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Talent Management Column

The Last 25 Years Point to the Future

From the professionalization of HR to the rise of the vendor, our talent-management columnist recalls the trends that have shaped HR since 1987-- and will continue to shape the profession going forward.

Monday, March 26, 2012
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Editor's note: Leading up to HRE's 25th anniversary in May, each of our online columnists were asked to address the changes they've seen affecting their areas of expertise over the past 25 years and what those changes might mean to HR leaders going forward.

Human Resource Executive is soon to be 25 years old, which just reminds me that I've been writing about HR issues longer than the magazine has been around. The plus side of that is what we mature workers call perspective, the ability to sort out transient developments from long-term trends.

My fellow columnists and I have been asked to apply some of that perspective to our views about what has changed in the past 25 years and what might that tell us about the future.

 

It is difficult to realize that the practices we see now were not inevitable -- that things used to be different and will no doubt be different in the future as well.

To illustrate, the social commentator William H. Whyte observed in 1956 that human resources was rated by executives as the most glamorous function, something that stuns most managers today. The reason was that in those days, all career progression was internal, and the HR department more or less determined who went where. Unions were also powerful, and the functions that managed them for employers were, therefore, powerful as well.

Twenty-five years ago, in 1987, human resources was in the throes of a serious transformation -- in retrospect, a revolution -- that began with the 1981 recession. Management had more or less won the power battle with unions, an abundance of job seekers that accompanied the job-cutting associated with the re-engineering meant that hiring was not a problem, and there was less reason to grow talent when it could be hired from the outside.

HR wasn't alone in experiencing cutbacks, but the different functions of HR all seem to have lost influence at the same time.

They say the future is like the present only more so, and that truly describes what happened to human resources in the years following 1987.

In big companies, labor-relations departments were cut down to nothing, recruiting was cut back as were training departments and talent management generally. The pressure at the corporate level to get profits up by cutting costs -- the most obvious way to do so -- was intense.

The idea of HR as employee advocates gave way to this pressure to cut costs. By the early 1990s, consolidations to save money in the form of shared-service models began. The tasks of distributed HR reps in the field were pulled into call centers. Administrative functions, especially those associated with benefits, were outsourced.

How did all this affect the practice of human resources?

First, most employers simply did less HR work, but the relative power across different HR sub-functions shifted. When I began my career, human resources reported to labor relations. After 1987, it had reversed. Labor relations was largely gone -- it was rolled into "employee relations" to reflect the greater importance of legal compliance issues -- and it now reported to human resources.

 

Second and most important, the outsourcing of so many HR tasks created a new industry led by staffing companies and search firms, and administrative operations that managed payroll and benefits. There are now scores of HR vendors -- most of them IT-driven -- providing the whole range of services that employers had performed internally before, from managing performance appraisals to calculating succession plans.

Third, hiring from the outside began to affect human resources as well. As with other functions, people in HR jobs interested in their careers began to focus their attention beyond their current employers to the outside labor market.

To illustrate, in the mid-1970s, the American Society for Personnel Administration had about 4,000 members. Executives were discouraged from participating in professional organizations like that because it suggested they were not focused on their own businesses.

By 1987, however, ASPA had almost 10 times as many members. After changing its name to the Society for Human Resource Management in 1989, membership took off and it now has more than 250,000.

Members come to advance their own careers, and the idea that human resources is a profession -- an unheard of notion in 1987 -- is now commonplace.

 

The people in the profession also changed. I have been around employer HR groups since 1985. It was rare to see a woman at any of those gatherings then, and they were rarely made to feel welcome. Now, the majority of participants in most HR gatherings appear to be women. In an earlier column, I noted that the percentage of the top HR jobs held by women in big corporations grew from 27 percent in 2000 to 42 percent in 2010.

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What became more important? Recruiting was very hot in the late 1990s when the economy was booming, arguably hotter than at any time in history because most talent now came from outside, at all levels of the organization.

Talent management has recently become hot again -- when employers discovered it was pretty hard to get exactly what they needed in terms of skills if they didn't pay attention until the last minute. Top HR execs often find their influence now in the role of personal headhunter for the CEO, advising on board appointments and top executive vacancies.

In terms of the practice of HR, the rise of vendors has been the most important development because vendors now set the agenda. They create the "buzz" that largely shapes which issues HR functions feel they need to tackle and how they should tackle them.

On the plus side, many of the new technologies, like applicant-tracking systems, do much more than all but the very biggest employers could have ever done on their own. On the minus side, the drive to make money, which ultimately motivates vendors (indeed, all businesses) can be achieved by creating "needs" that aren't really important.

What does this tell us about the future? Unless there is some fundamental shake-up in the environment like a roaring economy or radical employment legislation, my best guess is that we will continue to play out the above trends. That means more powerful vendors and more professionalization. When hiring grows, recruiting and talent management will get hot again. The demand is there for practices that improve productivity.

The question is whether vendors will meet that demand or will HR do it alone. Bet on the long-term trends.

Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School. His latest book, with Bill Novelli, is Managing the Older Worker: How to Prepare for the New Organizational Order.

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