultimately depends on the unique requirements of their organization and its employees at any given time:

“There's no magic HR-employee ratio. The size and make-up of your People team should depend on many factors — your company's growth plans and ambitions, the amount of investment you make in tooling and people infrastructure, and the amount of hands-on coaching and support your leaders and managers need.”
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5. Identify the best HR structure for your company

You should now have a clear understanding of:

• Your current HR department’s strengths and weaknesses
• Your HR department and organizational goals
• Your HR department’s scale and size

The next step is choosing the right structure for your human resources department.

Evaluate the pros and cons of centralized, decentralized, matrix, and outsourced models. Here’s a quick overview (more details further below):

• Centralized structure: Best for consistency and cost-effectiveness but may lack agility
  
  
• Decentralized structure: Empowers teams to act quickly but requires strong coordination
  
  
• Matrix structure: Combines central oversight with autonomous teams, ideal for dynamic environments
  
  
• Outsourced structure: Great for scaling rapidly or accessing specialized expertise

A centralized structure could be a good choice for companies with a unified culture and business model that prioritize consistency and cost-effectiveness since there’s no duplication of resources. However, centralized departments can be slow to approve decisions and adapt to changing needs, so this model isn’t always the best choice for organizations that need to adapt and innovate quickly.

Organizations with varied business units or different branches might want to consider decentralized structures like federated or business partner models. Decentralized, goal-oriented HR teams can be good options for companies looking to empower smaller, cross-functional teams to act quickly and hit KPIs. 

Matrix structures promote flexibility and are great for dynamic business environments but can be too complex for some organizations. 

Last, companies looking to scale quickly without major human resources overheads may decide on an outsourced structure. Building outsourcing into your HR structure may also be a good idea if you need high expertise for particular tasks. For instance, contracting an immigration expert might be better than hiring one if attracting overseas employees isn’t a central part of your business.
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6. Review, adapt, and scale

Your HR department structure should evolve alongside your business. You’ll need to regularly check whether your current setup meets organizational needs and goals — especially as they shift over time.

Set a defined period to review your department’s setup and strategy. You can begin by returning to the questions in step one to reevaluate your structure and ensure the communication, workflow, and processes are all working for your team. Be sure to celebrate what’s going well and identify key areas for improvement. 

You should also perform data-driven audits of HR functions. Track KPIs like employee turnover rate, cost per hire, and benefits utilization rate. Go beyond the numbers by using pulse surveys and feedback tools to get deep insights into employee satisfaction and experience. 

As your company needs change, continue to benchmark your HR department’s size against industry standards — and remember that larger companies don’t always need the same HR-to-employee ratio as smaller businesses. Research shows that, in general, the HR ratio per 100 employees decreases each year as organizations develop. In addition, as companies grow, HR roles tend to diversify. While there may be fewer HR people in proportion to company size, larger organizations often expand HR roles to strategic change agents, diversity and inclusion managers, and employee champions.    

Based on her experiences, Hannah Keal advises that the most significant factor in determining team size and skills mix is your stage of growth: 

“Early-stage companies and start-ups benefit from generalists, hands-on builders, and fractional strategic support. Being intentional about your People practices from the get-go saves a lot of time and money as you scale. As you grow your team, you'll likely need to bring in a senior-level People hire, supported by specialists in People Operations, People Experience, and People Partnering.”

💡 Some tips to keep in mind as you adapt or scale your department:

• Use technology to enable scalable people processes throughout the transition.
• Be prepared to create new roles or remove redundant ones based on your current needs.
• Consider outsourcing specific HR functions if your growth is too rapid to manage internally or you need specialized support.
• Regularly reassess your HR department’s strategy to ensure you evolve in line with your company’s long-term goals.
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Key HR department structures to be aware of

Choosing the right department structure can significantly impact the efficiency and effectiveness of HR functions. It’s essential to make sure that your org chart fits your team’s needs across the different phases of the company life cycle. 

Here’s a quick guide to the main HR department structures you’ll want to consider: 
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Matrix structure

Matrix-style human resources departments mix decentralized and centralized approaches. They have a centralized HR leadership team that oversees things but also include different teams working on various functions, goals, business types, or projects. Each team has some autonomy but reports to a primary manager or leader.

This is by far the most common organizational structure — 84% of US employees work in a company that uses a matrix model.
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Centralized structure

In a centralized HR structure, activities and decisions come from a single, central human resources department. They usually have a central HR leadership team that makes the final decisions, with different subunits, managers, and individuals who take care of specific functions like training, recruitment, benefits, and employee relations.
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Decentralized structure

Decentralized departments use a flat structure with autonomous, cross-functional HR teams assigned to specific goals, regions, or business divisions. 

In goals-oriented models, different human resources units support different company objectives, from driving key performance indicators (KPIs) to promoting diversity, equality, inclusion, and belonging (DEIB) initiatives. Federated or business partner models involve assigning HR teams to distinct company branches or departments so they can focus on local needs. 
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Outsourced structure

With outsourced models, a core team of decision-makers generally oversees HR strategy and measures results. However, they delegate key functions such as payroll, recruiting, or legal compliance to contractors, freelancers, consultancies, or other third parties.

One of the most popular outsourced HR department structures is the shamrock model, which combines three main groups:

• A small full-time team
• Contracted staff brought on for specific projects
• External service providers or freelancers 
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Structure your human resources department for success

Whether you choose a centralized approach for consistency, a decentralized or matrix structure for agility, or an outsourced model for cost-effectiveness, your HR department should empower and engage employees across the organization.

Adding a robust, holistic HR platform like Leapsome into the mix can take your People management strategies to the next level.

Our flexible suite of tools can integrate with any HR structure. Choose and implement our customizable modules to streamline your key HR tasks and processes, run meaningful performance reviews and employee surveys, set and track goals across your organization, set up transparent, motivating compensation programs, and encourage continuous learning and development. 

A well-structured HR department backed up with Leapsome’s all-in-one platform is an investment in your business’s long-term success.

📈 Scale your HR department with confidence

Leapsome’s HR analytics and reporting tools give you the insights you need to enable your team — even as you grow or restructure.

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