Future of HR 

from: Patrick Wright [pmw6@CORNELL.EDU] A summary of responses to question posted on 

list for members of the HR Division [HRDIV_NET@EMAIL.RUTGERS.EDU] January 7, 2005

Dear HR Division Colleagues:

Thanks to all who responded to my question about the future of HR. As of the writing of this summary, I have received 16 thoughtful responses plus one response stating that the respondent was posing the question to his HR students and would provide their answers later. 

The responses were mixed between focusing on HR in organizations or HR in the ivory tower, but I tried to classify either their actual words or tone into an overall vote of the future. By my (very subjective) tally, 5 suggested that HR will become more important, 2 felt it would become less important, 3 leaned toward it staying the same, and 6 presented a mixed approach (parts would become more important, and other parts less important). This is not exactly what I would hope for in terms of interrater reliability. However, digging more deeply into the responses revealed some potential moderators that explained the variation.  So, this report tries to tease out these moderators to provide some insight into the two potential futures of the field. 

While the following document is quite long, it is only 1/3 as long as simply posting all the responses. So, first let me give you the bullet point executive summary (it follows the outline of the rest of the message), and you can read on if you're interested:

The Future of HR in Organizations:

* HR will become more important to the extent that it:
a)      focuses on human capital and not the HR function
b)      focuses on strategic, not administrative HR
* But, all this should be taken with the caveat that the current environment (global competition, short term orientation, profit-maximizing goal systems, etc.) may lead toward employees being viewed as a cost, rather than "human capital."

The Future of HR in the Academy:

* We need to focus on teaching managers about HR both in terms of good managerial practice (at the micro level) and in terms of HR as strategy execution (at the macro level).
* Research in HR (particularly macro) has been bogged down with the HR-Performance focus, while other fields are capturing the human capitalnotion. This, if left unchecked, will lead to our demise.
* The ongoing power shift away from HR toward OB, OT, and Strategy will continue, largely driven by the AACSB.

The full report, for those who have lots of time on their hands:

The Future of HR in Organizations:

Differences of opinion existed regarding the future of HR in organizations. The major areas of distinction tended to be around the following 2 dimensions:

Human Capital vs. the HR Function: The optimistic view of the future almost universally was based on the logic that a firm's human capital is becoming increasingly important to competitive success.

For instance, Tony Wheeler (CSU-Sacramento) stated:

"The owners and presidents of these small businesses are clamoring for help.  They realize the importance of human capital, and they want to manage their employees as best as they can.  They just don't know how to do it."

The pessimistic view focused on the potential irrelevance or inability of the HR function to contribute to the management of the firms "human capital."  The thinking was that while human capital is increasingly important, many in the HR function do not possess the skills, abilities, and perspectives to contribute to firm success. A narrow view of HR in terms of functional activities may not increase the stature of the field of HR.

Scott Snell (Cornell) best illustrated this distinction, stating:

"So as long as the field of HR is still defined by its "tools" it will become less and less important, even while the real human resource (people-- who by the way are among the most flexible resources) become more important."

This view leads to the recognition that the most important aspects of human capital management will be the responsibility of line managers.

As Clint Chadwick (U of Illinois) wrote:

"I have always thought that the most important strategic HR managers are line managers, starting with the CEO, and that the focus in SHRM research on the formal HR function's "seat at the table", influence in decision making, etc. was too high."

Finally, the "human capital" emphasis was not universally heralded as a trend. Ingrid Fulmer (Michigan State U.) presented a well articulated statement of the problem that human capital (or at least not all human capital) is so strongly valued:

"Given trends toward: (1) short-term thinking/performance focus in organizations, (2) growing emphasis on organizations'  responsibility to the shareholders (not to society, not to employees, etc.), (3) increasing cost pressures brought to bear by foreign competition and offshoring, and (4) declining union threat in some arenas, I suspect that HR as a function will remain stable or diminish in importance within organizations through no real fault of its own, but rather as a result of a general shift back toward viewing employees as a cost to be contained.  This is assuming that we continue to lack ways to measure HR's top line contribution to firm performance; in the absence of such a valuation model, the easiest and most direct way to value people is to look at their cost."

This was echoed by Sanjay Menon (LSU-Shreveport) who noted:

"The cover story in the latest issue of SHRM's HR Magazine is about how Wall Street analysts ignore HR issues.  Part of the explanation seems to be the fact that even if HR metrics are used, they don't show up on the financial reports.  Also, while it is fashionable for CEOs to claim that people are the most valuable assets, in the eyes of the financial analyst, people show up as costs to be managed/cut.  Any investment in training and development shows up as an expense."

Strategic vs. Administrative HR: The second dimension upon which the optimistic/pessimistic distinction could be drawn focused on the role or activities of HR emphasis, particularly on the strategic or administrative activities.  Some of the administrative activities were viewed as negatives, or at least certainly not as value-adding: Gene R, a longtime practitioner similarly criticized the non-strategic HR view stating:

"There were and still are hacks and mechanics in this field who do the kind of reactive administrative work that deserves no more influence and respect than they are getting. Many of these folks do not have a clue as to what an important role they could be playing if they knew how, or went to work in a firm where a higher order of demands were placed on them by the CEO or COO."

On the other hand, consensus seemed to exist that administrative activities will continue on under the realm of HR, but will be increasingly outsourced or delivered through information technology solutions.

Kurt Kraiger (U of Tulsa) suggested that:

"...many or most HR activities will be automated for most organizations in the forseeable future.  Sure, you can design a better performance appraisal system starting from scratch, but the form you'll download from performanceappraisal.com won't be that bad, and there will be tools available to customize it to individual contexts. The most immediate impact of this will be more downsizing of the HR profession, but the long-term impact (if we're smart, and ready) will be that the remaining HR practitioners will have the time to focus on the things that really make a difference to their organizations and their careers."

So, what are the things that "really make a difference" to organizations? One view of the more strategic emphasis tended to focus on the critical role that HR plays in the execution of strategies.

Charles O'Reilly (Stanford) described the strategic role uniquely well, stating:

"...there is increased awareness (on the part of executives and MBAs) that getting the right strategy is not as important as the ability to execute (see Bossidy's book). Even consulting firms acknowledge this. Therefore, when we teach HR here at Stanford, we explicitly position it as the follow-on to the strategy course. Execution is about getting large numbers of people coordinated--and this is what HR should be doing."

Mark Lengnick-Hall (U of Texas -San Antonio) saw knowledge management as another one of the key strategic HRM activities that will propel the field forward.

 "I believe that knowledge management is one area that HR has the potential to subsume, but seems to be caught in a struggle with IT people in many organizations.  Managing knowledge, as part of human resource management, and as separate from it, offers a potential avenue for the expansion of HR roles in future organizations."

In summary, it seems that human capital and knowledge management may be important competitive levers where HR may be able to contribute. However, not all human capital may be viewed as an asset, and not all HR people may be able to manage the assets.

The Future of HR in the Academic World

The above discussion focused primarily on the practice of HR, but many of the respondents wanted to explore the academic repercussions and trends.  I'll structure this analysis around teaching, research, and power.

Teaching: HR for HR vs HR for Managers:

Respondents tended to describe some of the implications for the above issues on how we teach HR within the academy.  Respondents from MBA programs tended to focus on the importance of giving managers good practical HR skills for doing day-to-day managerial work.  For instance, Michael Harris (U of Missouri-St. Louis) stated:

"Specifically, line managers will spend more time dealing with HR things on a day-to-day basis, dealing with discrimination issues and basic HR things (e.g., hiring, firing, etc.). I teach my HR courses on a very practical basis, focusing on legal issues, hiring, firing, appraising performance. I do provide what I call a conceptual background, but emphasize "how a line manager can do...."

Charles O'Reilly (Stanford U) sees the strategic aspect of HR as being more critical in our role of teaching MBAs (repeated from above, but with emphasis added on the teaching role):

"...there is increased awareness (on the part of executives and MBAs) that getting the right strategy is not as important as the ability to execute (see Bossidy's book). Even consulting firms acknowledge this. Therefore, when we teach HR here at Stanford, we explicitly position it as the follow-on to the strategy course."

Fewer respondents focused on the implications for teaching HR students. However, those that did seemed to feel that the time was ripe for a massive restructuring of HR curricula. For instance, Mark Lengnick-Hall (U of Texas -San Antonio) stated:

"My guess is that future HR academic training will focus on two areas that receive less attention now:  information system design and management consulting.  Of course, there will still be a need for training in the basics of HR functions (HR textbooks of the future will probably have the same chapters on recruiting, selection, compensation, etc.), but that will/should not be the primary focus.  There will be a greater demand and need for business people who do HR rather than HR people who do business."

Anthony Wheeler, (CSU-Sacramento) similarly suggested a rethinking of HR curricula:

"I guess my point is this...and I am going to rip-off a slogan here...the HR revolution will not be covered by academics.  We are far too insular to realize that businesses really do need our help...as do our graduates.  Maybe one way of addressing this issue would be to gear HR curricula toward a generalized audience.  That is, why teach nuts and bolts HR courses like compensation when 95% of our HR graduates will never run a regression to establish a pay line in their entire professional lives?  Moreover, how many of HR grads actually work in HR? As HR has been decentralized and some parts outsourced, we should teach our students that every job has a little bit of HR in it."

Research: HR Practices or Human Capital:

Clearly, a lot of the discussion revolved around the implications for research.  Tim Gardner (BYU) most eloquently and passionately described what he sees as a problem with current strategic HR research:

"Ultimately, I think that if we do not diversify the strategic HRM research stream the folks from the Entrepreneurship, BPS, OB, and OMT divisions as well as the IRRA will eat our lunch. Of course Im talking about our single-minded pursuit of extending, critiquing, and validating the Huselid (1995) paper. Almost every time the topic of strategic HR comes up (in the form of conversations, articles, conference papers, etc) invariably what is meant is the correlations between HR systems and firm performance&Human capital has become an important variable for scholars from all of the divisions listed above (scholars from the IRRA are also doing very interesting work). These papers are vibrant and interesting&In my opinion, the waves from Huselids (1995) groundbreaking article have hit the shores of other divisions and resulted in some very interesting work. As a division, I fear we are stuck at the point of impact trying to remake the same article."

A second issue deals with the relevance of our HR research. 

Naresh Khatri (U of Missouri-Columbia) suggested that:

"The more valid issue to me is to ask the question how we (HR scholars) can make a difference in managing organizations more efficiently and effectively. In other words, we have to make ourselves RELEVANT. I believe this is the area where we have not done a good job. We are doing research that is very high on rigor but very low on relevance. We have to come to terms with combining relevance and rigor."

Power: HR vs. OB or HR/OB:

Finally, a number of concerns were expressed about the shifting in power toward OB and Strategy with increased diminishing power for HR within business schools.  Lizabeth Barclay (Oakland U) presented an insightful theory of the basic cause, noting:

"The AACSB does not define HRM as part of the Common Body of Knowledge (CBK), but ORG is. So, if the business school needs to add global and technology and ethics to make AACSB happy it seems totally rational to get rid of HRM since it is not CBK...so I think AACSB is driving part of this."

Ingrid Fulmer (Michigan State U) suggests that HR may be partialled out to other areas:

"As an academic field, if HR "dissolves" and is subsumed under other specialties, I predict that compensation and SHRM people will become aligned with the strategy folks, and everyone else (particularly those with psychology backgrounds and not business backgrounds) will blend with OB (I/O salaries are generally lower, so I don't see b-school people migrating to I/O willingly).  I think you're sort of seeing this occurring already . . .  I also expect that you will see fewer doctoral candidates who choose a degree in HR/IR and more choosing to hedge their bets by focusing on both HR and OB or some other combination."

In summary, it is safe to say that the field of HR faces numerous challenges within the academic world.  Our research and teaching overlaps with other areas which seem to be either doing a better job of it, or better marketing of the job that they are doing. The politics of science also come into play as AACSB guidelines favor other fields over HR, and the business school rankings also seem to favor deans devoting attention to fields other than HR.

Conclusion:

My reading of the comments that I received indicate two potential scenarios. One is that people (human capital) becomes more important and those disciplines that can provide insight into how to best manage it for competitive advantage will experience tremendous growth and vitality. The other is that the bulk of people in an organization are increasingly viewed as commodities, and disciplines such as HR will become commodity managers&necessary, but not critical to organizational success. Within each of those scenarios, there are alternative HR scenarios: one where HR takes the lead and becomes the most visible contributor to organizational success, and the other where some other field does so (OB, Strategy, etc.).  I think I'll end with Kurt Kraiger's insightful comment (abridged to get the point and emphasis added):

"Here's two predictions I've made, perhaps (again) optimistically.  The first is that many or most HR activities will be automated for most organizations in the forseeable future...The most immediate impact of this will be more downsizing of the HR profession, but the long-term impact (if we're smart, and ready) will be that the remaining HR practitioners will have the time to focus on the things that really make a difference to their organizations and their careers.

"The second prediction is that HR will enjoy a resurgence of popularity when someone with a strong HR background takes over as CEO/COO of a highly visible organization and oversees a successful corporate turnaround.

"We have some control over the first scenario, little over the 2nd."

(As a note: John Hofmeister, the SVPHR at Royal Dutch/Shell will take over as the President of Shell Oil effective March 1. While this won't be a turnaround situation, this will be an HR professional running a huge business.)