Many of the Human Resource Issues That We Worry About Don’t Really Exist

Why do we spend so much time and energy talking and worrying about HR issues which are not even real concerns if you look at them carefully? The HR agenda has been hijacked by the vendor world, a “human capital industry” of enormous size and scope, which is trying to generate concerns and then offer solutions to them, a new study found. 

A study published recently in Human Resource Management (HRM) found the astonishing degree to which human resources (HR) work previously [A1] performed by employers themselves is now performed by separate businesses. These businesses, for-profit vendors that handle HR-related tasks for individual employers (for example, HR consultancies and business process outsourcing services), are described as the human capital industry. This industry globally is as large as the gross national product of many large nations, and its marketing efforts now drive the HR agenda. 

According to Peter Cappelli, the lead author of the study and the George W. Taylor Professor of Management at The Wharton School of the University of Pennsylvania, “the agenda of human resources has been hijacked by the vendor world. The size of this industry is massive. We concluded that it was just under 2 trillion US dollars a year in terms of revenue! And then, if you see what companies spend on marketing - 10% or so of their budgets, that would be $200 billion spent on marketing. So now we have a sense of why they drive the agenda. They drive publications, they drive conferences, they produce all these reports, and they all say the same thing, then the issue becomes topical and then everybody has to do a report on it and the reports often have little to do with their own evidence”. 

The issue is that this agenda often creates the perception of HR challenges for which there is no practical evidence. So, we spend much time and energy talking and worrying about issues that just don't matter, things that, if one looks at them carefully, are not even real concerns: “The industry is trying to generate concerns and then offer solutions to them. And of course, it's really easy to offer solutions to problems that are not real, because nobody's going to know whether you solve the problem or not, right? If you look at how we manage employees and, in particular, the HR issues that appear in public and in the business press, a lot of them in retrospect turn out to just be wrong - we were worried about things that were not real problems or never occurred. You know, in the US in 2002 or 2003, I would go and talk to employers, and they're worried about preparing for the coming labour shortage. But there was no labour shortage coming. There was no evidence of this anywhere, except that vendors were claiming it was. And frankly, it all started with a McKinsey report suggesting that labour shortage was going to be a real problem for employers. That report was, however, based only on a smaller cohort of new entrants. Labour shortage wasn't a problem in the end, it didn't matter at all, but a lot of companies spent a lot of time planning and worrying about something that never happened”, said Cappelli. 

Another example of a big issue which we talk about all the time is “generational differences”. According to Cappelli, this issue is not real as there is no evidence for it: “The US National Academy of Science looked into it a couple of years ago and concluded it was all fake. The demographers always knew this, but they didn't care enough to say anything about it though. That's somebody else's problem, right? And as a result, we've wasted all this time and energy worrying about generational differences, which aren't even true in the US, let alone thinking that the US generational differences would apply in China and Europe and the rest of the world”. 

This disconnect between what the vendors are interested in and the reality of what is actually happening in the world around us has direct implications for HR practice and the relevance of the research in the field. However, neither HR professionals nor academics appear to be fully aware of this issue: “It's a problem for the practitioners, but it's also a problem for researchers because we follow what we think practitioners are doing and we don't quite realise that what they're doing is being driven by this industry behind them”, said Cappelli. 

While the research community could play a much bigger role in explaining what the reality is and which issues really matter, Cappelli argues that the problem is that the issues that HR researchers are pursuing are largely not particularly real. There's a huge disconnect between what HR researchers are focusing on and the way HR practice is going. “This disconnect in the HR research community between the reality and the historical theoretical concerns is maybe the biggest issue for researchers. If you're in the sciences, there is not such an issue. If you're in biomedicine, there's a bunch of diseases to be cured, which are right in front of you, and you can't pretend that they're not. The research agenda is set by nature, it is coming from the world around us. One might say that the world of business is similar in the sense that changes in business that affect society should be setting the agenda. However, in the field of human resources that has not been true for a long time. What happened after the 1980s starting in the US, is that with the collapse of unions in particular, HR function that had been at the board level disappeared. Human resources used to report to industrial relations. The HR practice was largely internally focused, and the research was all about making that internal system work - how do we test people carefully to hire? How do we figure out how to promote? How do we build succession plans? The problem is that agenda, more or less, just continued research-wise, even when that world had largely disappeared. So, we are now losing the race to the economists because they're stepping in and saying, here's what's actually going on in the workplace. If you're a researcher interested in the HR field, you should maintain relevance. Otherwise, it's a misplaced mission”, said Cappelli.

To bridge the two disconnects, the one between what the vendors are pushing and what is actually happening around us, and the one between research topics and practice, both HR professionals and the research community therefore need to focus much more attention on what is actually happening in the world.

According to Cappelli, HR professionals need to defend themselves against these marketing campaigns by questioning the issues that come from the vendors, such as asking, what do we actually know about generational differences? Do they really matter? What do we actually think will happen with new technologies, like ChatGPT? Is it really going to eliminate all our jobs the way some of the forecasters say? They have been wrong about everything so far. Do we think they're going to be right about this?

Part of the problem HR have is that their own business leaders seem to be heavily influenced by these marketing campaigns. “Some of that is a way of HR impacting their own leaders.  Rather than saying, ‘we've looked at this, here's what we think is going to happen in the workplace’, HR often wait and then react to what the CEOs think. And the CEOs are just getting their views from the business press, right? And that may mean being out of step with what the marketing world is saying about HR in the future”, said Cappelli.

Effectively what has happened, is a lot of the tasks from human resources that were done internally have been pushed out into a marketplace, which is good. This demonstrates how hugely important HR tasks are. “If you were to say, we've got this task as a function that is supported by a $2 trillion industry, you would say, wow! Before that it was all buried inside companies, and you'd never know”, stated Cappelli. 

The size of this human capital industry is a bit of a mixed blessing for researchers in the HR field as well: “This industry and its endless marketing is generating a lot of attention, and so researchers in some ways benefit from that attention. While it is important for researchers to know that the agenda is being driven by these companies, sometimes the researchers can use that agenda. For example, the topic of the future of work is now everywhere. Although it's not clear that everything is up in the air the way the industry seems to think it is, people are interested in the future of work, so they might be more interested in our research. Researchers will get a lot of attention talking about those topics, which they never would have a generation ago before these industry marketing campaigns”, said Cappelli.

Cappelli’s co-author was Shoshana Schwartz, an Assistant Professor of Management at the Luter School of Business of Christopher Newport University. 

Contact Peter Cappelli at cappelli@wharton.upenn.edu

Written by Jelena Petrovic, Knowledge Transfer Editor of HRM and Associate Professor at the University of Southampton Business School, j.petrovic@soton.ac.uk

HRM is a Financial Times Top 50 Business Journal