View From City Road: Support for an old-fashioned view

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Many of us have long held the view that personnel management, or human resource management as companies sometimes insist on calling it, is a uniquely irrelevant executive function fulfilling no obvious purpose other than to stifle initiative, flair and creativity.

This, however, has become a deeply unfashionable view. In the kinder, gentler 1990s it is usually taken as axiomatic that successful and socially responsible companies should make every effort to cosset their employees.

They are urged to create powerful personnel departments and committees where workers and managers can discuss issues of mutual interest.

Research by the London School of Economics for the Employment Policy Institute has at last come to the rescue of those of us with a more old- fashioned leaning in these matters.

Personnel management, it appears, is largely ineffective in improving employee morale and company performance. Worse, sometimes it is positively counter-productive. The study exposes most varieties of 'human resource management' as a complete waste of time promoted by soi-disant gurus and self-serving consultants with an eye for a quick buck.

Companies that employ personnel specialists or have specific personnel managers have worse employee relations and lower productivity than those that do not, according to the analysis of 2,000 British workplaces. Companies with personnel specialists also create fewer jobs and lose existing employees more frequently.

Human resource management, moreover, makes little or no contribution to good industrial relations, although measures like employee involvement, performance-related pay and the promotion of 'organisational flexibility' do boost productivity.

Personnel directors may argue that they are associated with poor industrial relations and weak company performance precisely because those are the situations in which they are most needed. Nice try, but the LSE study found no evidence for this.

Furthermore, the research cannot be dismissed as flaky nonsense. It is based on the authoritative Workforce Industrial Relations Survey, the biggest such survey in the world.

Astonishingly, all the respondents were themselves personnel managers, so they can hardly complain about misrepresentation. So, if your company has poor morale or low productivity, kick the personnel director off the board and shut down his department. It should do wonders.