The Evolution of HRM in
North America
Dr. Yonatan Reshef
SMORG
School of Business
University of Alberta
My Key Objectives
• Identify stages in HR development in
North America
• Highlight major determinants of HR
transformation
• Explore the role of unions in HR
development
• Position current HR practices, policies, and
laws in a historical context
• Speculate on future HRM directions
• We will not discuss HR practices since you
should have enough knowledge about them
I.
The Old Model
In The Beginning …
• Until around WWI, employers had no
personnel function
• Nearly all aspects of hiring, firing, pay, job
assignments, etc. were left to the discretion
of individual foremen
• The prevailing model of work motivation
was the “drive system” = coercive
supervision
And Then …
Labor unrest + the
booming economy of
WWI forced
employers to develop
a new system of labor
management. I refer
to it as the ‘Old HRM
Model.’ This system
was based on four
basic elements:
 PERSONNEL
MANAGEMENT
 EMPLOYEE WELFARE
BENEFITS
 HUMAN RELATIONS
 EMPLOYEE
REPRESENTATION
Basic Assumptions of the Old Model
• The North American economy is relatively
self-contained and immune to foreign
competition
• The employment is full-time, long-term,
and relatively stable; the typical workplace
is a large firm
• The corporation is a stable sovereign
organization with a clear division of labor
• Everyone abides by the “social contract”
The Old Social Contract
• Hierarchy – lines of authority and levels of
status are clearly defined; clear division of
labor
• Paternalism – the company is viewed as a
‘family’ by employers and employees
• Entitlements – to a job, a steady pay, and
generous benefits
• Permanence – in the employer-employee
relationship, i.e. long-term job security
II . The Evolution of the
Old Model
The Late 19th and Early 20th Century
• Socialist and anarchist ideas gained
currency in North America
• Recurring political and labor unrest
• Bitter labor disputes
• High Labor turnover due to angry workers
and powerful and heavy-handed foremen
who had unlimited authority over workers
1917/1918 – World War I
The booming
economy of WWI
created problems
for employers
►Tight labor market
►High turnover
►Waste and
inefficiency
►Widespread strikes
►Union growth
The State of Personnel Management
• The practice of personnel management barely
existed
• “Labor policy” in most firms was informal and
decentralized
• Labor was typically treated as a commodity
• Labor was dealt with in an authoritarian manner
• There was little legislation to protect worker
rights
Taylor’s Scientific Management
• Labor problems (e.g., waste, low
productivity, high turnover, and the
adversarial relationship between labor and
management) arose from defective
organization and improper methods of
production in the workplace
• Management used rules of thumb to
decide on what constituted a fair day of
work
Taylor’s Scientific Management
• Production was governed by universal and
natural laws that were independent of
human judgment
• The object of Scientific Management was to
discover these laws and apply the "one best
way" to all managerial functions such as
selection, promotion, compensation,
training, and production
Welfare Capitalism
• In their search for ways to deal with the Labor
Problem, many companies (e.g., GE, Ford) began
to practice “welfare work” (the early 1920s)
• Employers sought to win workers’ cooperation and
loyalty through positive HR practices such as:
• Above-market pay (Ford’s $5/day pay)
• Job security
• Employee benefits – paid vacations, bonuses, pension
plans, health insurance
• Promotion from within
• Employee participation plans
Late 1920s – Early 1930s:
The Great Depression
• The specter of bankruptcy forced companies to
drastically reduce labor costs through wage cuts
and layoffs
• Loose labor market made it far cheaper for
employers to “motivate” workers through threats
of layoffs than the promises of high wages and fair
treatment
• Labor unrest subsided = less pressure on
managers to win over workers
• Apparently, “welfare capitalism” practices were
market driven; they were not based on a new
theory of management
The 1930s
• In 1933, the US government passed the National
Industrial Recovery Act; Section 7 dealt with labor
issues and became, 2 years later, the National
Labor Relations Act (Wagner Act)
• In Canada, Wagner Act was the basis for the 1944
Order in Council PC 1003
• Unprecedented union growth
• Companies had to design employment policies that
complied with the government regulations (e.g.,
Social Security Act of ’35; Fair Labor Standards
Act of ’38) and negotiate with unions, or preempt
union organizing
• For example, the NLRA banned the welfare
capitalist employee representation plan
The 1940s: World War II
• The combination of wartime production
demands, the fast growth of unions, and
the need to negotiate collective agreements
forced many companies to expand their
personnel staffs and systematize their HR
practices
• Companies developed personnel practices
such as job classification systems, hiring
standards, uniform pay grades, and
written disciplinary procedures
1930s – 1950s: Human Relations
• Following Mayo’s “Hawthorne experiments,”
(1927-1932) managers accepted the basic idea
that workers responded not only to economic
inducements but also to psychological and
social influences
• Cooperation/communication was a basic
human need
• The human imperative to cooperate render
groups, but not formal teams, the vehicle to
elicit extra effort from and improve control of
workers
Human Relations
• The refinement and implementation of this
basic idea did much to humanize the
employment relationship
• The basic power structure at work
remained intact. The Taylorist division of
labor remained
• Good managers took care of their
employees and use it to elicit their loyalty
Determinants of Personnel Management
• The growth of large multi-plant corporation
and the need to professionally manage
labor relations
• Prosperous economic conditions in the
1920s that helped require and support a
welfare capitalism
• Labor unrest
• The desire to avoid unionization through
effective management practices
Personnel Management: The
“Technical/Maintenance Side” of HRM
• Division of labor
• Central hiring offices
• Rules for disciplining and dismissing
workers
• More systematic approaches to training
• Performance evaluation
• Job analysis to aid in employee selection
and rationalize wages
• Employee representation plans
The Centrality of the Firm
• Over the 40 years that followed the Second
World War, firms came to be relied on as
the institution that would provide, either
on their own or through collective
bargaining, secure long-term jobs and
careers, private reserves for retirements,
health insurance for workers and their
families, and training and education
(Osterman et al., Working in America,
2001: 61)
III. From Personnel
Management to HRM
Key Developments
• New Technology – new technology allowed
outsourcing of many activities and
handling many administrative aspects of
HR electronically; firms focus more on
“core competencies”
• Outsourcing of HRM responsibilities (e.g.,
compensation, hiring, training)
• Globalization – HR experts have to deal
with expatriates – preparing them for work
abroad and for successful return to their
home country
Key Developments
• Diversity – HR were asked to reconcile the
social demand that employment practices
be open and inclusive with respect to
diverse cultures and lifestyles and the need
for high-performing employees
• Family-Work Balance – more and more
employees are interested in leisure
• Flexible Employment – the number of part
time workers and independent contractors
grows
Key Developments
• Stiff competition – long-term organizationoriented HR decisions give way to shortterm market orientation
• Risk of low firm performance is transferred
to employees whose job and compensation
stability grows more and more fragile
• Strategic HR – companies are more focused
on generating shareholder value, and they
look to HR experts to take more long-term,
profit oriented perspective; HR is a source
of competitive advantage and value added
(not only cost cutting) initiatives
1970s – 1980s: Quality of Work Life
• Growing dissatisfaction among workers with
unchallenging jobs and heavy-handed
management prompted managers to rethink the
way work was organized and managed
• Several recessions, oil crises, deregulation, and
mounting foreign competition brought
considerable pressures to bear on managers.
Management learned that quality, not only cost,
was a key to market success.
• The value of people increased, (hence the shift
from the term “personnel management” to “HRM”)
and opened the door to a new conceptualization of
how work is organized and the role of HR
specialists
QWL Experiments
•
•
•
•
Reorganization of tasks and technology
Self-directed work teams
Joint problem-solving groups
Improved communication between
management and labor
• Quality circles
1980s – 1990s: Quality Improvement
• June 1980 – If Japan Can… Why Can’t We?
• Trying to stay competitive, many companies
looked at Japan and took up TQM and
reengineering.
• HR departments became more focused on serving
internal customers, training workers in QI
techniques, and facilitating organizational change
and organizational learning initiatives
• Greater emphasis on union avoidance in the US
(greenfield sites) called for more work reform
A New Model of Work System:
Different Names – Similar Meaning
• High Involvement
• High Commitment
• High Performance
Two Work Systems
• In the past two decades, we have witnessed two
work systems which exist side by side
Two Work Systems
HRM Practices
Command & Control
High Performance
Internal career
opportunities
Hiring mainly from outside
the firm
Very little use of internal
career ladders
Hiring mainly from within
the firm
Extensive use of well defined
career ladders
Training
No formal training provided
Extensive formal training
provided
Result-oriented
appraisals
Performance measured by
quantifiable output
Performance measured by
behavior-oriented measures
Incentives
Mainly extrinsic
Extrinsic and intrinsic
Little
High
Benefits to “downsized”
employees
Formal dismissal policies
Participation in
decision making
Little
High
Job descriptions
Jobs are clearly/tightly
defined
Jobs are broadly defined
Employment
security
Is There a Third Work System?
• Less job security
• Less internal development - employees are
expected to develop their own skills
• Employees bear more risk – rewards are
closely linked to performance
• Employees are more connected to the
market than to a particular company
(employability vs. job security)
• Employment relationship is market basedperformance risk is devolved to employees
Implications to Managers
• Retention – how to retain key skills
• Recruiting = poaching (e.g., academia)
• Training/Development – Do employers
have any incentives to invest in employee
development?
• Loyalty and commitment – can
uncommitted employees be empowered?
• Can employees be committed to an
organization that is not committed to
them?
IV. Determinants of HRM
Transformation
Factors Influencing HRM Evolution
• Public Mood/Sentiment
Legislation/new HR practices (safety &
health, the importance of family-work
balance, diversity of workforce)
• New Technology – monitoring (middle
management becomes obsolete);
outsourcing
• Research
Factors Influencing HRM Evolution
• Critical events – wars, revolutions, depression,
violent strikes
• Labor shortage and labor unrest
• Intellectuals – Radical vs. Conservative
• National culture – Individualist vs. Collectivist
• Unions – N. America vs. Germany/Sweden
• Employers’ attitudes
• The state – Voluntarism vs. Political Exchange;
regulating IR processes vs. regulating IR outcomes
• HR developments abroad
V. Lessons
Lessons
• Profit – profit is the invisible hand that
guides and shapes all aspects of company’s
HR practices
• Strategic HR – the more that labor issues
have the potential for impacting the bottom
line, the more that top management will
start to look at HR from a strategic
perspective
Lessons
• Contingency – HR practices that work well
for one company/country or in one situation
may be an embarrassing failure in another
• Alignment/Bundling - management must
adopt a holistic, systems view of HR and
mix and match HR practices so they
interact with each other to maximize
overall performance
• Human Resources are People – every
person wants to be treated with respect
and fairness
VI. HRM in the Near
Future
Philosophy I:
Resource-Based Strategy
• HR managers are advocates on behalf of
employees
• The objective of HR is to secure competitive
advantage based on distinctive employee resources
• Human resources and HR practices are inimitable
sources of competitive advantage.
• Therefore firms have to invest continuously in
their employees – they have to “make talent”
rather than buy it
• The above calls for a long-term, organizationoriented approach to HR development
Philosophy II: ‘When the Times Get
Tough, Throw Them Away’
• HR managers are not advocates on behalf of
employees
• The objective of HR is to minimize labor cost and
respond quickly to changing market circumstances
• Employment and pay are market-oriented
• This orientation invites a short-term approach to
employees’ well being, training, commitment, etc.
• This philosophy leads to the outsourcing of many
HR functions (to save money); and the devolution
of HR authority to line managers (to respond
quickly to market developments)
What Is This Creature?
Can we improve an
organization’s
performance by
fancifying its “spoiler,”
that is adding HRM
techniques, without
nurturing its “head,”
that is soft side (e.g.,
culture, training and
development)?
THE END