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Turning Points in HR

Experts weigh in on the most important events in U.S. history that either redefined or greatly impacted the human resource profession.

Saturday, April 1, 2006
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A century ago, philosopher and essayist George Santayana famously proclaimed that those who cannot remember the past are condemned to repeat it. But does that nugget of wisdom apply to the world of human resources?

Perhaps. More to the point, a review of landmarks in the annals of HR may yield insights into where the profession is headed and, at a minimum, lend some perspective on how far it has come.

Such a reminder may inspire nostalgia, a deep sense of satisfaction at progress achieved -- and hope for the future. With all that in mind, the editors of Human Resource Executive® considered the sweep of U.S. business and labor history and, with expert help, identified dozens of key events whose impact may be significant enough to classify them as turning points in the evolution of human resource theory and practice.

Indeed, the fallout from many of the HR turning points has been so broad and deep as to jolt American society as a whole in one direction or another. Thus, it is hard to imagine many other professional fields whose evolution has been so closely intertwined with the ups and downs, twists and turns of economic and social progress. (Education is another that comes to mind.)

A quick note on the process: The initial roster of "prospective turning points" identified by the editors of Human Resource Executive® was presented to a brain trust of distinguished HR academics (see sidebar). Panelists were asked to single out their top 10 picks to facilitate a consensus-based distillation of that longer list. Several panelists contributed their own personal turning-point candidates, some of which were incorporated into the master list. From the panelists' top-10 lists, a consensus top-20 list was formed. Those items are laid out in these pages along with an additional 20 "honorable mentions" included in the timeline.

Many turning points are focused and self-contained events that occurred at a single point in time, such as the infamous 1911 Triangle Shirt Waist Co. fire, whose ultimate impact spread widely throughout the broad realm of employer-employee relations.

Others, such as the 1994 launch of The Monster Board, had a dramatic impact--but primarily on a particular function of HR--in that case, online recruitment. Still others were identified as key symbols of a broader trend that rocked -- or continues to rattle -- HR. An example is the 1977 formation of the Human Resource Planning Society, a manifestation of the emergence of the strategic perspective in HR.

For all their diversity of opinions, at least half of the panelists agreed that four of the turning-point candidates are worthy of special status. The "top four" list:

* The 1886 foundation of the American Federation of Labor;

* The 1909 publication of Principles of Scientific Management;

* Early 1930s research by the likes of Elton Mayo and Abraham Maslow into the human function in the workplace; and

* The 1964 enactment of the Civil Rights Act and the subsequent 1965 formation of the U.S. Equal Employment Opportunity Commission.

After the longer list was boiled down to the top 20 moments in history to impact the human resource profession, the panel of experts was asked to reflect on any broader conclusions suggested by the list its members came up with -- particularly regarding what it suggests about the future of HR.

No Turning Back?

The earliest historical events generally garnered the least commentary because their significance is perhaps most widely -- and easily -- understood. For example, the advent of the industrial revolution in the United States, as represented in the 1793 construction of the first American water-powered textile mill, is the stuff of secondary school history textbooks. The fact of U.S. industrialization is a "given"; but where the world of business goes from there offers more grist for discussion.

Thus, "the most recent [developments] almost by definition are the most significant going forward," says Peter Cappelli, director of the Center for Human Resources at The University of Pennsylvania's Wharton School.

But for New York native Sheila Wellington, growing up with vivid accounts of the 1911 Triangle Shirt Waist Co. fire passed down through her family rendered the significance of that tragedy particularly great in her mind. "It was a seminal event in American social history; it has clearly had an enormous effect on HR history," says Wellington, a clinical professor of management at New York University's Stern School of Business.

"The horror of it, the doors nailed shut, only one fire escape . . . . It galvanized a reform movement, it gave a powerful impetus to unionization, and drew in people like Sen. Robert Wagner," ultimately leading to the Wagner Act, she says.

In addition, the economic collapse during the 1930s -- the Great Depression -- "was [another] very seminal kind of event" that triggered new concerns about the role of business in society, and gave rise to basic New Deal-era labor laws, says Daniel J.B. Mitchell, a professor at UCLA's Anderson Graduate School of Management and Public Affairs. Those statutes are captured in three of the 20 top HR turning points.

Little that has occurred since then, at least in the economic sphere, has "shaken the whole system" of laws governing labor relations and employment practices to the degree that the conditions of the 1930s did, Mitchell says. "I wouldn't put the responses we've had to the corporate scandals, like Sarbanes-Oxley, on the same level" as the labor-law reforms of the 1930s.

Mitchell's assertion suggests this theme emerging from the chronology of turning points: A general shift from turning points involving change imposed by government action (e.g., the National Labor Relations Act, the Social Security Act, etc.), to trends and developments originating from within the private sector.

Wellington concurs with that perception. "Clearly, there has been a shift in thinking about the role of government and that of the employer," she says.

In recent years, she has witnessed a transformation among her students' attitudes that reflect the larger change in public perception. Wellington teaches a class on women in business leadership in which she frequently asks students, "What entity would you turn to for assistance in balancing work and home life?"

In earlier years, she says, "students would have said, 'The government, of course.' But today they say, 'I'd turn to my employer' or 'I'd figure it out on my own.' "

That same societal shift has played out in the academic world of HR, says Cornell University professor Lee Dyer. "In the 1960s, it was all basically applied industrial psychology or organizational behavior, very micro-oriented, with an emphasis on legislation and the labor movement," he says. "But over time, clearly, the field has evolved to incorporate more of a strategic and business perspective."

A related and highly significant theme that leaps out from the list's progression is the decline of labor unions, a trend starkly evident in the university world as well. "Nobody signs up for [courses on] labor relations any more," says Boston University's Fred Foulkes.

What's a Labor Strike?

Perhaps an even starker illustration of the fading impact of those earlier labor-oriented turning points in HR comes from Michael R. Losey, a consultant and former chief executive of the Society for Human Resource Management. An individual holding a "major HR position" in a large organization who was taking a class Losey was teaching shocked him by asking whether striking workers continue to be paid by their company while on strike.

"How could this person not know that answer?" he asks. "Where was her life experience or general education? How can she effectively serve as a general manager?"

Yet the decline in unions plays a part in another fundamental shift in the HR world that, according to Losey, has occurred too gradually to pin to any particular event that would qualify as a turning point. That's HR's evolution "from a male-dominated profession to a profession dominated by women."

One key driver, says Losey, is the decline of unions. "Through World War II, HR was mostly concerned with collective bargaining and union growth. This was a tough, cigar-smoking, all-night bargaining and sometimes violent environment. Men sat on both sides of the table, company and union," he says.

A subsequent emphasis on "individual performance, recruitment, training and development, benefits and compensation, employee participation, employee relations and much more" -- opened more doors to women, he adds. "In many of these areas, some would argue women would show greater interest and could do the job requirements better than men."

If the series of turning points based on the enactment of ground-breaking federal labor and employment laws can be roughly lumped together as a kind of "super turning point" in the history of HR, the next mega-shift, according to the panelists, was the switch from the focus on service delivery to the "strategic perspective." An emblematic event in that shift was not only the formation of HRPS in 1977, but also the 1980 publication of the book, Human Resource Planning, by HRPS founder James W. Walker, according to Cornell University's Dyer. And Walker's book "was the first I know of to really articulate the strategic perspective."

Panelist John W. Boudreau, research director for the Center for Effective Organizations at the University of Southern California and a professor in that university's Department of Management & Organization, points out an association between the emergence of that strategic perspective and pressure to outsource non-strategic HR administrative functions. (The final turning point on the panelists' list of 20, the 1999 BP Amoco/ Exult transaction, represents the most significant development in the outsourcing trend.)

But, Boudreau adds, something more basic was at work during this turning point other than an attempt to save a few dollars in administrative expense. He and his colleague, Peter Ramstad, have pointed out a parallel in the earlier emergence of the strategic-thinking chief financial officer from the humble origins of bookkeeper and accountant. That "paradigm shift," Boudreau says, "opened up an era where framework-based and principles-based thinking began to extend the paradigm of accounting, which was about service delivery and fiduciary control."

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The same began to occur in HR at its strategic-perspective turning point: HR was no longer about "service delivery," but instead focused on the strategic application of human capital to achieve long-term organizational goals.

And the value of that new model for HR, Boudreau says, will be measured not by posing the question, "Do we have good HR programs?" but, "Is our organization good at this human-capital stuff?"

Mind-Boggling Data

Measuring whether the organization is good at human-capital functions has been made somewhat easier by the advent of powerful HRIS and ERP systems. "The amount of data available from some of these systems is just mind-boggling," says Boudreau.

Interestingly, however, none of the panelists considered the 1987 birth of PeopleSoft -- and the HRIS revolution that event helped to inspire -- as one of the top HR turning points. (Boudreau, for his part, laments that many organizations train their HR analytical systems on "somewhat old-fashioned questions, such as, 'Is our function doing well?' or 'Are our programs working?' [instead of], 'Are we making decisions about our human capital that really drive our competitive success?' "

Implicit in that question is an element of the "strategic perspective" turning point that may be considered by some as a downside: When HR rounded the corner at that point in history, Dyer says, the profession (or at least some members of it) jettisoned the role of employee advocate. "Now, you get all these situations where senior executives are pillaging their organizations at the expense of employees, and HR is either complicit in the process, or helpless to do anything about it. I think that's unfortunate," he says.

The HR turning point most closely linked to corporate restructuring occurred in the mid-1980s, when General Electric CEO Jack Welch began reorganizing that industrial giant in the face of intensifying international competition. In addition to restructuring, massive "downsizings" soon became standard fixtures of the corporate landscape, most notoriously exemplified by layoffs inaugurated at a variety of companies led by corporate turnaround specialist Albert "Chainsaw Al" Dunlap.

The international competition that fueled the downsizing phenomenon is part of globalization -- a titanic force of change in HR -- though it could not be pinned to a specific turning point. Globalization, of course, can spell growth for U.S. companies, as well as downsizing. It also brings new challenges for HR.

"General Electric now has 41,000 employees in India," says Boston University's Foulkes. "HR people need to be sharp about how to handle people in other countries -- it adds a whole new dimension to HR jobs."

Losey, meanwhile, stresses the need for HR leaders today "to have comparative global policy, legal and practice knowledge to match their global accountability." Although many HR executives "are preoccupied with their level of involvement in the largest market in the world--the United States," this will not shield them indefinitely from globalization's impact, Losey adds.

Nevertheless, when HR executives have digested the impact of globalization and the other most recent turning points, including the "strategic perspective," total outsourcing and its underlying sophisticated information technology, will that be the end of the line?

End of History

In 1992, conservative international affairs pundit Francis Fukuyama wrote a provocative book entitled The End of the History. In it, he argued that "a true global culture has emerged, centering around technologically driven economic growth and the capitalist social relations necessary to produce and sustain it." No longer would tyrants rule or nations clash, given a new understanding of the universal path to prosperity and happiness, he wrote. Quaint-sounding, perhaps, for 2006. It also may sound very naïve to suggest HR has run out of turning points. But what are the next ones?

Some HR turning points identified by panelists have a "genie-out-of-the-bottle," no-turning-back quality about them. For example, it's hard to conceive of a reversal of the Industrial Revolution.

Others may have been the product of something akin to a political pendulum. Take, for example, the cycle of federal involvement in the employer-employee relationship. While, as noted, the government's level of involvement has diminished in recent decades, that could change. UCLA's Mitchell, for example, points to the looming national financial crunch related to the aging baby-boomer generation's impact on Social Security, as well as private employers' disappearing commitment to footing the bill for their retirees' health care. Not to mention employers' shriveling contributions to the health costs for active employees. "There's no easy fix; the solution will probably involve the federal government," says Mitchell.

Indeed, that prospect is strengthened, says Boudreau, by the fact that "more business leaders are coming forward asking the federal government to solve" these problems.

And what about the pre-strategic-perspective role of HR as employee advocate? Gone forever?

If "treating employees right" contributes to the bottom line, there is no incompatibility between advocating for employees and caring about the financial health of the organization, says Dyer. Therefore, he can see the pendulum "swinging back" in the direction of HR as employee advocate.

Boudreau concurs. "Some really thoughtful folks in good companies are beginning to think about the strategic value of having someone there who is a voice for the employment relationship and its sustainability," he says.

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