The HR (R)Evolution

Change the Workplace, Change the World

Alan Watkins, Nick Dalton

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781000729993
• Edition: 1
• Topic: Business
• Subtopic: Business generale
• Index: Business

Many observers have suggested that capitalism is fast destroying our planet, concentrating power in a few big companies. Excessive short-termism, leveraged debt, digitisation, and disruption are the new normal. We stand at a critical juncture where the two paths ahead could lead to very different futures. One route could take us back to the harshest days of the early Industrial Revolution and the Great Depression. The other could lead to a world of abundance, equality, inclusivity, and prosperity for all. Which future awaits us will largely be determined by business, and HR (Human Resources) in particular.

Books on HR tend to focus on HR practices and potential interventions, but they rarely look at the profession, how it evolved, and how and why those people practices were created. The HR (R)Evolution: Change the Workplace, Change the World describes the "Seven Great Waves" of change and explains how each wave impacted business. It explains how some companies are stuck in the past and how HR can break the deadlock if it understands what the future holds. This book is meant for senior business leaders or anyone currently working in HR who are grappling with the paradoxes of business today. It's for leaders who recognise that people issues are the central challenge of our time. Whether we embrace the waves yet to come will determine whether we survive or regress, whether we flourish or flounder. The future is in our hands.

1 HR 1.0

The Paternalism wave (pre-1920)

It all started with Mrs E.M. Wood.

In 1896, Rowntree appointed Mrs Wood as the first “welfare officer,” essentially the first HR manager (HR 1.0). She was charged with ensuring the welfare of women and children working at the Rowntree factory in the UK.

The “factory system” emerged in Britain during the Industrial Revolution in the late eighteenth century. For the first time in modern history, labour required organisation. The majority of factories, like the “dark satanic”¹ cotton mills of Lancashire, were powered by water or steam, and only later by electricity. The factory system completely changed the economy. It shifted the production of items such as shoes and muskets away from skilled craftsmen, who made entire products, to unskilled labour, who only made part of the product. Such changes in the way people worked ushered in a brutal time for many employees as they entered factories and mills in their thousands. Men, women, and children were expected to toil for long hours in dingy, often toxic environments on dangerous machinery. It was the emergence of the factory system and the gathering together of large groups of people in the mills that eventually led to welfare concerns and the emergence of Paternalism.

Paternalism, in this context, is a system or practice of managing and governing individuals in business like a father figure dealing with his children. At best, this meant a benevolent authority imposing restriction on his subordinates “for their own good,” and at worst a harsh, punitive, and cruel disciplinarian flexing his will and whim. As factories become more commonplace, the smarter and more perceptive owners realised that there may be some advantage to managing the workforce rather than just bullying them.

On 6 June 1913, the Welfare Workers’ Association (WWA) was formed at an employee conference in York. Thirty-four employers in attendance, including Rowntree, Boots, and Cadbury, declared the WWA as an “association of employers interested in industrial betterment and of [the] welfare [of] workers engaged by them.”² With the formation of the WWA just over 105 years ago, the discipline of HR management emerged. In fact, the WWA is now known as the Chartered Institute of Personnel and Development (CIPD), which will be familiar to many HR professionals today.

Before the factory system, work used to be “put out.” Weavers would work from home. Families would work together to ensure delivery of weaved cloth, organising themselves around the rhythm of their daily lives. Guilds of apprentices, journeymen, and masters would provide services such as weaving, dying, bookbinding, painting, masonry, baking, leatherwork, embroidery, cobbling, and candle-making. None of them had any need for an HR function. They were their own HR department.

All this changed when Richard Arkwright built his first cotton mill in Nottingham, first using horses to power spinning machines, which he held the patent on, and then switching to water power. Along with partners, Arkwright went on to build several factories, eventually moving to steam power. By 1833, his mill complex in Belper, seven miles south of Cromford, Derbyshire, employed 2,000 people. Several factories in Manchester employed over 1,000 workers. Although still the exception, the giant factory had arrived,³ and with them a growing need for people such as Mrs Wood and associations such as the WWA.

But factories were not all doom and gloom. They produced a boom in productivity. The “social science” of economics emerged around the same time to explain the relationships between individuals within a society as a result of shifting financial patterns. Adam Smith, largely seen as the father of economics, and Alfred Marshall’s contributions were immense during this time. Smith’s “division of labour” described how dividing the production process into different stages enabled workers to focus on specific tasks. If workers could concentrate on one small aspect of production, it would increase overall output – so long as there was sufficient volume and quantity produced.⁴ Marshall, one of the founders of neoclassical economics, brought the ideas of supply and demand, marginal utility, and costs of production to business for the first time.⁵ Together, Smith and Marshall were instrumental in explaining how specialisation of task and increased scale, enabled by mechanisation, reduced marginal costs and increased profits. It made complete sense for businessmen to build for scale.

The impact on productivity and society was revolutionary. According to historian and author Joshua Freeman:

The average annual per capita growth of global economic output from the birth of Jesus to the first factory was essentially zero. After the introduction of the factory system, in the eighteenth century it approached 1 per cent per annum, from the mid twentieth century 3 per cent per annum.⁶

Of course, this advance was welcomed, and seen rightly as genuine progress that would, or at least could, benefit all. For the vast majority of the global population prior to the early stirrings of the Industrial Revolution in the eighteenth century, human endeavour was focused on eking out a living in rural areas or small settlements. Work was sporadic and life was precarious, plagued by hunger and disease. The Industrial Revolution offered alternative employment, and people flooded to the factories in the hope of a better life as towns and cities sprang up around them.

In the UK, the birthplace of the Industrial Revolution, the government was keen to encourage industrialisation. People were getting rich; an empire was being built.

Perhaps unsurprisingly, the UK government cleared the way for the mill owners to proceed without hinderance. The Combination Acts of 1799 and 1800 made it illegal for people to “enter into contracts for the purpose of improving conditions of employment or calling or attending meetings for that purpose and of attempting to persuade another person not to work or refuse to work with another worker.”⁷ In other words, it was illegal for workers to strike or even discuss the possibility of seeking improved safety, conditions, or welfare. Punishment was jail time, hard labour, and even transportation to Australia for those leading such action. Anyone contributing to the expenses of a person convicted under the Acts was also subject to a fine, and defendants could be forced to testify against each other. Collectively, the Combination Acts drove labour organisations underground. Ironically, this effort to combine into groups, tribes, or gangs is a defining characteristic of the emergence of the Paternalistic wave. Individual survival in the harsh conditions of the mills and factories of the time was tough. The family unit is the first tribe we belong to, but that sense of “us” will eventually push out to include other groups, including co-workers banding together to improve working conditions and safety and reduce exploitation. Collaboration provides strength in numbers, at least in principle, and the factory owners recognised it and sought, with government help, to diminish that strength.

The Masters and Servants Act of 1823 went even further in favour of employers, and was designed to discipline employees and prevent workers from working together to press for better conditions – actions viewed at the time as a “restraint of trade.” Permitted punishment under the law included up to three months’ hard labour for an employee who missed any days of service before the end of their contract. Between 1858 and 1875, there were 10,000 prosecutions under the Act.⁸

The leading edge of Paternalism was, however, waking up to what was going on in the factories and mills and the brutal and unjust realities facing the vast majority of workers. Remember, the “leading edge” of any evolutionary change represents the most inclusive, most advanced, and most sophisticated thinking at that time. It doesn’t represent the majority, but it encapsulates a potentially “better way” that emerges from the negative realities of the current way.

And Freeman paints a very bleak picture of the current way at that time:

the noise and motion of the machinery; the stifling air, full of cotton dust, in many mills kept oppressively warm to reduce breakage; the pervasive stench from whale oil and animal grease used to lubricate the machinery … and the sweat from hundreds of labouring people, the pale countenances and sickly bodies of the workers; the fierce demeanour of the overseers, some of whom carried belts and whips to enforce their discipline.⁹

Or, as William Blake more poetically put it:

And did the countenance divine

Shine forth upon our clouded hills?

And was Jerusalem builded here

Among those dark Satanic Mills?¹⁰

Every evolution, every advance, has an upside and a downside. The large factories of the Industrial Revolution made many people very wealthy. They were viewed as the pantheons of human achievement. However, that success came at a cost – significant human suffering.

The first glimmers of Paternalism

Paternalistic concern drove the UK government to intervene. Sir Robert Peel MP, whose son would later become Prime Minister, initiated the Health and Morals of Apprentices Act of 1802. Ironically, Peel, who was also a wealthy factory owner, had been instrumental in starting the practice of employing “pauper apprentices.” Poor children or orphans, often under the age of 10, were “employed” as unpaid, bound apprentices until the age of 21. Needless to say, their free contribution significantly boosted mill owner profits. The children usually boarded on an upper floor of the building and were locked in. Shifts were typically 12 hours long after allowing for a meal break, and the children “hot-bunked” – where one child who had just finished a shift would sleep in a bed recently vacated by another child about to start a shift.

However, Peel’s emerging Paternalistic concerns turned to action after an outbreak of a malignant fever at one of his cotton mills caused most of the children to die. The Manchester Board of Health investigated the employment of children in all Manchester factories, taking evidence from Peel among others. Seeking to address the issue, Peel introduced his bill in 1802. In doing so, he said that he was convinced of the existence of gross mismanagement in his own factories, and having no time to set them in order himself, was getting an Act of Parliament passed to do it for him.

In 1831, the Truck Act was passed to outlaw truck systems, also known as “tommy shops.” “Truck” was the collective term used for company tokens, company currency, or credit. The Act prevented factory owners from paying their workers in tokens or credit that could then only be used in the mill store with vastly inflated prices. The Truck Act required workers to be paid in cash. In 1833, the first meaningful Factory Act was introduced, directly targeted at improving the conditions for children in factories.

In relation to the world view of today, it is illuminating to revisit the provisions made in the Factory Act of 1833:

• No child workers under the age of nine.
• Children 9–13 to work no more than nine hours a day.
• Children 13–18 to work no more than 12 hours a day.
• No child to work at night.
• Two hours’ schooling each day for children.
• Four factory inspectors appointed to enforce the law.

Even though children as young as 9 were explicitly permitted to work nine hours a day, still considered brutal by today’s standards, the process of ensuring the effective welfare and management of people had begun. Prior to these provisions, children as young as 5 had been apprenticed to mills, providing free labour to mill owners. This development was an important nod to the need for schooling and the beginnings of standard-setting, albeit with a limited number of inspectors and minimal enforcement.

“HR management” got its foothold through these early safety and education provisions. As Freeman noted, “the giant cotton factory had led to new ways of organizing production, new sets of social relations, and new ways of thinking about the world.”¹¹

It was increasingly clear that the factory system needed to develop a people management system not only to coordinate vast workforces, but also to get the most out of those workforces to maximise productivity. Child labour may have been free, but it wasn’t always efficient, especially when those children were sickly. They were also unskilled and uneducated. The primary HR challenge for the early mill owners was recruitment and, according to Andrew Ure, an early business theorist, “training human beings to renounce their desultory habits of work, and to identify themselves with the unvarying regularity of the complex automation.”¹²

Apprentices, journeymen and master craftsmen didn’t want to lose their autonomy – at least until the factory system put them out of business. Male workers, especially skilled workers, used to their own paternalistic superiority in the home, resented the loss of freedom and imposition of rules. Although an appreciation of the value of training to change behaviour may have arisen during this time, it was achieved via discipline rather than actual training.

Women and children, already more familiar with subservience in the home, were easier to constrain and cheaper, so they often made up the vast majority of the workforce in the early textile mills. And yet the use of child labour became increasingly distasteful to polite society.

As large-scale mills and latterly iron and steel factories became common, workers would often have to walk many miles to work, depleting their energy reserves before their shifts even began. This led to the building of housing and mill villages by some of the early mill owners such as Richard Arkwright. Not only did this bring the workforce closer to the factories, preventing the wasted energy on their daily commute, but the mill villages also made provision for the creation of community, with schools, shops, churches, etc. This then encouraged wider Paternalistic interventions. Initially driven to ensure greater oversight of the wo...