Imagine a time when the performance of government officials was evaluated by the colour of their robes. In ancient China, during the Han Dynasty, a system of coloured ranks was used to determine promotions, demotions, and even dismissals. Those who consistently performed well were adorned in red, while poor performers were relegated to black.
Before that, in Ancient Egypt Hieroglyphic inscriptions provided evidence of reward systems and punishments based on performance on the walls of the Egyptian temples.
Fast forward to the 7th century AD, during the Tang Dynasty, and the system evolved. Merit, rather than social status, became the primary criterion for evaluation. Officials were assessed based on their knowledge of Confucian classics, history, and government administration. This marked a significant shift towards a more performance-based approach to human resource management.
These early examples illustrate the long and complex history of HR, a function that has evolved dramatically over centuries to meet the changing needs of organisations and societies.
The Industrial Revolution and the birth of Modern HR function
It wasn’t until the Industrial Revolution, centuries later, that we saw a more formalised approach to HR emerge. As factories and large-scale organisations sprang up, a new need arose for managing vast workforces.
One of the key developments during this period was the application of management principles. Pioneered by Frederick Taylor, scientific management sought to improve efficiency and productivity using scientific methods.
Management principles had a profound impact on the development of HR practices. They helped to establish a more systematic and objective approach to managing employees and improving organisational efficiency.
The Western Electric Company, a manufacturing subsidiary of AT&T, was a pioneer in this field. In the early 20th century, they began experimenting with various management techniques, including scientific management and welfare work. These initiatives laid the groundwork for a more structured HR function within the company.
Another notable example is General Motors Corporation, which established a centralised personnel department in the 1920s. This department was responsible for a range of HR functions, including recruitment, training, and employee relations.
Ulrich’s three-legged stool and the evolution of strategic human resources:
More than a century after the Industrial Revolution, HR underwent another significant transformation. David Ulrich’s three-legged stool model introduced in 1997 revolutionised the way HR professionals viewed their role.
Ulrich proposed that HR should focus on three key areas:
This model has been widely adopted by organisations worldwide, providing a framework for HR professionals to balance strategic, operational, and employee-focused responsibilities.
While the Ulrich model has been influential, it has not been without its flaws. Some critics argue that the model exaggerates the administrative side of HR, while others find it challenging to put the model into practice.
A recent Gartner study revealed that over two-thirds of CEOs believe HR lacks the strategic vision to fuel business growth. Deloitte echoed this sentiment, with 65% of CEOs expressing dissatisfaction with HR’s focus on administrative tasks. Another study by IBM found that only a third of CEOs felt their HR teams were fully prepared for the digital age.
These findings point to several challenges in implementing the Ulrich model:
These challenges coupled with a rapidly changing business landscape highlight the need for a new approach to HR that is more aligned with the evolving needs of modern organisations and have paved the way for a new HR paradigm.
HR: A New Era
While it took millennia for HR to evolve from its ancient Chinese roots to the strategic business partner of today, the current revolution is happening at a breakneck speed. We’re witnessing a dramatic transformation in the HR function, driven by technological advancements, globalisation, and changing workforce dynamics and we can witness this transformation can be noticed in three shapes:
1. The rise of HR outsourcing
The days of HR departments handling every aspect of employee management are over. More and more companies are outsourcing administrative tasks like payroll, benefits administration, and recruitment to specialised service providers. This allows HR professionals to focus on strategic activities that drive business value.
2. HR as a revenue center
Forward-thinking companies are now recognising the potential for HR to generate revenue. By offering specialised HR services to other organisations, HR departments can become profit centers, contributing to the overall financial health of the business.
Air Arabia is a prime example of this trend. By establishing a subsidiary called Air Arabia HR Services, the airline has successfully transformed its HR function into a revenue-generating unit, offering services such as recruitment, training, and payroll administration to other companies.
3.The age of AI and automation
Artificial intelligence (AI) is revolutionising the HR landscape. From automating routine tasks like resume screening to providing data-driven insights, AI is transforming the way HR professionals work.
While AI offers numerous benefits, it also presents challenges. HR professionals must be mindful of potential biases in AI-driven decisions and ensure that AI is used ethically and responsibly. Additionally, professionals must develop the skills to effectively leverage AI tools and interpret the data they generate.
In today’s dynamic business landscape, HR professionals must anticipate and adapt to emerging trends. Let’s explore three key trends shaping the way we work and the skills that will be essential for HR leaders to succeed in the future.
The rise of remote work
Since the COVID-19 pandemic, remote work has become a mainstream practice. This shift has far-reaching implications for HR, including the need for new policies, technologies, and management strategies to support a distributed workforce.
The gig economy
The gig economy, characterised by short-term, project-based work, has gained significant traction in recent years. This trend is challenging traditional notions of employment and creating new opportunities for both workers and businesses.
Diversity, Equity, and Inclusion (DEI)
Globalisation and the growth of multinational companies have made workplaces increasingly diverse. This has led to a growing emphasis on DEI initiatives, which aim to create inclusive and equitable work environments for all employees.
HR professionals must possess a diverse skill set to thrive in the fast-paced changing economic and business contexts. Here are five key competencies that will be crucial for success:
HR professionals must be comfortable with technology and able to leverage digital tools to streamline processes and understand how AI and automation can streamline tasks and improve efficiency.
Despite being a long-standing requirement, business acumen remains a surprisingly rare skill among many HR professionals. While the importance of understanding the broader business context has been emphasised since the 1990s, many HR leaders still prioritise their own areas of expertise.
The future of HR will undoubtedly belong to those who cannot only navigate the complexities of human resources but also understand the strategic goals and financial metrics of the business. This shift is no longer a luxury; it’s a necessity for HR professionals to have a seat at the table and contribute meaningfully to organisational success.
Today’s global workforce, coupled with the rise of remote work, means that employees are increasingly likely to collaborate with colleagues from diverse cultural backgrounds. Without cultural intelligence, navigating these cross-cultural interactions can be challenging and may lead to conflicts or misunderstandings. To foster a positive and inclusive organisational culture, it’s essential for HR professionals and employees alike to develop strong cultural awareness and sensitivity.
This skill will be a critical skill for HR professionals in the future. With the increasing availability of data and analytics tools, HR leaders will need to be able to use data to inform their decisions and drive strategic initiatives. This includes understanding HR metrics, analysing data trends, and using data to measure the effectiveness of HR programs.
Successful HR professionals will need to be change champions. They must be able to anticipate, plan for, and execute organisational changes while ensuring a smooth transition for employees.
The HR function has come a long way since its ancient origins. By developing these essential futuristic skills, HR professionals can position themselves as strategic partners to their organisations and drive success in the ever-evolving world of work.
Hisham ElSaied
Head of Human Resources
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