A guide to structuring your HR department for success (& a free, downloadable checklist!)

Organizational environments are changing — and the best human resources departments are keeping up the pace. An impressive 89% of HR divisions have either restructured or plan to do so within the next two years. (1)

People departments must be agile and strategic to thrive in a work environment that’s shaped by hybrid work models, shifting employee expectations, and AI-driven processes. Using outdated organizational structures is as ineffective as relying on old paper maps in a GPS world. It's not just inefficient — it could lead you badly astray.

But updating your department structure isn’t just about adapting to the times. It’s equally as important to tailor your approach to your organization’s specific needs, especially if you’re scaling or transforming. 

Less than a quarter of restructuring efforts actually improve performance — often due to a mismatch with the company’s scale, goals, or stakeholders. In fact, McKinsey research suggests that “small structural changes or off-the-shelf approaches for delayering rarely result in lasting value.” (2)

With this in mind, how can HR leaders avoid the pitfalls and structure their departments for success? Our step-by-step guide will walk you through how to implement the right HR structure for your company at all stages of development. Use our expert-backed insights and free, downloadable checklist to take action and start updating your department structure today. 

1. Gartner, 2023
2. McKinsey & Co, 2023
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Key HR department structures to be aware of

Choosing the right department structure can have a huge impact on the efficiency and effectiveness of HR functions. It’s important to make sure that your org chart fits with 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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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 that are 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, and inclusion (DEI) 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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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 that work on various functions, goals, business types, or projects. Each team has some autonomy but also reports to a main 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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Outsourced structure

With outsourced models, there’s generally a core team of decision-makers who oversee HR strategy and measure the results. However, they delegate certain key functions, like 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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Free download: A guide to structuring a people-centered HR department

Department structures aren’t one-size-fits-all frameworks. To structure an HR division that supports and empowers employees across your organization, you’ll need to keep multiple factors in mind. That includes everything from your company size and geographic spread to your budget constraints and overall business goals. 

Weighing up all these different considerations can overwhelm even seasoned people ops professionals. But don’t worry — we’ve got you covered with this free, downloadable checklist that shows you exactly how to structure your department, even as you grow and scale and your needs change.
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Align your HR team with your company culture and organizational goals. Use our guide as your roadmap.

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6 actionable steps to structure an HR department that aligns with your company needs

Building a human resources team structure that matches your organization’s long-term requirements is no small feat. Many HR departments develop in an ad hoc way, often 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 make sure your department can 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 aligns seamlessly with your unique company culture and goals.
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1. Evaluate your department’s current structure 

Before you can optimize the way your human resources team is organized, you need to have a clear understanding of the current state of things. This step allows you to identify what’s working and what’s not so you can identify the gaps that need to be filled and make targeted improvements.

Start by creating an inventory of your current HR functions and roles. Include every task that your department is responsible for at that moment, including hiring, payroll, compliance, managing employee benefits, and employee engagement. If you don’t already have an org chart, map out job titles, reporting structure, and areas of responsibility as they currently stand. Use arrows or lines to show how different roles and functions interact or depend on each other so you can understand the workflow and quickly spot any bottlenecks or inefficiencies.

Next, run a SWOT (strengths, weaknesses, opportunities, threats) analysis by asking questions like: 

• Is the department hitting KPIs like time-to-hire, employee engagement and employee satisfaction scores, or low turnover rates?
• Does the department currently support and drive forward the company’s overarching 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 personnel department structure compare with our competitors?

Set up a team meeting and put these questions on the agenda so employees have time to consider their answers in advance.

In addition, use a tool like Leapsome’s Surveys module to create a questionnaire that includes these kinds of questions. Our platform also enables you to quickly personalize surveys from expert-verified templates and easily analyze the responses for effective people analytics. 

Send a team-specific survey to all current HR team members to get a pulse on how they feel the department is working and how satisfied they are with their roles. 

Then, send out a survey to members of other departments so you can understand how they feel about the HR function. Make sure you include a space where people can add open-ended thoughts, as they might have insights on a particular area you hadn’t thought to ask about. Making surveys anonymous and offering opportunities for ad hoc feedback like suggestion boxes can make sure you have the full, honest picture. 
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2. Sync HR functions with company goals 

Our Workforce Trends Report showed that 27% of dissatisfied employees thinking of leaving their company cited “lack of clarity/agreement on company direction” as a reason. It’s critical that department structures are clearly aligned with company goals so teams understand exactly where the organization is headed and how their role contributes. 

Start by defining, exploring, or discussing overall company objectives. Work with senior leadership to make sure the HR department interprets the organization’s short and long-term objectives in the same way and understands how they align with human resources goals.

Then, using the inventory of tasks you created in the previous step, explicitly connect HR functions and goals with company objectives. For example, if your organization plans to launch at least two new products annually, you’ll want to identify the HR aims and functions that support that. If you don’t have the right talent on the team at that moment, maybe you’ll need to set a goal to hire two top-tier engineers or designers that quarter. Or perhaps you’ll want to focus on people enablement and fostering employee innovation with dedicated training and development programs. 

Above all, make sure you set actionable, measurable goals and track your progress along the way.

Goal-setting software like Leapsome’s Goals module keeps everyone aligned and enables different departments to collaborate on common objectives, visualize goal trees, and add context with interactive goal communications. You can also set up cascading goals to translate high-level objectives across all levels of the organization.

3. Assess your department & company size 

A mismatch between department size and structure can lead to inefficiencies and hinder your ability to scale and adapt as the company grows. If you create a department that’s too small to meet organizational needs, your team can easily become overworked and overwhelmed. However, a giant HR department can cause inefficiencies and unnecessary overhead for smaller companies. 

Start by assessing the current size of both your organization and your HR department. Consult with leadership to understand planned growth in the short and long term so you can take that into account as you structure your HR division. 

Then, compare your HR-to-employee ratio with industry benchmarks to find the ideal department size. A recent SHRM report found that, on average, organizations employ 2.57 HR people for every 100 staff members. 

However, determining the best ratio for you is a little more nuanced than that. Smaller organizations tend to have higher HR-to-employee ratios — the average is 3.40 HR staff for every 100 employees. This is generally because they have fewer staff members and may require more people dedicated to hiring and onboarding should they need to adapt to sudden changes or scale rapidly.

For medium-sized organizations, the number of HR people per hundred employees drops to 1.22, and for large organizations it’s even less — 1.03 — mostly because of economies of scale. 
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4. Identify the best 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. This will depend on your organization’s unique needs and priorities. 

For example, 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 that are 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 levels of expertise for very specific tasks. For instance, contracting an immigration expert might be a better option than hiring one if attracting overseas employees isn’t a central part of your business.
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5. Set up effective technology

Using the right digital tools lets you make data-driven HR decisions, improving your department’s effectiveness and adaptability. 

Once you’ve determined your optimal department structure, empower your HR team with tech solutions for holding effective meetings, setting up clear compensation strategies, and improving the employee experience through surveys, feedback tools, and impactful, growth-oriented reviews.

Leapsome’s flexible people enablement platform is designed to support HR engagement initiatives across different organizational structures, helping human resources departments meet their most important goals. 
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6. Review, adapt & scale

Structuring an HR department isn’t a one-and-done job. You’ll need to regularly check whether your current setup meets organizational needs and goals — especially as they shift and evolve over time.

Set a defined time 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 make sure 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 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. 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 overall, larger businesses often expand HR roles to strategic change agents, diversity and inclusion managers, and employee champions.    

Hannah Keal, Chief People Officer at Unleashed, reminds HR leaders that determining the right department size and structure will ultimately depend on the unique requirements of their organization and people:

“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.”

Based on her experiences, Hannah advises that “possibly the biggest 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.”

Here are 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 either 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 if you need specialized support.
• Regularly reassess your HR department’s strategy to make sure you evolve in line with your company’s long-term goals.
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Structure your human resources department for success

Whether you go with 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 whole organization.

Adding a powerful people enablement tool like Leapsome into the mix can take your HR strategies to the next level.

Our flexible platform can integrate with any HR structure. Choose and implement our customizable modules to run meaningful performance reviews and employee surveys, set and track goals across your whole 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 tools is an investment in your business’s long-term success.
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