The New Work Order
On the power struggle that's shaping the way we work
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The most important power struggle in corporate America isn’t between CEOs and their boards or sales and marketing– it’s the quiet battle being waged between HR departments and people managers.
What’s strange about this struggle is that neither side views the other as a rival. Managers generally trust HR reps to help them solve tricky situations, and HR believes that their job is to empower management. Yet, for HR to impact the metrics they’re measured on, like retention, engagement, or employees’ felt sense of belonging, the department must ultimately exert control over how managers operate.
While this tension has existed since the dawn of human resources, recent trends have shifted the balance of power in favor of HR. In this post, I’ll unpack these trends and the implications of HR’s increasing rise in scope and authority.
The Power Struggle in Practice
To illustrate the struggle between HR and management, imagine a generic startup destined for unicorn status.
At the beginning of the company’s life, its HR department has relatively little control– mainly because there isn’t a department in charge of HR. Instead, the function is entrusted to a single person who is busy building the systems needed for managing a workforce. This allows individual managers to shape policies around hiring, performance management, and compensation based on their personal preferences.
As the company scales, things break. Early employees who have been elevated into management find themselves out of their depth. As a result, bad interviewing practices emerge, regrettable attrition spikes, and word spreads about embarrassing compensation disparities.
This all comes to a head when the CEO notices a spate of negative Glassdoor reviews that cost the company a few critical hires. That’s when the Head of People gets word that something needs to be done before the next fundraise begins. So HR bulks up on budget, headcount, and software to start cleaning up.
Initial employee surveys show that people feel over-worked, under-recognized, and sick of constant change. When the company was smaller, managers might have told employees to suck it up and appreciate that “this is startup life.” But not anymore.
In the coming months, HR rolls out standardized hiring practices, leveling frameworks, and mandatory manager training, to normalize the employee experience and curtail the influence of individual managers.
While some managers bristle at the added bureaucracy of these new programs, many welcome the prospect of delegating compensation conversations and vacation approvals to someone else.
As the company grows through its IPO, individual managers come and go. Meanwhile, HR continues expanding its remit to turn people management into a function where managers can be swapped in and out without much disruption to the whole. While these later-stage managers have less agency over how they do their jobs, they benefit from much more centralized support. For the most part, the control they sacrifice to HR makes everyone in the company better off.
HR’s Advantage Increases
While this power shift from management to HR happens at all growing companies, several recent trends seem to be tipping the balance further in favor of HR.
1. Increased Employee Power
Ever since the wave of COVID layoffs in early 2020, labor markets have gotten significantly tighter. This dynamic has given employees much more leverage to quit if they aren’t happy with their current position. And quitting is indeed what they have done.
To maintain staffing levels in the face of this “great resignation” and reduce the massive costs associated with turnover, HR departments have been authorized to do what it takes to maintain employee engagement.
Since managers have considerable sway over engagement scores but rarely own engagement as a KPI, HR departments feel an increasing need to exert influence over managers and their impact on individual contributors.
2. Inexperienced Managers
In the wake of this great resignation, a number of employees have lost their bosses and are being asked to take on new management responsibilities. This would be a daunting prospect at any point, but it is particularly challenging in a paradigm of remote and hybrid work, where even the most experienced managers are feeling out of their depth.
As these managers struggle, HR has all the more reason to step in and improve outcomes.
3. A Mandate for Equity
In the wake of America’s racial reckoning, every HR department across America was given the mandate to promote Diversity, Equity, and Inclusion (DE&I). While diversity and inclusion can be driven through grassroots efforts like employee resource groups, equity, which refers to a philosophy of fairness, can only be enforced through top-down control. That means the idiosyncratic hiring and compensation practices that managers may prefer simply aren’t compatible.
4. Hybrid Work
While the transition to remote work was complicated, the migration to hybrid is even more chaotic. Is it fair if 80% of participants in a meeting get to be in the same room together while 20% sit on Zoom, cut out of the conversation? What impact will this have on who gets the best assignments or the biggest comp increases? These are complicated questions that must be enforced through top-down policies to further the goal of equitable employee treatment.
5. Better Tooling
As work migrates from physical to digital spaces, software is having a much bigger impact on how work takes place.
While most B2B software works well for end users, the primary stakeholder that companies build for is the buyer of their product. Since individual managers are a diffuse group, most tools that dictate the employee experience are sold to HR.
In practice, this means that software vendors are devoted to giving HR better ways to collect data on employees and influence how work happens.
Not such great expectations
HR’s growing authority has plenty of advantages for companies and employees alike. Companies with robust HR departments are often better at attracting and retaining talent. Meanwhile, employees end up with more explicit career paths, better-trained managers, and a host of benefits that improve their lives. That said, there are also risks.
The problem with any department having too much top-down power is that its goals start to supersede the organization’s other objectives. Based on recent news, it seems as though HR’s mandate to drive retention and engagement may be helping contribute to a slow-down in productivity and performance.
Take Meta, for example. During a June 30th company-wide Q&A, Mark Zuckerberg tried to convey to his employees that they needed to step up their game in response to a recent market downturn and increased competition from TikTok. Shortly after, an employee asked Zuckerberg whether the extra days off that the company introduced during the pandemic would continue. Needless to say, Zuckerberg wasn’t pleased by the display of entitlement.
Meta isn’t the only company that’s experiencing productivity problems. One month later, Google CEO, Sundar Pichai called an all-hands meeting to warn employees that productivity was too low and needed to improve. If the recent wave of day-in-the-life Tik Tok videos is any indication of how much employees are working, it seems that this problem is quite widespread.
While HR’s rise to power isn’t necessarily responsible for tech’s productivity slow-down, there’s a strong case that it’s one of the catalysts. After all, when an increasingly powerful department is measured on its ability to engage and retain employees, it’s no surprise that they would devise subtle ways to lower performance expectations to keep employees happy.
The Future of the New Work Order
In light of the recent economic downturn, the future of HR’s growing power is unclear.
Will managers reassert control in response to wartime conditions? Will HR divert the power they’ve amassed toward driving productivity and performance rather than engagement and retention?
Ultimately the balance of power between HR and management has no stable, optimal state. There are benefits and risks to either side having control over how work gets done. What’s important is that these tensions are legible so that companies can see where power lies and make sure it’s being put to good use.
For Your Information Diet
📺 How the YouTube Creator Economy Works – A recent poll found that YouTuber is the #1 dream job for young kids. This video details the economics of the creator profession, why long-form platforms are winning, and how creators are earning more by launching their own product lines. (Wendover Productions)
📖 The “Cold Open” as a Method for Launching a Course – A “cold open” is a narrative device that throws the reader straight into the exciting part of a story to capture their attention. It turns out this same technique is also helpful for hooking learners into a lesson. (Management Teaching Review)
😰 Failure to Cope “Under Capitalism” – A wave of post-pandemic writing has tried to pin personal anxiety on larger macro forces like “living under capitalism.” While these narratives offer a convenient justification for those who want to avoid dealing with their problems, they provide no actual means of alleviation. (Gawker)
🤡 The Hypocrisy of Elites – Why do elites support body positivity for the masses while obsessing over their own health? Why do they endorse public education while investing in expensive private education for their own children? Erik Torrenberg chronicles the hypocrisy of those who strive for excellence in their own lives while advocating mediocrity for everyone else. (Ideas and Musings)
🤖 Reject the Algorithm – As our lives move online, it’s increasingly tempting to say and do things that are rewarded by social algorithms. Nick makes a case for being yourself and focusing relentlessly on the quality of your ideas. (Of Dollars and Data)
The Jungle Gym
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