Part 1. The Future of HR in a Stakeholder World: Why History Still Holds It Back and What Must Change

Human resources (HR) sits at the center of enterprise performance—and yet remains structurally marginalized in enterprise decision-making. This is not an accident. HR did not evolve as a value-creation function. It evolved as a control and compliance mechanism. This is the first of a two-part series on human resources in the new world of stakeholder management. The second part addresses what the profession can do to grasp the opportunity.

By Bruce Bolger

Labor as a Problem: The Origins of HR (Late 1800s–1910s)
The Human Relations Movement: A Partial Correction (1920s–1940s)
Procedural HR: Labor Relations and Administration (1940s–1960s)
Compliance Takes Over (1970s–1980s)
“Human Capital” Without Capital Discipline (1980s–1990s)
HR as Service Provider (2000s–2010s)
The Unresolved Opportunity of the 2020s
Why Stakeholder Management Feels So Difficult for HR
What HR Can Learn from Total Quality Management

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At a time when analytics increasingly point to a direct connection between stakeholder engagement and future equity value creation and company valuation, the human resources profession has the opportunity of a generation or more.

In a recent interview with Wall Street Journal’s CEO Brief by Allan Murray, the Starbucks CEO Brian Niccol says: “I just underestimated the scale and the magnitude of people. You know, we've got 250,000 employees—we call them partners—in the United States. So in order to get everybody on the same path, it takes a little bit longer of an adoption curve. And you have like 50% turnover. Luckily, with our coffee house leaders, the turnover is more in the 20% range. So those are the folks that are actually running the coffee house, setting the culture, setting the standard.”

What better demonstrates the potential for HR? Allan Murray did not ask Niccol the cost of 50% turnover of employees and 20% of management. Is that turnover inevitable? What is being done to address that and who is taking command of the complex strategy and blend of tactics to harmonize the interests of so many people around the world?

Over more than a century, HR absorbed psychology, labor relations, and administration, but it never crossed the most important boundary: from managing labor as a cost to managing human capital as an investment. As a result, HR today is:

Central to productivity, growth, and resilience, yet...
Structurally excluded from capital allocation decisions
Poorly equipped—by design—to measure value creation

This tension explains nearly every modern debate in HR, from engagement to culture to talent shortages. It also explains why stakeholder management feels foreign to the HR function, even though people are the core stakeholders in every enterprise.

As a result, the subject of stakeholder management rarely occurs in human resources. This is surprising considering that Dave Ulrich, Rensis Likert Professor Emeritus, University of Michigan, Co-Founder, Principal of the RBL Group, arguably one of the field’s top thought leaders, has made stakeholder value creation a bedrock principle in his organization’s framework with few signs HR has embraced these principles. His view? "I am trying to tweak the world of business to recognize the impact of investing in human capability for the good of all stakeholders. Has stakeholder HR caught on? Not fully, but it is coming I hope. Strategic HR was a bit of a novel concept 25 years ago and it is now the norm. I like to be on the beginning of the s-curve."

To understand where HR must go, it helps to understand where it came from—and why its original design no longer fits the modern economy. HR reform keeps stalling because the problem is not execution—it is structural. HR was built to manage labor as cost and risk. The modern enterprise needs a function that manages human capital as an investment portfolio, optimizing productivity, durability, and growth capacity and most of all—an enterprise harmonized toward a common purpose, goals, objectives, and values, as articulated by Starbuck’s Niccol.

Stakeholder management, properly understood, demands this shift. AI-driven transparency will accelerate it. Enterprises that fail to adapt will increasingly find themselves constrained not by markets—but by their own institutional design that will become increasingly transparent whether they like it or not. The future of HR is not an improved support function. It is a redefined capital function. And the sooner we acknowledge that, the sooner stakeholder management can move from aspiration to advantage. This is the opportunity for HR.

Labor as a Problem: The Origins of HR (Late 1800s–1910s)

HR’s roots lie in the industrial revolution, when labor was abundant, interchangeable, and unstable. Early personnel offices were created not to improve productivity in a modern sense, but to control labor risk. Their responsibilities were basic and defensive:

Hiring bodies
Tracking time
Calculating wages
Enforcing discipline
Reducing accidents and absenteeism

The intellectual foundations reinforced this view. Frederick Taylor’s Scientific Management treated workers as inputs whose tasks—not capabilities—could be optimized. Welfare capitalism offered paternalistic benefits not to create value, but to reduce unrest. Labor was a cost. Labor was a risk. Labor was a problem to manage—not an asset to invest in. That DNA lives on.

The Human Relations Movement: A Partial Correction (1920s–1940s)

When productivity failed to respond predictably to incentives, researchers like Elton Mayo revealed something inconvenient: morale, belonging, and social dynamics affect output. Personnel departments added training, supervisor coaching, and communication programs. HR became “softer,” but not more powerful. What did not change was more important than what did:

No capital framework
No productivity accounting for people
No balance-sheet recognition of human assets

HR acknowledged psychology—but never economics.

Procedural HR: Labor Relations and Administration (1940s–1960s)

As unions strengthened and employment stabilized, HR became the manager of formal employment relationships:

Contract negotiation
Grievance handling
Job classification
Benefits administration

Professional associations emerged. Best practices were codified. Standards emerged. HR became procedural, legalistic, and reactive. Still not strategic.

Compliance Takes Over (1970s–1980s)

Civil rights legislation, workplace safety laws, and anti-discrimination enforcement shifted HR’s center of gravity decisively toward risk containment. HR became:

A shield for the firm
A control function
A legal intermediary
A response to social media demands

This was a turning point. HR’s authority increased—but only in service of compliance, not growth.

“Human Capital” Without Capital Discipline (1980s–1990s)

As knowledge work and services dominated the economy, it became obvious that people drove value. HR adopted new language:

“People are our greatest asset”
“Human capital management”

But language outran reality. HR gained no capital budgeting authority, no ROI frameworks, no pricing power in strategic discussions. The rhetoric evolved faster than the function. Money got spent or budgets with little accountability.

HR as Service Provider (2000s–2010s)

Outsourcing, shared services, and HR technology made HR more efficient and more data-rich—but no more influential. Metrics focused on cost, speed, compliance, and engagement surveys that acted as weak proxies for performance. Investment logic never arrived.

The Unresolved Opportunity of the 2020s

Today, everyone knows the truth:

Human capital, customer, and distribution partner engagement are imary drivers of enterprise value
Customer and employee turnover destroys value
Talent shortages constrain growth
Cultural failure causes operational weakness

Yet HR still:

Often reports to finance or legal C-suite management
Lacks capital allocation authority
Cannot capitalize its largest investments
Is evaluated on process, not yield

This contradiction is structural, not personal. HR was never designed to manage assets. It was designed to manage labor as a problem.

Why Stakeholder Management Feels So Difficult for HR

True stakeholder capitalism is not about empathy or advocacy. It is about value creation across a system of interdependent participants that include all stakeholders, not just employees but customers, distribution and supply chain partners, and communities.

That implicitly requires HR to cross boundaries it has historically avoided—the move from:

Administration to investment
Compliance to capital discipline
Advocacy to economics

This is why stakeholder management feels radical inside HR—even though it should be its natural home.

What HR Can Learn from Total Quality Management

There is a powerful analogy that clarifies both HR’s challenge and its opportunity: HR today is where manufacturing quality was before total quality management (TQM).

Before TQM:

Quality was inspected at the end
Defects were blamed on workers
Scrap and rework were accepted as normal

After TQM:

Quality was designed into systems
Defects were treated as process failures
The interests and needs of all stakeholders were continually addressed based on outcomes
Measurement became continuous and economic

HR today still operates in the pre-TQM mindset:

Attrition is investigated after the fact
Burnout is treated as individual failure
Turnover is accepted as inevitable
Measurements have little connection to impact
Enormous expenditures are made with little Net Present Value or related assessment

In human capital terms:

Attrition is a defect
Mis-hires are design failures
Burnout is a system breakdown
Productivity yield matters more than sentiment scores

A TQM-inspired HR function would focus on clear purpose, goals, objectives, and values (the equivalent of quality in people), process controls, leading indicators, statistical process controls, and continuous improvement, not episodic programs, ad hoc tactics, and annual surveys.

This is how stakeholder management becomes operational rather than ideological.

Part 2 focuses on the practical application of stakeholder management to human resources.

Enterprise Engagement Alliance Services

Celebrating our 17^th year, the Enterprise Engagement Alliance helps organizations enhance performance through:

1. Information and marketing opportunities on stakeholder management and total rewards:

ESM Weekly on stakeholder management since 2009. Click here to subscribe; click here for media kit.
RRN Weekly on total rewards since 1996. Click here to subscribe; click here for media kit.
EEA YouTube channel on enterprise engagement, human capital, and total rewards since 2020

2. Learning: Purpose Leadership and Stakeholder

Management Academy to enhance future equity value for your organization.

3. Books on implementation: Enterprise Engagement for CEOs and Enterprise Engagement: The Roadmap.

4. Advisory services and research: Strategic guidance, learning and certification on stakeholder management, measurement, metrics, and corporate sustainability reporting.

5. Permission-based targeted business development to identify and build relationships with the people most likely to buy.

Contact: Bruce Bolger at TheICEE.org; 914-591-7600, ext. 230.