A fascinating and provocative article in The Economist magazine this month argues that HR is growing in size and stature, not just in the U.S. but around the world. Pay for HR executives is up as well.
Wow, who knew? Especially tenured HR managers who can remember getting all the articles about how everyone hates HR. (Remember the one with the bomb on the cover? That was me.) This must seem like a surprise. Is it just me or doesn’t it seem like HR is always in a headcount and budget squeeze?
The argument as to why it could have grown, which certainly seems plausible, is that there are just so many big challenges in HR now, from tighter job markets (at least in the U.S.) to new regulations to social problems spilling over into companies. Yet if you have been around for awhile, or just go back and read through business articles from earlier decades, there were always big challenges—or at least we thought so at the time.
Does it feel right to you that HR is booming? Has your department boomed in the last decade? It does not seem right to me. I spoke to the author of the piece, and he sent me data from the U.S. Bureau of Labor Statistics showing that the total number of HR managers is in fact 84% higher in 2024 than it was in 2014. That sounds stunning. But how can we tell if that really measures a boom in HR?
One question we might ask: How much of this increase is simply what happened to the economy as a whole? Did everything grow by that much? What if there are simply more companies and organizations now, but each one just has a little HR staff? The 84% figure does not imply that every HR department grew by 84%.
The economy and the labor force didn’t grow by that much. But how much of the increase in HR management jobs is just part of an overall growth in management jobs, at least in part because the economy and the labor force is bigger? HR manager roles grew faster than the overall increase in management jobs, but not by that much: The total number of managers of all kinds increased over the same period by 62%. Most of the increase in the HR numbers therefore seem to be part of something more general like giving people management titles to make them non-exempt workers. HR managers are only 9% of all manager roles, so they are not driving the total up by much.
Once one goes down the rabbit hole of dealing with government statistics, though, things get curiouser and curiouser. If we look within the HR function from 2004 to 2023 (the most recent data broken down), we see that HR staff in “compensation and benefits” grew only by 18%. That sounds more like it, as we know the elaborate compensation programs have gotten simpler and simpler over time. Training and development? Up 68%, not far off the average growth for all management jobs. Here’s the big one: HR specialists, this is everything but comp and benefits and training and development. It almost doubled, up 96%. It’s looking like maybe there was big growth in HR.
But then just to complicate things, the statistics break down where these jobs are. Most important for us is the big category of HR specialists. The “industry” that uses the most of these is… employment services like staffing agencies. They have twice as many HR specialists as we see in what appears to be the HR functions inside regular organizations. That is not true for the smaller functions of comp and benefits and training and development or HR managers who remain disproportionately inside regular employers.
This would explain why it doesn’t seem that our HR departments are booming at the same time that HR jobs are increasing: Those jobs are disproportionately in the vendors who essentially are outsourcers. HR-related work might be increasing but not inside HR departments. So, HR jobs could have increased even if HR departments are not growing.
That seems neat and tidy except for one additional question, as TV detective Columbo used to say. What if we ask the question that HR people and employers really want to know, which is what do staffing ratios look like in HR departments? Has the number of HR staff per employee grown? That’s the measure of HR departments. We won’t find the answer in any government data. It’s private and proprietary. If we ask our little AI agent to go look, what they report is that there was no clear data in 2004. But that doesn’t stop AI! It says the best practice ratio was 1 to100. Now it is closer to 1.7 to100. If those figures are correct, then HR departments and not just people doing HR work someplace would have grown by 70%.
Everything clear now?
It seems to me that HR has just been going through cut after cut and more outsourcing the past 30 years or so. But if the staffing ratio really did change that much, then I must be wrong. While I wasn’t paying attention, both the number of people doing HR work and the size of HR departments grew.
What do you think?
Peter CappelliGeorge W. Taylor Professor of ManagementDirector - Center for Human Resources for the The Wharton School