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Talent Management Column

The Dust-Up Over HR Standards

Is human resources a profession or a management function? This fundamental question is driving the current debate between SHRM and the HR Policy Association over the creation of HR standards.

Monday, August 13, 2012
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Those of you who are not deeply into the human resource function in corporations can be forgiven for not knowing about the nasty little fight going on between the HR Policy Association and the Society for Human Resource Management, two powerful membership organizations for HR people, over whether to create a set of standards for reporting the value of human resources inside companies. 

What is revealing about it for bystanders like me is that it makes quite tangible the long-running question that I've talked about before as to whether human resources is and should be a profession or whether it is a management function like others in business. Before we get to that question, here's a quick background to why two groups representing HR people could have such different positions on what seems on the face of it like a rather harmless idea.

In the world of accounting and finance, one of the fundamental questions is to try to understand what measures predict future company performance and, more generally, how do we put a price on what a company is worth. The reason this question is so tricky is that the usual accounting measures, which focus on physical capital, don't explain very much about current value and future value of companies. The term "intangibles" refers to these factors we are not capturing. It's a pretty safe bet that because labor is by far the biggest expenditure in a company, something about that labor is responsible for a lot of the value that we aren't able to track now.

Into that context insert the American National Standards Institute, a 100-year-old organization whose better-known international counterpart produces the ISO standards, such as ISO 9000 for quality. The idea behind these standards is that they provide information to the market -- providers, buyers, and also investors -- about what they are selling and buying. The "10W30" grading for motor oil is a common consumer example, but accounting standards are the best illustration here. The economy is full of standards like these, and in 2000, a plan was put in place to extend them much further into the economy. Business and business groups are heavily involved in the standard setting, but the idea is to get a consensus among the interested parties. 

SHRM is part of the ANSI standard-setting network, and it set out to create some consensus among constituents, again largely employers, about standards for assessing investments in human capital to help address the question in the financial area as to what companies are worth. 

Still with me? 

Now we come to the dispute. SHRM has been the most important proponent of the idea that HR is a profession, manifested by the notion that there are standards for determining appropriate employee management practices that cut across organizations. SHRM's remarkably successful Certification Institute, which both sets those standards and assesses whether individuals know them, is the engine driving that approach. It is completely consistent with the ANSI notion of standard setting in business practices. 

Establishing standards for assessing employer investments in human capital would be a real boon for those who believe that those investments matter. The peer pressure to report them would be enormous, and the companies that are not investing and that don't have sophisticated practices in this area of HR would feel the pressure to do so. It would both expand significantly these investments and standardize the way they are carried out.

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On the other side is the HR Policy Association, which is made up of the top HR executives in the biggest publicly-held companies. They are opposing the idea of having these standards with an aggressive public relations campaign. Why would HR professionals object to them? 

Because these folks don't see themselves as HR professionals. They see themselves as executives of their companies first and foremost. As a top executive, you are thinking that these standards will cost the company a lot of time and money to put in place, and you also know there will then be pressure to spend and standardize how they do it. This is restrictive for the company even if it expands your personal empire in the process. Are you going to side with the HR professionals on this or with your CFO? No prizes for the answer to that one.

The general lesson here is that conceptual arguments like whether HR is a profession or a business function end up having real consequences.

Any bets as to which side will win?

Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School. His forthcoming book is Why Good People Can't Get Jobs: The Skills Gap and What Companies Can Do About It.

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