Human Resource Management
Historical Analysis and Best Practices for the 21st Century
Sarah Stottsberry
Project 5
History of HR
Human resource management became necessary as early as the first working arrangements between master craftsman
and apprentices. During this time, prior to the industrial revolution, these relationships were very different than ones
that are common today. Apprentices often lived with their mentors, and if the apprentice was not able to perform their
job duties, the responsibility of their recuperation fell on the families of the apprentices. While these relationships
persisted for quite some time, the industrial age brought with it a need for low-skilled employees, hazardous working
conditions, and a wealth of other concerns that would need to be addressed. Often times, businesses were primarily
focused on the needs of consumers alone. The need for human resources was simply the need for hands that could
perform monotonous tasks on the assembly line. At this time, however, forward-thinking employers began to realize a
relationship that existed between worker productivity and worker satisfaction. While emphasis was still on consumer
demand, given that the work itself and production rates were of top concern. It was during this time that modern
human resource management became a reality.
Personnel Management
National Cash Register (NCR) initiated the first personnel department in the 1890’s. The plight of blue collar worker
having to endure long hours of work, unsafe working conditions, and low wages opened up a need for personnel
management. The movement to factory jobs brought with it concerns for wages, safety, child labor laws, and 12 hour
work days. Due to these conditions, unions became commonplace. The role of personnel managers was typically one
that focused on ensuring job satisfaction on some level in hopes of the prevention of external unions, and often time
was responsible for the creation of internal unions. Continued advancement in this field continued into the 1900’s,
which witnessed some key milestones in history as shown in Table 1.
Table 1
Date
Description
1913
US Department of Labor: Created to “foster, promote and develop the welfare of
working people, to improve working conditions and to enhance their
opportunities for profitable employment.”
1920’s
Human Relations Movement: aimed at increasing productivity by expanding
medical aid, sick benefits, vacations, holidays, and housing allowances.
1924-1932
Hawthorne Studies: Elton Mayo(Father of Human Relations) explored how
working environments affected productivity. Results suggested that manager
attention was more of a predictor of productivity than physical working
conditions.
1929
Great Depression brought forth the elimination of jobs and Government policies
aimed at the creation of jobs. Labor Standards and minimum wage instantiated..
1935
National Labor Relations Act(NLRA) The Wagner Act giving employees the right to
organize unions and bargain collectively; employers are prohibited from unfair
labor practices.
1940’s
WWII brought together a nation to focus on the war efforts. Labor was in short
supply; women and teens called in to work; Led to expanded rolls of the
personnel manager in recruiting, testing, training and mediating employee
relations.
1944
GI Bill of Rights provides educational assistance to returning war veterans.
1947
Labor Management Relations Act (AKA: Taft Hartly Act) banned businesses
requiring union participation
1960-1970
Post Korean War: personable group of managers emerges having interests in
people; Programs started to increase wages and fringe benefits emerge. Workers
ideas and initiatives are encouraged.
1981
Prestigious MBA program offered at Harvard Business School
Human Resource Management (HRM)
HRM is a modern term used to describe personnel management. It is the “strategic and coherent approach to the
management of an organization’s most valued assets – the people working there who individually and collectively
contribute to the achievement of the objectives of the business”.i Given the long history of personnel management,
HRM has absorbed the ideas and techniques of over a century of management theories and social science research.
While management philosophies change over time, an underlying theme has been that the most successful companies
are those that make the most effective use of people.ii While personnel management in the past was typically
characterized as a welfare tradition, HRM incorporates the importance of human resources in helping businesses form
effective business strategies.
Origins
The modern view of Human Resource Management gained significant attention when Harvard Business School began
offering an MBA program in 1981. This program’s philosophy spurred interest in the field and several other
interpretations or “schools of thought” emerged including the Michigan and New York Schools, The Warwick School, and
the Schuler School.iii Table 2 describes each of these theories and their similarities and differences.
Table 2 –HRM Philosophies
Harvard School: The multiple stakeholder’s
HRM policies are influenced by two significant
iv
theory
considerations:
Situations Factors: Outside and inside
environment including laws, societal values, labor
market conditions.
Stakeholder Interests: Shareholders, management
employees, union, community, and government.
Michigan Model
Schuler Model
Four C’s of HR Policies: Manager’s can affect a
number of factors by means of policy including the
competence of employees, commitment of
employees, degree of congruence of the goals of
employees and that of the organization, and the
cost effectiveness of HRM.
Four Common HR Process:
 Selection: Matching people to jobs
 Appraisal
 Rewards
 Development of Skills

Best known as the “matching model” or “best-fit”
approach to HRM. It limits the role of HR as a
reactive organizational function, and puts less
importance on societal and other external forces.
Similar to the Michigan Model, but also takes into
account broader factors including technology,
organizational structure, unionization and the
industry sector.
HRM Trends
Trends in HRM are very different across companies of varying workforce sizes. The Bureau of National Affairs publishes
a yearly analysis of HR Benchmarks.v These statistics offer insight into practices of firms ranging in size from 250 to over
2500 employees. Some interesting statistics in the areas of HR staffing ratios, strategic planning, outsourcing, and HR
expenditures vary greatly according to company size. Appendixes 1-5 give some insight into these trends. Generally, it
is shown that as companies get larger, there is a greater need for HRM and its more widely acceptance as a key
component of a company’s success. Additionally, there seems to be greater awareness of the possibilities of
outsourcing some of the more monotonous functions of HRM as companies grow larger.
Small Business
In spite of the wealth of HRM research, there appears to be a lack of focus on small businesses even though a 2000
study by the U.S. Small Business Administration indicates that the majority of businesses are classified as having fewer
than 100 employees. vi While the statistics mentioned previously are interesting, one cannot assume that they hold true
for small businesses. Surprisingly, an early study conducted in 1984 indicates that areas of accounting, finance,
production, and marketing all took precedence over HRM functionality. For those small companies who did employ the
use of HRM, it was found that the owner of a firm typically handled HRM functions for firms having fewer than 50
employees, while only 62% of the firms with 51 to 100 employees had a full-time HR manager.
Larger firms typically offer a comprehensive offering of HRM. While some activities may be more involved at certain
workforce sizes, an overall consensus indicates the following activities to be prevalent:
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Maintenance of Personnel Records remain a core responsibility
Wage and Salary Administration; Job analysis and evaluation; executive compensation and job descriptions
Handles Benefit Activities
Employment and Recruiting
Employee relations and shared responsibility with other departments
Employee Services: Employee Assistance Programs, Retirement Planning, and Outplacement Planning
Work jointly on Strategic Planning, Training, and Development
External Relations
While larger organizations can justify the expenditure on a comprehensive offering, smaller firms typically focus on the
issues that they find most important to their organizations. As seen in Table 3, while they vary slightly according to
company size, for the most part smaller companies share concern for the same top issues.
Table 3 – Top HR Issues for Smaller Firms
Company Size
Top HR Issues
1-50
 Availability of Quality Workers
 Benefits
 Training
 Competitive Wages
 Government Regulations
51-100
 Benefits
 Retention
 Availability of Quality Workers
 Childcare
 Flexible Scheduling
101-150
 Availability of Quality Workers
 Benefits
 Government Regulations
 Attendance
 Retention
 Wages
Human Resource Information System (HRIS)
The HRIS is software or online solutions for data entry, data tracking, and data information needs supporting human
resources, payroll, management, and accounting functions within a business. There are several typical functions of an
HRIS system including:vii
 Entry and Tracking of employee information
 Reporting and Analysis of employee information
 Support for company related documents including: handbooks, and safety guidelines
 Benefits administration: enrollment, status changes, and updating of personal information
 Complete integration with payroll and other company financial software
 Applicant and resume management
Additionally, it helps companies to track employee information including:
 Attendance and vacation
 Pay raises and history
 Pay grades and positions
 Performance development plans
 Employee training
 Disciplinary action history
 Personal employee information
 Growth plans
 Applicant tracking, interviewing and selection
HRIS Historical Trends
HRIS has changed drastically over the past 20 years. Mainframe personnel systems were initially created, followed by
the client-server HR software offerings like PeopleSoft, SAP, and Oracle. Logically, these have been followed by internet
technologies, and the demand for HR self-service capabilities by way of Application Service Provider (ASP) models .
During this transition, most large businesses adopted some form of the client-server solutions, and were plagued by the
need for continual upgrades to the software. Small to mid-sized companies were quicker to adopt the self-service ASP
model. Now, there is a new software architecture that is challenging existing HRIS systems. viii
Service-Oriented Architecture (SOA)
SOA is an architecture where software functionality is grouped around business processes and subsequently packaged
as separate services that can operate together if needed. Each one of these software functions or processes has the
ability to communicate with other processes when exchange of data is needed during the course of business. ix The
exciting future of this type of architecture could be beneficial for small and large firms alike. The ultimate solution is
that firms will have the ability to define their own processes, and to then select the pieces or services that they need.
For larger organizations, this could mean the use of internal or legacy systems, but for smaller companies, they may
choose to outsource some of the functionality. Regardless of the decisions, SOA allows for all of these interconnected
parts to work seamlessly together. x
The SOA architecture appears to be the leading trend in HRIS offerings, with some of the leading vendors planning for
and offering such services. Two of the largest Enterprise Resource Planning (ERP) vendors have been showing support
for the SOA architecture. Oracle acquired PeopleSoft and JD Edwards, and it also supports its own E-Business suite,
allowing for all of these interconnected parts to work together seamlessly. While some of the more popular named
components are included, Oracle has additional challenges lying ahead aimed at fusing together approximately 12
different subsystems they have acquired in recent years. “Fusion” is Oracle’s promise for the SOA world.
Similarly, SAP has an SOA initiative. Its “Enterprise Services Architecture” is already available through the NewWeaver
platform. While some services including the mySAP business suite are SOA compliant, an upgraded version is due later
this year that holds a promise for additional services to be offered.
SOA and Small Business
While the large expensive systems may not be economical for smaller companies, SOA offerings may be adopted faster
by smaller companies. There are some vendors that are offering best-of-breed applications that are based on the SOA
concept. Dave Duffield, co-founder of PeopleSoft, has been involved with a new startup after losing the battle of Oracle
taking over PeopleSoft. “Workday”, is a new product that was designed in support of the SOA environment from the
beginning.xi This is clearly an exciting time for HRM and the evolution of HRIS. It should be interesting to find out the
outcome of smaller startups and the giant vendors including Oracle and SAP.
Best Practices in Selecting an HRIS
Obviously, there are a lot of choices on the market. There are some sources of information that can be used to lessen
the burden of selecting an HRIS. The Society for Human Resource Management published a paper on the 18 Steps to
selecting an HRIS system.xii These steps are designed for a selection of a stand-alone application, or a fully-integrated
HRIS system that could be used by larger organizations. Regardless of the size of the company, there are some key steps
that will ensure success.
Step 1 – Teamwork
Formulate a 3-7 cross functional team including a member of the organizations IT department. Additionally, this team
could be supported by a “steering committee”, consisting of decision makers or management personnel that are
allowed to sign off on costs, participate in contract negations, and to provide top level support when needed.
Step 2 – Goals
Define goals by answering the following questions. These questions should be answered by interviewing senior
management and any HR personnel.
 What is your overall HR information technology strategy?
 What do you need and why do you need it, what system functionality do you need?
 What results do you wish to accomplish with this effort?
 What work processes do you wish to change through this selection and what should the new processes look
like?
 What are the business drivers for the new system, how does this system support the overall needs of the
business?
Step 3 – Big Picture
Once goals are defined, be sure to analyze the entire situation and to determine how any new systems or processes will
need to interact with current HR functionality. Begin to think in terms of how you will prevent the need for manual data
conversion if conversion is necessary.
Step 4 – Future Needs
Don’t forget about the future needs. There may be some specific processes and technologies that are needed now.
However, don’t forget about the 5-10 year outlook. It would be nice to build foundational infrastructure now if buildout
is needed in the future.
Step 5 – Technical Environment
The information technology representative will be a key member during this step. You must define the base technical
environment for the new application(s). This will be imperative to have when beginning the process of looking at
various technologies that are available. Some typical questions may be:
 What type of application are you looking for?
 What operating system requirements?
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What database does your company support?
How will you connect remote offices?
Does it need to be web-deployable?
What language the application is written in? Could you perform software modifications using qualified persons
inhouse?
Step 6 – Budget
Define some ballpark estimates of what your organization is willing to pay before you talk to vendors. A good practice is
to separate costs into three areas including software, hardware, and implementation.
Step 7 – Specifications
Define an overall HR IT strategy, list your project goal, define the base system functionality, specify needed integration
with other systems, and list technical requirements from step 5.
Step 8 – Build vs. Buy
Ideally this is determined by step 8 because this could be the cause of much debate and distraction if this question is not
determined. At some point, the decision must be made and the process must move forward. Some typical questions to
answer include:
 Are the necessary IT resources available internally for this project?
 Does the human resource staff have the time and expertise to develop detailed system specifications, screen
designs, system edits and reporting requirements?
 What priority will it be given by IT management compared to other business systems?
 What is so specialized about your needs that you can't get 80 percent of your requirements with commercially
available software?
If the decision is to build in-house, cost and time estimates should be created for the in-house work.
Step 9 - Research
Begin to identify and research vendors and products that could meet your needs. Talking to others who have been
through similar experiences is a good start. Additionally on-line resources are a good start as well. Here are 3 sites that
are worth visiting:
 www.ihrim.org
 www.workindex.com
 www.benefitslink.com/software.shtml

Step 10 – Literature
Get product literature from potential vendors you selected during Step 9. Ensure that you request material that is a
level of detail that is going to satisfy your inquiries. If the vendor is not willing to share this type of information, you may
need to reconsider your selections. This is a key step that could reduce your potential list to a reasonable size for the
rest of the process.
Step 11 – RFP
Formal RFP or informal RFI’s can be used. The most common elements include:
 An overview that describes your company.
 A description of your software need and the employee population it will support.
 Desired system functionality.
 Required technical environment/specifications.
 A request for pricing (licensing fees, maintenance charges, training and implementation support, annual
maintenance fees and telephone hotline support).
 A request for customer references.
 Details on customer service/support available from the vendor.
 A request for sample contract terms.
The vendor should be allowed 3-6 Weeks to respond. The vendors response should include:
 Are each of the required features currently in their system?
 Are certain features proposed in a future version of the system?
 Will any of your required features require system customizations and if so what are the costs and problems
associated with the customizations?
Step 12 – Evaluate
Use a common evaluation procedure for all RFP’s. The team should meet, review and evaluate the outcomes.
Step 13 – Demos
During product demonstrations , you should try to control the demonstration so that you can get the most accurate
information. You can do this by modifying the vendor’s agenda, and ask specific questions that pertain to your
particular situation. Additionally, all team members should be involved in the demonstrations.
Step 14 - Evaluate Again
Time for the team to meet and evaluate all the information that is available so far. Each team member should share
their thoughts on the following:
 Likes
 Dislikes
 Concerns
 Unresolved Questions
The goal of this evaluation is to limit your selections to 2-3 vendors and to invite them for a second product
demonstration.
Step 15 – Decision Points
The project team needs to determine the items that will drive the final decision. It would be advised to have the
management team representative be involved with this step to ensure that management agrees with the selected
drivers. Typical drivers include:
 Price
 Differences in functionality
 Compatibility with existing systems
 Implementation costs
 Timeframes
Step 16 – Check References
Project team should formulate a questionnaire to be answered by all references. Keep in mind that you could perform
this step a little earlier in the process to potentially eliminate some of the options from the start prior to having the first
product demonstrations.
Step 17 – Demo Again
The items that team members would like to see again and clarify should be the focus of the second demonstration. You
should again control the presentation and to not accept a canned presentation that could be used by all customers.
Step 18 – Evaluate Again and Select
An important aspect of this step to step back and evaluate all that you have learned and to compare it to the goals that
you defined in the beginning. If more than one system matches your specific needs, contract negotiations may be in
order to finalize the selection.
Appendix 1 – HR Staff Ratios by Workforce Size
Appendix 2 –Use of Strategic Tools
Appendix 3 – Outsourcing Trends
Appendix 4 – Commonly Outsourced Activities
Appendix 5 – Outsourcing Prevalence and Company Size
i
http://en.wikipedia.org/wiki/Human_Resource_Management
ii
http://www.hrmguide.net/hrm/chap1/ch1-links1.htm
iii
http://www.hrmguide.co.uk/hrm/chap1/ch1-links3.htm
iv
http://www.bestbooks.biz/hrm/harvard_beer.htm
v
www.payrollcomply.com/press/protected/2005hrbench.pdf
vi
http://www.allbusiness.com/human_resources/3502190-1.html
vii
http://humanresources.about.com/od/glossaryh/a/hris.htm
viii
http://www.shrm.org/hrmagazine/articles/0506/0506hrtech.asp
ix
http://en.wikipedia.org/wiki/Service-oriented_architecture
x
http://www.shrm.org/hrmagazine/articles/0506/0506hrtech.asp
xi
http://www.shrm.org/hrmagazine/articles/0506/0506hrtech.asp
xii
http://www.shrm.org/hrresources/whitepapers_published/CMS_000197.asp#P-4_0