Idea in Brief

The Pendulum Swing

For decades, when U.S. labor markets were slack, HR focused on cost cutting, which meant squeezing employees’ pay, benefits, and training. But now that labor markets are tight, the challenge is to retain workers.

The New Priorities

HR must focus on keeping positions filled and preventing employees from burning out or becoming dissatisfied.

HR’s New Role

The HR function must educate leaders about the true costs of turnover, address employee anxiety about AI and restructuring, lobby for investments in training, rethink how contract workers and vendors are used, and strengthen diversity, equity, and inclusion efforts.

From World War II through 1980 the focus of the human resources function was advocating for workers—first as a way to keep unions out of companies and later to manage employees’ development in the era when all talent was grown from within. Then things changed. Driven by the stagflation of the 1970s, the recession of the early 1980s, and more recently the Great Recession, HR’s focus increasingly shifted to relentless cost cutting. Decades of slack labor markets made slashing HR expenses easy because it was hard for people to quit. Pay and every kind of benefit, including training and development, got squeezed. Work demands went up, and job security fell.

A version of this article appeared in the May–June 2024 issue of Harvard Business Review.