People & Culture vs. Human Resources

5 min. read

Do the names mean anything, and do they even matter?

Does your company have a "Human Resources" department? Maybe instead it has a "People and Culture" department or just a "People" department? We noticed that the divide continues to grow, and more companies than ever have a People and Culture team. So we wanted to take a look at where these names come from and figure out if the name matters at all. Let's compare the two main options.

Human Resources

In 1954, management guru Peter Drucker wrote a book called "The Practice of Management." The book's ideas and principles were revolutionary at the time, but many of them are now part of the bedrock of modern business management. Among Drucker's many breakthrough concepts was considering employees to be one of the fundamental resources (along with money, material, equipment, and knowledge) that a business has to obtain from outside itself to operate. Along the way, he coined the term "human resources." Within a decade, the people in charge of personnel at large businesses were calling themselves "human resources directors." By the 1990's, "human resources" was the customary name for the departments in charge of the employee lifecycle—from recruitment and onboarding to training and termination or retirement.

"Human resources" is by far still the dominant name for a personnel department. Perhaps this is because it's become ingrained in our business culture, or perhaps its due to something deeper. But it has at least one major competitor.

People & Culture

It's not clear where the practice came from, but at least as early as the 2001, some organizations were using the term "people and culture" to describe this operational area of businesses. This remained uncommon well into the 2000's, but somewhere along the way, a shift occurred. Companies were looking for more people-centered approaches to hiring and supporting employees. Booming tech firms were experimenting with new and distinctive company cultures. New research in managing people was showing that companies could reap substantial benefits by making their workers engaged, excited, and comfortable. David Sirota gathered much of this research in his book "The Enthusiastic Employee" where he leveraged data on 2.5 million employees to prove beyond any doubt that improving employee enthusiasm and happiness results in financial benefit for the companies that do it.

In the midst of this national business conversation—whether in a rebrand or a real transformative step—many companies shifted to having a People and Culture department. While there are no clear statistics on the exact popularity of "People and Culture" and similar names, they are now found at a substantial minority of companies (especially in tech firms and startups).

What's in a Name?

Looking at the origin of each term, we can try to get a sense what the difference may be. Using Drucker's view, we could say "Human Resources" stands for treating employees like materials, equipment, and money: something that comes from outside the business and should be measured, managed, and budgeted in dollar value. While "People and Culture" introduces the concept that people are more like customers, who provide their companies with financial benefit in proportion to how well you serve them.

Given what we know about the concrete financial benefits of people-focused workplaces, perhaps this means that a People and Culture department is better. But is this really true? Is a company with a People and Culture department always more successful? Of course not. A name change doesn't "do" anything by itself.

Sarah Peiker, CEO of Orion Talent, argued in Forbes that a change to "People and Culture" can transform the organization. She warns that the traditional view of Human Resources ignores how a focus on employee happiness can benefit the whole organization (Peiker calls it "strategic" when something is intended to drive the overall success of the organization, not just a limited area). Addressing the shortcomings of the traditional view, she says:

While HR leaders are fond of phrases like 'employees are our greatest asset,' do they always understand the work people are doing? And does HR truly know how to align its many workforce programs with the employee experience? If the answers are no, then HR risks becoming an out-of-touch department with few opportunities to provide strategic guidance to leadership and positively impact business success.

Peiker explains that because we know employee happiness and engagement is critical for company success, the care of employees should be a "deeply integrated, strategic function of business operations." Sure, she thinks that changing the name of the department is a good idea, but she points out that a company has to also "walk the walk" and act in a people-centric manner. In other words, a change to "People and Culture" in itself does nothing. But the change can be a massive benefit if you also build an empowered People and Culture team that fosters a distinctive company culture, listens to employees when they speak up, and demonstrates to employees that they are valued because it is good for the company.

The conclusion: the name of the department that handles employees at work does not limit the potential of the department—it can be great regardless of the name. But the name can send a message. If the message is "we're going to have happy employees" then the name is good.

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