Gusto’s People Advisory Certification program is an interactive 4-hour e-learning course that goes beyond traditional product training. The program teaches concepts so that you can help clients build a business where people want to come to work.
Accountants from all walks of practice life have shared that the training has helped them build expertise on payroll, benefits and people operations best practice, boosted their confidence to advise clients on building a great place to work, and deepened the value they can provide as their clients’ most trusted advisor.
Our Certification program features three chapters on payroll, benefits, and HR—each of which starts by laying out a brief timeline of historical events that led to the formation of our current systems. By grounding People Advisory Certification in historical insight, the course shows the significant role accountants can play in helping clients and their employees through the turbulent economic times we are in. History tells us why now is the right time to become People Advisor Certified.
Where we’ve been
History helps us make sense of the world we live in, the systems that govern us, and the cultural norms we adhere to. In light of the COVID-19 pandemic and heightened awareness of racial inequality, many of us have been grappling with our nation’s complexities and contradictions. We’ve also been forced to confront the all-too-real economic inequality that’s taken root in our communities. While these may seem like distinct issues, health, equality, and economic security are interconnected and are best understood from a holistic lens.
By traveling back in time to the dawn of industrialized work, the timelines featured in Certification detail our country’s shifting norms, regulations, and beliefs about the value of workers and their labor. In their own small way, the timelines help put in perspective the economic toll COVID-19 has had on small businesses and their employees, and they crystallize the essential role accountants can play through delivering people advisory services.
To understand why people advisory services are more critical now than ever, it’s important to start from the beginning.
The history of the labor-management relationship starts in the mid-1860’s with the industrial revolution. Following the Civil War, the mass migration of workers from rural to urban areas led to a surplus of labor—and fierce competition between factories.
Factory owners focused on cutting costs and increasing productivity instead of taking care of their personnel. There was little regulation in place to protect workers from the dangerous and arduous work they found themselves participating in—including long working days for little pay. In response, workers began to strike and organize through unions to win better working conditions.
It is against the backdrop of strikes, the rise of union membership, and increasing regulation that “personnel” departments were born—the predecessors of modern HR. The National Cash Register Company is credited with establishing the first HR department of its day to look into issues such as grievances, safety, dismissals, court cases, and also recordkeeping and wage management.
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Gradually employers began to realize the link between employee well-being and business productivity. Take Henry Ford, for example. By 1913, Model T car production totaled 200,000. But while Ford had figured out production, the company suffered from chronic absenteeism and a sky-high turnover rate.
To attract more reliable workers, in 1914, Ford doubled daily salaries for line workers and reaped immediate benefits. Productivity surged, and the company doubled its profit in less than two years. From a national point of view, Ford established an industry standard for pay, which set the foundation for the industrial middle class.
Ford’s innovations in manufacturing were just one of the reasons behind the staggering growth of the roaring 20’s, when the country’s economy grew by 42%. The US victory in World War I, soldiers returning home from war, the rise of mass production and consumer goods, and easier access to credit all contributed towards the decade’s leap forward.
All good things must come to an end, and the roaring 20’s ended with The Great Depression which was the worst economic downturn in the industrialized world at that time. By 1932, 20% of the US population was unemployed.
Franklin D. Roosevelt’s New Deal was passed to put money into the economy and get people back to work. Other landmark legislation included the Social Security Act of 1935 to provide Americans with unemployment, disability, and pensions for old age. The Wagner Act of 1935 gave employees the right to form unions and bargain collectively. It also listed unfair labor practices. Then, in 1938, the Fair Labor Standards Act was passed. The act banned child labor, set the minimum hourly wage, and defined the maximum workweek.
The Great Depression ended as the nation’s factories went back into full production mode when the US entered World War II. On the home front, the war changed the type and volume of work that women and minorities had access to. Despite widespread racism and discrimination, many consider the war a turning point in the struggle to gain better jobs.
Following World War II, the 1950’s was an era of prosperity as the United States became the predominant world power. The economy was booming, and workers found their lives changing as industrial America changed. By the mid-1950’s, unions in the US had successfully organized approximately one out of every three non-farm workers. This period represented the peak of labor’s power. Fewer workers produced goods; by 1956, a majority held white-collar jobs. Some firms granted a guaranteed annual wage, long-term employment contracts, and other benefits.
In the 1950’s and 1960’s, “stakeholder capitalism” was the preferred management theory. CEOs saw their role as one of balancing the interests of the various groups that touched their companies—customers, employees, suppliers, shareholders, and the community at large.
This approach to management manifested as a spate of labor legislation such as the Equal Pay Act (1963), the Civil Rights Act (1964), the Occupational Safety and Health Act (1970), and the Employee Retirement Income Security Act (1974).
By the 1970’s, the post-World War II economic boom began to fade due to increased international competition, the expense of the Vietnam War, and the decline of manufacturing jobs. Unemployment rates rose, while a combination of price increases and wage stagnation led to a period known as stagflation. President Richard Nixon tried to alleviate these problems by devaluing the dollar and declaring wage- and price-freezes. More and more American jobs were in the service sector, which had lower wages and fewer benefits than manufacturing jobs.
In contrast to the stakeholder capitalism outlook, the idea that shareholders should be preeminent took hold in the 1970’s, and grew throughout the 1980’s for many reasons. Among them was a widespread belief in the efficiency and intelligence of markets4. The decade saw the deregulation of financial markets, increased globalization, and large tax cuts.
The “knowledge economy”—which relies primarily on the use of ideas and application of technology—was in full swing by the 1990’s, and demands for higher-skilled workers continued to rise7. Employers started to invest more in creating great places to work to attract and retain talent, and boost the bottom line. The role of HR as a compliance-focused function began to widen to account for adding value throughout the employee journey. The broader scope of the function was given the name “people operations.”
Where we are now
Trends that took root in the 1980’s have continued to grow. According to the Pew Research Center, not only is income inequality rising in the US, it is higher than in other advanced economies. The wealth gap between America’s richest and poorest families more than doubled from 1989 to 2016. Also, the income gap between Black and White Americans has persisted over time. The difference in median household income has grown from about $23,800 in 1970 to roughly $33,000 in 2018 (in 2018 dollars).
On a more human level, these macroeconomic trends translate to statistics such as:
- 40% of Americans don’t have $400 to cover an emergency bill or expense. (US Federal Reserve 2018)
- Even 25% of households making $100–150,000 per year can’t cover a $2,000 expense. (Brookings Institute 2011)
It’s amidst this backdrop of economic and racial inequality that COVID-19 has hit our nation, leaving small business owners at a distinct disadvantage. The statistics don’t refer to hypothetical people. They refer to the countless people your clients employ and depend on. Ensuring their health, well-being, and financial stability is paramount to their ability to meaningfully contribute to the business and help it grow.
Where we’re going
People advisory pairs financial insight with knowledge of people operations best practices to help clients create a great place to work where their team can thrive. Now, more than ever, small business owners need your help to make sense of changing regulations and workplace norms. They need an accountant’s expertise to understand the financial and business impact of taking care of their team by providing benefits, establishing HR policies, and creating a strong culture.
History shows us that the pendulum has swung between business benefitting the few versus the many. The pendulum continues to swing, and recent events have built momentum, powered by a belief that people matter. Employees, employers, customers, owners—people from all walks of life—matter. To help clients create a place where employees want to come to work, you’ll need to move beyond the numbers. You’ll need to understand the “people story” those numbers tell so that you can lead discovery about teams, and recommend tools and resources to help clients manage the employee journey.
History isn’t contained to the course, or to high school textbooks. We are living through significant events that will be remembered throughout the ages, and it’s up to us to understand the moment and act on it.