The early history of human resource management: exploring the influence of contextual factors on managerial capacity

Purpose The purpose of this paper is to extend Penrose’s (1959) theoretical work on managerial capacity by tracing the beginning and evolution of the human resource management function as it evolved in the late 1800s and early 1900s to address the growing personnel management challenges from external forces that were straining leaders’ limited information processing capacity. Many leaders during this time found themselves unwilling, unprepared or unable to address these challenges, especially those from political and social interests, and began delegating personnel tasks to this new organizational function. Penrose’s (1959) theory of firm growth posits that firms cannot grow indefinitely even if market opportunities are abundant. Growth is constrained by the limited time, knowledge and ability of managers (i.e. their managerial capacity) to coordinate, integrate and deploy resources as the firm expands. However, Penrose did not address how contextual factors also affected managerial capacity. The authors use the historical evolution of the management of human resources to provide an in-depth exploration of the influence of a contextual factor on management capacity. Design/methodology/approach The approach used to achieve the purpose is abductive inference. Abductive inference is especially appropriate when there is a need for more in-depth investigation into the contemplation of and/or speculation about observable facts than allowed by traditional deductive research designs (Folger and Stein, 2017). Abductive research starts by observing consequences and then constructing reasons for those consequences (Timmermans and Tavory, 2012). Findings Without question, the contextual factors of social and political interest in how managers handled human resources strained their managerial capacity. This historical review of how organizations’ leaders created a new organizational function to which they could delegate the task of responding to these contextual influences adds new understanding of how leaders of growing organizations respond to external pressures on their decision capacity. Originality/value Research on managerial capacity has rarely focused on how the external context can stress managerial attention and information processing capabilities. This study of the historical evolution of the management of human resources provides new insights by showing how organizational leaders responded to contextual pressures on their managerial capacity by creating a dedicated organization function to which these issues could be delegated and, thus, managed.