In this article, Bailey challenges the perception of HR as a business burden, exploring how strategic HR drives productivity, manages risk and supports long-term growth. Drawing on market insight and research, he highlights why modern HR functions are increasingly central to organisational performance and competitiveness.
I recently came across this claim in a UK broadsheet, and while attention-grabbing, it felt like an overarching comment about a function that has fundamentally changed, and here’s why.
In my experience, working with some of the very best in the profession, these claims don’t reflect what’s actually happening inside organisations today. The idea that growth in HR (particularly around areas like equality, diversity and inclusion) somehow weakens productivity or holds businesses back is based on an outdated view of both HR and how modern companies create value.
Modern HR is not just an administrative process anymore. When done well, it is a central driver of productivity, profitability and innovation. There is research to back this up, but even more tangible evidence lies in the value our clients and candidates contribute daily to driving performance in top organisations.
Critics often point out that the UK has proportionally more HR professionals than the US or parts of Europe, assuming this automatically signals inefficiency. In reality, it reflects how much more complex organisations have become. Today’s businesses operate within heavier regulation, hybrid working models, growing data governance requirements and persistent skills shortages. As organisations become more people-intensive, managing talent, risk and capability naturally becomes more complex too.
HR hasn’t grown in isolation; it has grown alongside the demands placed on modern businesses.
What we’re seeing is a broader shift away from administrative HR toward strategic, analytics-enabled functions that mirror the evolution of the modern workforce. As HR becomes increasingly data-driven, its impact on workforce performance and productivity becomes far more visible. Far from slowing organisations down, HR’s evolution is both a response to, and an enabler of, modern economic conditions.
I was recently speaking with a Head of HR Operations who used workforce data to identify revenue gaps across a multinational business. By translating those insights into targeted initiatives, they were able to improve performance and ultimately drive measurable revenue growth – a clear example of HR creating commercial value rather than administrative overhead.
The suggestion that HR and DEI “reduce productivity” is not supported by empirical data. In fact, high-quality strategic HR practices have demonstrably positive effects.
A major study by researchers from the London School of Economics, MIT, Oxford University and Gallup found a link between higher employee wellbeing and productivity¹. Their findings show that improving wellbeing can increase productivity by an average of 10%, with strong correlations across industries between wellbeing, customer satisfaction and financial performance. These are all areas typically led or shaped by HR, and evidence like this reinforces an important point: HR isn’t a cost centre weighing businesses down, it’s increasingly a driver of productivity and performance.
Furthermore, HR’s role in talent management improves profitability and innovation. Businesses that invest here experience higher profitability, greater innovation and measurable productivity gains over time.
Strong talent management ensures businesses are building the skills and capabilities they’ll need for the future, while robust succession planning creates a pipeline of leaders ready to step into critical roles and reduce organisational risk. Put simply, when HR helps ensure the right people are hired, developed and retained, businesses perform better – it really is that straightforward.
The article in question argues that DEI policies create division and impose unnecessary costs, yet the evidence shows the opposite. When implemented strategically, DEI enhances recruitment, improves retention and leads to better decision‑making.
Younger talent pools, in particular, actively assess employers based on fairness, culture and inclusivity. Diverse teams are proven to challenge groupthink, drive innovation and better reflect the clients and markets they serve. Organisations that ignore DEI risk weakening both their competitiveness and their employer brand.
The problem is not that DEI exists; it is that when poorly executed, it can feel performative or labelled as a ‘woke’ agenda pushed by HR. Done well, however, commercially aligned DEI programmes support stronger business outcomes and, ultimately, improved performance and profitability.
The claim that HR makes businesses more “risk-averse” also misunderstands how organisational risk actually works. Poor people management is often what creates risk in the first place, leading to legal liabilities, costly tribunals, high employee turnover, reputational damage and operational instability.
HR exists to mitigate these risks, not create them. Without strong HR capability, legal, compliance and people-related responsibilities don’t disappear, they simply shift onto untrained managers. The result is typically greater risk exposure and less productivity, as commercial leaders are pulled away from their core roles to manage complex people issues without the right expertise.
Britain does have a productivity problem, but HR is not the culprit. The evidence points instead to deeper structural issues:
In reality, HR plays a role in solving many of these challenges, not creating them. Strategic HR helps build capability, develop stronger leaders, design more effective ways of working and ensure organisations get the best from their people. Ultimately, better-managed employees will create better-performing businesses, and strategic HR helps to push this.
The argument that HR “gets in the way of actual work” misunderstands what work looks like today. In a knowledge-driven, service-led and skills-dependent economy, people are the work, and managing them effectively is a high-value activity.
Commercial, strategic HR isn’t an expensive overhead – it’s a driver of growth. The organisations that recognise this aren’t reducing HR’s influence; they’re expanding it to strengthen productivity and competitiveness.
In my opinion, HR is not a barrier to productivity but one of the most under-recognised drivers of business performance in today’s knowledge economy.
References:
¹ Global Happiness and Wellbeing Policy Report
