HRM Practices in the United States – A Perspective on the Past, Present and Future

Rajendra Prasad Koirala

The rise of the US economy in the 1990s was propelled by productivity improvements fueled by technological innovations. The massive economic growth resulted in labor shortages, forcing businesses to adopt innovative recruitment and retention strategies to hire people from non-traditional backgrounds resulting in creating a more diverse workforce.

This situation prompted HR experts to recognize the need to upgrade their technical abilities and establish solutions to manage more virtual enterprises and make HR departments strategic partners in organizations.

Over the past three decades, the services sector has replaced manufacturing in the US as the country’s industrial base moved to other countries where cheap labor and raw materials are available. Manufacturing employed 27.3% of US workers in 1970 which came down to 14.9% in 1998 (US Census Bureau, 1999). Globalization has allowed US companies to explore previously untapped areas, but it has also fueled mergers and acquisitions that necessitate substantial HR skills.

With the economic boom in the 1990s, the unemployment rate fell from 7.5% in 1992 to 4.5% in 1998. (US Census Bureau, 1999). Legal and societal barriers to employment are continuing to crumble, easing labor shortages. For example, between 1970 and 1998, the female labor force participation rate increased from 31.5% to 63.7% (US Census Bureau, 1999).

On the other hand, organizations actively started to seek to resolve the issues related to workforce diversity. The aging of the US workforce has been one of the major issues in diversity management.

As CEO salary continues to climb in the United States, there are significant pay gaps between workers and executives (Hansen, 1999). According to experts, the fall in union membership from 20.1% of the workforce in 1983 to 13.9% in 1998 has hampered employees’ capacity to earn higher pay during the most recent economic growth.

Scarcity of Workers
1999-2000 saw the US labor market face a tight situation due to a dearth of information technology (IT) experts as the economy continues to expand. A survey published in April 2000 reads that US firms will require over 1.6 million new IT workers in the coming year, with 850,000 of these positions going unfilled (Information Technology Association of America, 2000).

HR professionals are boosting recruitment efforts in response to labor shortages. Due to labor shortages, 64% of respondents stated recruitment would be a top issue, while 46% said the training would be a top priority.

Companies are being advised to use the internet for recruitment purposes by consultants, and bonuses for employee referrals are increasing, often reaching five figures. Small businesses compensate for labor shortages by raising wages, offering more vacation days, providing better health-care coverage, and providing flexible hours or daycare, according to a 1998 study by Dunn & Bradstreet (Cooper, 2000).

In the meantime, companies are focusing on retention initiatives as a result of labor shortages (Hansen, 1999b). According to a Fortune magazine survey, fostering a sense of community, identifying and investing in the organization’s best people, making it easy to move within the organization, hiring very selectively, giving all employees decision-making authority, and assisting employees in balancing work and life demands are all examples of retention practices (Stein, 2000). According to a vast body of academic research on employee retention, companies can improve staff retention by providing:

  • fair and effective management;
  • high levels of organizational support (e.g., demonstrating appreciation for employee achievements and caring for employee well-being);
  • competitive compensation;
  • promotion possibilities;
  • Procedural justice in staff promotion.

Managing a Multicultural Workforce
As the representation of historically underrepresented groups continues to increase in organizations across the US, workforce diversity management has become an issue of critical importance. The civilian labor force in 1980 was 88% white, 10% black, and 6% Hispanic; in 1998, it was 84% white, 12% black, and 10% Hispanic.
A growing labor supply is one reason why US labor shortages have stayed manageable as businesses tap previously neglected groups like individuals with disabilities, former welfare beneficiaries, older workers, ex-convicts and international students. According to research, providing work-life perks and diversity management initiatives can improve recruiting by making the company more appealing to a diverse staff.

To improve performance and quality of life at work, organizations must modify their methods, habits, and attitudes to accommodate a more diverse workforce and many firms have launched diversity initiatives in response to these challenges. Training seminars and orientation sessions, as well as affinity groups, aggressive recruiting and retention efforts, managerial accountability, executive diversity councils, and work-life programs, are all examples of diversity initiatives.

Globalization has numerous impacts on human resource management. In negotiations, mergers and acquisitions, and increasingly globally diversified workforces, managers must increasingly cope with members of other cultures. According to a recent international poll of over 200 HR professionals, 60% of respondents expect their companies to go through a merger or acquisition in the next five years, and nearly 70% had already gone through one. HR professionals encounter hurdles in integrating various corporate cultures and compensation/benefits plans as a result of multinational companies’ growth.

Compensation that Changes with Time 
Pay systems that are flexible and strategically aligned with complex and changing business contexts are becoming more popular in the United States (Lawler, 2000). Competency-based pay, in which remuneration is based on individual talents and competencies that contribute to company success rather than the job that individuals perform, and broad banding are two examples.

The rising adoption of stock option programs for lower-level employees is perhaps the most fascinating variable compensation trend. In the United States, stock options have long constituted a key part of top executive compensation. Stock plans, on the other hand, have recently been extended to lower-level employees. According to current estimates, there are about 3,000 active broad-based stock plans in the United States, with the majority of full-time employees receiving options.
The emergence of these so-called “wide based option plans” has been attributed to a variety of factors. Employee salary can be linked to the performance of the company through stock options. Tying compensation expenses to business success can improve employee morale and performance, as well as help the firm decrease risk.

Technological Influences 
The way businesses manage HR data is changing as a result of technological advancements. Changes in technology may possibly be assisting in the re-definition of HR’s position in the organization. Some are now pushing for HR to be transformed from a strategic partner to a change agent as a result of technological opportunities. HR managers use the Internet to access information and communicate with others instead of shuffling papers and fielding phone calls, affecting practically every HR activity. HR database management systems keep track of employee information that is relevant to the firm. Computer technology and software advancements have enabled not only user-friendly access to employee data but also the capacity to analyze this data for organizational planning objectives.
Advances in technology such as the Internet and intranets, cellular phones, and fax machines have facilitated a shift from traditional “brick and mortar” firms to virtual organizations, where employees are physically isolated from one another and their bosses. According to estimates, between 11 and 40 million Americans work from home (McClelland, 1998). This poses substantial difficulties in terms of training, communication, work-life balance, and performance management.

In the United States, outsourcing all or part of the HR function is still a popular choice. In 1999, the United States spent an estimated $7 billion on HR outsourcing, a sum that could rise to $20 billion by 2023. (Leonard, 1999).

The” reengineering” movement, in which firms strive to uncover core capabilities, can be related in part to the current outsourcing craze in the United States. This is mirrored in the outsourcing of aspects of the HR function, such as benefits and payroll administration, in larger companies. There has been an expansion of “professional employer organizations,” or PEOs, in recent years that handle most or all of an organization’s HR operations.

The decision to outsource HR was based on a number of reasons, including strategic HR participation, demand uncertainties, compensation levels, promotional chances, positive HR outcomes, and idiosyncratic HR practices.

Human Resources Management with a Strategic Perspective 
HR is increasingly seeking a strategic role in business to assist companies in creating value and gaining a competitive advantage. The top three areas where HR is growing its contribution to organizational success are leading organizational change initiatives, working with management operations, and generating strategy. Empirical studies have found a correlation between HR practices and the financial performance of businesses.

HR practices that competitors can’t easily or quickly duplicate provide a competitive edge to organizations. HR may contribute value by developing procedures that help the company become a preferred employer, attracting and retaining top talent.

HR can also become a strategic partner by assisting with the tactical implementation of a business plan. HR is required to assess the sorts of knowledge and skills required in the workforce to carry out the firm’s plan, as well as to identify hiring and training needs and connect the performance management system with strategic goals. HR may also guarantee that the strategy is carried out in a fair and equitable manner.

Perspectives for the Future 
Because the US workforce will continue to diversify, companies that become preferred employers for historically marginalized groups may gain a competitive advantage. Firms are likely to continue experimenting with variable remuneration and high-performance work structures to boost productivity and the productivity gains from technological advancements will be achieved. HR functions are likely to be outsourced in the future, particularly by small and medium-sized businesses.

The difficulty for HR professionals, as should be evident by now, is not only that their duties are changing, but also that the number and complexity of those functions have grown. Managers in the federal government are asking more of their human resources departments. They want HR professionals to not only deliver excellent service but also to act like business partners, supporting the agency’s goal on a larger scale. HR departments, which are frequently understaffed, are stretched attempting to fill all of these responsibilities. HR personnel frequently lack the skills required for these new positions, and they may also face the challenge of genuine conflict between duties, particularly between the administrative role’s compliance interpretation and the customer service aspects of nearly all other functions.

Some companies have dealt with these many and contradictory tasks by splitting HR into distinct groups or centralizing or outsourcing administrative functions, but the underlying conflict still exists.

Although regular processing operations in the HR office used to necessitate a large number of employees, those tasks are now either farmed out or automated. The HR office of today and tomorrow requires employees with analytical skills, consulting expertise, and the ability to collaborate effectively in order to support management while adhering to the merit system principles articulated in Title V (Title 5 of the Code of Federal Regulations covers the codified Federal laws and regulations that apply to senior administrative professionals for each Federal Department and Agency as of the date of publication) of the United States Code, which articulate the core values on which the personnel system is founded. Building an HR team with these capabilities in each department will be vital to the Obama administration›s ambitious policy agenda being implemented successfully.

“HR Issues are dynamic in nature across the globe, but over the time, with the genuine research and observation, the issues are solved “
What about HRM practices in organizations in our country? Do we invest in research on HR Planning and Management? These questions are yet to be answered.

Koirala is a Ph.D. scholar. He can be reached at 

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