HR Britain: how human resources captured the nation

Is HR the force holding back our economy?

Illustration by Edmon Deharo

Until I started working in the Cabinet Office in 2020 I hadn’t paid much attention to human resources (HR). I had rolled my eyes at more time wasted circumventing another rigid recruitment policy, which, although introduced to make things better, was in fact making them worse. I assumed HR was unavoidable in large organisations, and mostly there to help.

My role was to restore relevance and rigour to civil service training, from entry to leadership. It brought me close to the gatekeepers of employee relations. This was both illuminating and depressing. Management consultants are taught to keep asking why, to better understand and solve problems. This turns Charlie Munger’s phrase “show me the incentives, and I’ll show you the outcome” into a useful analytical tool.

Why were recruitment processes taking so long? To ensure fairness. Who decides what’s fair? The Public Sector Equality Duty, in precedents set by courts and interpreted or pre-empted by employment lawyers and HR advisers.

Why were so many employee grievances settled at such great expense, before and after employment tribunals? Because there were so many transgressions of HR policy, often by the very people who had codified the rules.

Why did every internal meeting start with a lengthy “emotional check-in”? For psychological safety. Where are people learning about that, and similarly subjective concepts? In acquiring vocational credentials from the Chartered Institute of Personnel and Development (CIPD) and other HR representative bodies, and attending their courses. In September, Sam Bowman, Ben Southwood and Samuel Hughes published their “Foundations” essay, which attracted significant attention in the national policy debate. It details how Britain is an outlier, lagging behind comparable G7 nations since the financial crisis, and struggling with growth, productivity, and weak state capacity.

The authors explain why, with clarity and precision: private investment is over-regulated and distorted by complex tax codes; infrastructure projects are stymied by lobbyists and lawyers; and the 1947 Town and Country Planning Act removed the incentive for local councils to permit building infrastructure.

The essay does not mention that Britain is also an international outlier in its dominant and expanding HR sector. We have one of the largest in the world, second only to the Netherlands. HR jobs have been growing steadily in most Western countries but the UK is top of the league* (turn over to see tables evidencing this). The British Labour Force Survey (LFS) shows a steady, 83 per cent increase, from just under 300,000 workers in 2011 to more than 500,000 in 2023. Might this also be an explanation for our national sluggishness?

History

As long as there have been employers there has been the need for administration of employees to recruit, train and discipline. “Personnel” became a recognisable corporate function in most developed nations with industrialisation between 1700 and 1900. Initially, the purpose was keeping simple records. The need for people to manage welfare and other compliance standards expanded in response to government legislation. A range of scientific management theories emerged in the early 20th century, as did the places where they were studied, the new business schools. Why shouldn’t the same models and assumptions that economists were applying to money and goods, with the aim of improving efficiency, be applied to employees, the most vital commodity in most businesses?

The postwar period and civil rights movements brought more workplace legislation and social pressure so that staff welfare and fairness became a primary concern alongside productivity. By the 1980s “personnel management” had evolved into “human resources” and by the 1990s new computing technology had enabled “strategic HR management”: more data, more processes, and more people needed to oversee them. A further shift towards employee well-being, and diversity, equality and inclusion (DEI), in the last 20 years has completed HR’s evolution from responding to business needs, to shaping them.

Perhaps because of HR’s roots in industrial relations and civil rights campaigns, it is harder for politicians on the left to believe, let alone suggest publicly, that its expanded reach may be a problem. It is much easier for Kemi Badenoch, the new leader of the Conservative Party, to talk about HR as dominating a bureaucratic class, “not related to higher productivity”, as she put it, “but a new culture of harm focused on ideas of group equality of outcome”.

Oversupply

The majority of HR workers are university graduates, a rise in recent decades similar to other administrative sectors. Perhaps more surprising is the shift towards HR roles as a first occupation on completing a range of degrees. We might have guessed this would be a career destination for psychology and business studies graduates, but did those 18-year-olds, as shown in the table opposite, choosing history, English, politics, languages or philosophy expect to be HR officers?

This may illustrate “elite overproduction” in the social sciences, or in other words, of too many humanities graduates and not enough jobs for them. It’s worth noting that HR has been the beneficiary in Britain, rather than, for example, teaching. Alongside good pay and job security, in many organisations HR allows influence on high-status topics, incommensurate with position: global social justice and identity campaigns.

Demand

So what? What is the impact of HR growth? Definitely more HR. Bureaucratic theories from Max Weber, Patrick Dunleavy and Yascha Mounk show how individuals maximise power, expanding prestige and budgets. While there is demand from graduates, HR job supply is conditional on the HR function having the power to sway employers’ choices. In Britain the share of HR directors on boards has increased sharply, from 47 per cent in 2005 to 85 per cent in 2017. More than 70 per cent of FTSE 100 companies have a chief HR or people officer on their executive committee.

The UK legal and policy framework has also been fertile ground for HR growth over the past 20 years. The Equality Act assigns rights that have been interpreted well beyond their intent of fair opportunity, and definitions of “protected characteristics” are increasingly unhelpful. For example, graduates checking “disability” on their application to the Civil Service Fast Stream rose from 11 per cent in 2014 to 23 per cent in 2020. At the time, this allowed candidates to skip an assessment stage, perhaps an incentive to disclose an anxiety disorder. The civil service now is less certain how many people are blind, bipolar, using a wheelchair, or with self-diagnosed ADHD. It’s not a great leap to appreciate both the work this creates for HR, as well as the impact it has on productivity.

Is it working?

If we could track trends towards higher retention, happier workers, fewer grievances, this growth would be welcome. If there was a correlation with HR and improved outcomes it would be rational for leaders to invest more. There is evidence for the opposite. As HR roles have increased so too have the number of tribunals and days lost to work-related illness, while productivity has flatlined. HR expansion is not coinciding with desirable things and appears to be coinciding with undesirable ones.

Is it a profession?

Before I saw how many of my civil service colleagues had CIPD credentials after their names, or were being subsidised or fully paid to do postgraduate studies in people management and organisational psychology, I hadn’t considered the legitimacy of HR’s label as a profession (rather than an occupation, or trade). Professions – law, surgery, accountancy – have a status which depends on specific criteria. They rightly require expertise, combining objective knowledge and practice: learned, assessed and accredited. They are distinct in contributing a shared civic good, necessary for a safe and fair society, and so valued outside a market. These factors beget a collective interest in standards, trusted ethical codes, and representative bodies to regulate entry and exit.

HR and its representative bodies have built the apparatus of a profession but without these crucial defining criteria. Specialist HR knowledge can be acquired on the job, and once was, usually by non-graduates. In most cases it isn’t objective. If it was, we wouldn’t see so many successful challenges to the application or misapplication of HR policy. When HR is done well in an organisation – efficient recruitment, relevant training, clear performance management – the employer and employee are the direct recipients, not the public.

The CIPD, from its beginnings as the 1913 Welfare Workers’ Association to its now dominance in credentialling HR workers worldwide, may also explain Britain’s outlier position. It is the monopoly provider of HR credentials in the civil service. This privileged position may well perpetuate groupthink. Also, some of the CIPD literature has reflected contentious ideas, including discredited research on the link between diversity and profit.

What is to be done?

Many are studying the ways in which Britain is lagging behind its neighbours, in productivity, growth and state capacity. But in HR we are a superpower, leading the world in supply and demand. The first step is to acknowledge there may be a problem. As the report from last year’s Inclusion at Work Panel recommended, senior leaders in all sectors might look closely at what their HR functions are both costing and achieving. A second step might be to question whether all HR jobs need to be graduate level. Most start-ups and small teams now use AI tools for standard contracts and compliant policies. Larger organisations might find that with these tools school leavers, well managed, can easily provide the HR support they need.

To modernise the Cabinet Office, its highest-ranking minister Pat McFadden could make a positive argument for reducing the 1,000-strong “Government People Group” and its £65m wage bill, and set the standard for the rest of Whitehall and the public sector. There is increasing concern that the size, remit and seniority of HR functions may be causing harm: to individuals at work, to the effectiveness of organisations, and to the economy. Reducing HR’s expansion and influence, in all sectors but particularly government, may help unleash the productivity gains and growth that have eluded Britain this century.

Pamela Dow is the chief operating officer of Civic Future