Most of my work has been for smaller organisations in highly competitive environments. In these organisations HR is not an empowered function and most hiring is done personally by managers. In larger organisations and those that are not subject to much competition for example, the BBC or Microsoft, then HR and their hiring quotas and practices are very important.
The reasons for this are illuminated by the this interesting academic study of the performance of Royal Navy captains during the Age of Sail.
Imagine going to work for your uncle at an early age. Then, after a few years, you pass a major exam in front of a panel chaired…by your uncle, who has in the meantime risen to a position of major influence. Before long, at the tender age of 21, you find yourself in charge of 200 men, making life-and-death decisions on your own. What are the chances that an organisation where such a career path is not just possible, but common, will do very well?…
Senior managers with personal knowledge of candidates are well-placed to pick winners. In highly competitive environments they will strive to choose the best candidate for the organisation. In non-competitive environments they may indulge their own preferences.
Therefore the solution to discrimination is not hiring quotas to make sure that everyone feeds equally from the corporate trough but greater competition.
This provides a strong theoretical justification for exempting small businesses from HR compliance burdens.