The Human Resources Revolution: Is It a Productivity Driver?

Abstract

This paper assesses the empirical evidence and policy issues associated with the human resources revolution. While managers and practitioners have long emphasized the role of human resource practices, economists and policy makers have only recently begun to evaluate the impact of human resource policies on overall productivity growth. This paper suggests that advanced human resource practices (ranging from team-based problem solving, to incentive pay, to training) have facilitated the strong productivity record experienced in the 1990s, both directly and as a complement to the intensive adoption of information technology. Two implications emerge from the analysis. First, the advantages of innovative human resource practices can be realized only when the U.S. workforce possesses a strong human capital foundation. Second, although the private sector has invested intensively in advanced human resource practices, many of these investments have not been measured consistently or expensed correctly as an accounting matter. The lack of standards by which to measure workplace organization implies that society finds it difficult to identify and diffuse productive practices as quickly as possible.