Seeking Guidance on Management-to-Staff Ratios in Indian Manufacturing: How Do You Calculate Yours?

Dear HR folks, I have been working in a heavy construction equipment manufacturing company (OEM) as a corporate HR, having an employee strength of approximately 3,500 employees, including contractual workers. I have been asked by the management to prepare the trend of management-to-staff ratio in manufacturing industries in India.

Could you please help me prepare this ratio in the manufacturing sector?

Senior-level Management Ratio

Middle-level Management Ratio

Junior-level Management Ratio

Staff Ratio

Contractual Workers Ratio

Looking forward to hearing from you soon.

Regards

Dear A. Abhivisit,

There is no standard formula for the staff-to-managers ratio that works for all types of manufacturing companies. The total staff depends on the following factors:

a) The level of automation in the production processes
b) The number of production processes involved in the production
c) Methods of scheduling used in the production processes
d) The machine downtime because of stockout (of the material)
e) The machine downtime because of the poor quality of the material
f) The machine downtime because of curative maintenance
g) The machine downtime because of preventive maintenance
h) The number of components produced in-house
i) The number of components purchased from the suppliers
j) The turnaround time for the final assembly of the finished product
k) The time spent on reworking
l) The time spent in QC in the intervening stages as well as at the final stage
m) The competence of the production staff (please note, I am saying "competence" and not "experience")
n) The level of education of the staff
o) The Operations Research (OR) techniques used in the entire company in general and in the production department in particular
p) Is the "Quality Management" philosophy of the organization or is it just lip service?
q) The overall organization's culture of the company. Are the policies people-centric?
r) The overall interpersonal environment in the company. What is the level of rivalry amongst the departments or the managers?
s) The level of coordination amongst the Production, Purchase, and Sales departments
t) Is the labor union dormant, active, or hyperactive?
u) The level of empowerment of the supervisors and managers in your company
v) The level of bureaucracy in your company. How much time does an average manager have to wait for getting approval?

The list of points is exhaustive. However, if one were to study the systems and processes of your company, the above list would get even longer. Against this backdrop, deciding the staff-to-managers ratio is very difficult.

Solution to the Staff-to-Managers Ratio Issue

So what is the solution? The solution is not to worry about the staff-to-manager ratio but to measure:

i) The costs and ratios associated with the production, purchase, and quality departments
ii) The turnaround time of the processes for the production, purchase, and quality departments

Your goal should be to:

iii) Optimize the costs
iv) Increase/decrease some ratios
v) Reduce the process turnaround time for the production, purchase, and quality departments

Above all, you need to measure and strive to increase:

vi) Multi-factor productivity
vii) Partial productivity, especially labor productivity
viii) Measure the labor index
ix) Quality-Productivity Ratio (QPR)

Final Comments

The points mentioned from (vi) to (ix) would require a reduction in manpower also. This will reduce your manpower and improve the staff-to-managers ratio.

The staff that you have been given pertains to Operations Management rather than HR Management. In fact, no single person can handle this activity, but you have to form an "Operations Study Cell" that continuously studies the production and operations processes. To keep your boss in good humor, you may do some work; however, being from HR, you have limitations, and these limitations will cast a shadow on your work. Anyway, feel free to contact me if you wish to discuss this further.

All the best!

Dinesh Divekar

Dear A. Abhivisit,

The ratio of workmen, staff, and managers in an establishment is determined based on the requirements of the manufacturing companies. The ratio aspects vary from one establishment to another due to their production processes and the level of mechanization involved.

In most manufacturing industries, a separate department, Industrial Engineering, exists to devise efficient systems for the plant. This includes determining the requirements of different categories of workers (permanent and contractual), supervisors/foremen, managers, staff, as well as materials and energy needed for the operation.

It appears that your company does not have an industrial engineer to assess the work that has been assigned to you. This is a complex task as it involves various formulas and equations. It would be beneficial to consult an industrial engineer or an industrial engineering firm to achieve better results with comprehensive data about your plant. If this is not feasible, you can conduct time and motion studies of the processes by involving the heads of each department.

Dear Colleague,

The views provided by our colleagues are very valid and offer valuable insights. It was a great learning experience for me as well. Please find below my additional sharing and suggestions:

Similarly, you possess your own valuable insights and expertise in this operational area, which will complement the existing views and suggestions.

In the realm of Manufacturing Industries

During my over 30 years of HR experience across various group companies in the manufacturing sector, we have traditionally adhered to a Pyramid structure. The bottom line ratio is significant, while it tapers as you move up the hierarchy. At the topmost level, the numbers are minimal and easily countable. In terms of costs, the upper echelons are more cost-oriented compared to the lower levels.

In your current role at a heavy construction equipment manufacturing company (OEM) as a corporate HR with approximately 3500 employees, including contractual workers, you have been tasked by management to analyze the management to staff ratio trends in the Indian manufacturing industry.

For instance:

- Senior-level management ratio
- Middle-level management ratio
- Junior-level management ratio
- Staff ratio
- Contractual workers ratio

From my personal experience

Determining an organization's Talent Count should be based on internal benchmarking and an internal Industrial Engineering Study. External comparisons across the manufacturing sector may not yield fruitful insights due to differences in factors such as factory layout, technology adoption, production flow, talent skill levels, support technology for business functions, automation levels, and other relevant aspects.

Therefore, there is no one-size-fits-all solution to derive these numbers; internal analysis is crucial. I can share our approach from several years ago, which may provide valuable insights for your utilization. We often embarked on such assignments with limited initial clarity but progressed systematically.

Our methodology typically involved the following steps:

1. Formation of a Task Team (TT) comprising key stakeholders.
2. Mapping Matrix of Work Process (MWP) by thoroughly assessing work processes and automation levels.
3. Creation of a Talent Table with current and proposed numbers.
4. Reference benchmarking from similar industries.
5. Collaboration with the TT to finalize ratios based on the concept of "Profit Per Employee" (PPE).
6. Iterative discussions and adjustments with stakeholders, including Trade Union Leaders.
7. Setting targets for automation and manpower optimization.

In conclusion, developing an internal strategy tailored to your organization's unique characteristics is essential to determine the optimal management to staff ratio. Leveraging industry resources and benchmarks can also provide valuable insights for your analysis.

Best Regards,
Dr. P. Sivakumar
Doctor Siva Global HR
Tamil Nadu

This task is not solely the responsibility of HR. As shared by learned members, there are many aspects, areas, and departments involved. Therefore, the task requires the appropriate formation of teams with experts in their respective areas to provide the necessary inputs in terms of manpower, resources, and the company's ability to invest in resources for automation, technology, and expertise needed to maintain an upward trajectory for at least the next fifteen years. It should also include business continuity management systems and procedures to ensure sustenance even in emergencies.

I agree that a simple pyramid hierarchy structure works, and the ratios can be adapted, but the best results can be achieved through a study and inputs regarding the company's business, their short and long-term goals, the qualitative expertise required, resource investment, inventories, production flow chain, and many other resources that may be necessary. Considering all these and many other factors, one can determine the ratios of human resources required from top to bottom to effectively manage an organization with the best planning and outcomes for the next several years.

I suggest that a reference study of a similar kind would be of great help.