Companies are racing to adopt AI-powered HR tools—from hiring and onboarding to performance management, learning and workforce management. A new ISG report shows investment in AI has soared tenfold since 2023, driving HR AI budgets to reach an expected $1.6 million by 2026, but many organizations are not translating that momentum into meaningful workplace impact.
The ISG report finds HR performance is generally falling short of business expectations. Four in 10 organizations rate the efficiency of HR and their data for HR insights and decision-making “far below” to “somewhat below” expectations. HR leaders are looking to AI programs to help address these shortcomings by improving business efficiency, delivering new insights for improved organizational decision-making and boosting productivity and cost savings for the HR function, but so far, AI-driven productivity gains have been modest at best, with the average cost savings at 9 percent—well shy of the 30 to 60 percent returns cited by many providers in the market.
The capability of the technology is not what is holding organizations back. When asked about the main challenges impeding results, leaders will often point to gaps in data or governance, or the need to document and harmonize processes across the business. To truly capitalize on AI, data must be cleaned and integrated across various organizational platforms and the right AI governance model must be in place to ensure a safe, transparent and compliant approach.
These do represent real, foundational roadblocks to achieving results. However, there is an even larger missed opportunity in how organizations are approaching AI. Most organizations are evaluating AI on a process-by-process basis, identifying potential tasks for automation, compiling individual use cases, and selecting projects with the most straightforward ROI or that present the least risk to implement. And while this approach reduces risk and allows organizations to absorb smaller amounts of change within the organization, it limits results.
Getting results from AI investment is more human than technological
The solution to achieving AI results turns out to be more human than technological. AI should completely redesign the way we work—the roles and responsibilities of humans versus AI, interactions and processes. It requires us to change the way we think about work and our role in it. This should be HR’s home turf.
One might be tempted to blame HR for the function playing small—but this isn’t just an HR miss. After all, HR rarely drives the decision. Beamery data shows only 12% of CHROs influence AI choices, and just 30% are brought in early, compared with 60% of other C-suite leaders. If strategy, budget, timeliness and risk tolerance are set by executive leadership, IT and finance, key people-first considerations like talent and capability building get overlooked, and even the most promising technology will struggle to deliver ROI.
When AI is limited to acting as a job description builder, a resume screener or a chatbot, it isn’t because HR leaders lack imagination, but because leadership funds pilots instead of programs, and tools instead of capabilities. Yet, HR is not off the hook. If HR accepts AI as just another tool to implement rather than a force that reshapes work design, skills and decision-making, it reinforces the very transactional mindset HR claims to resist.
Few organizations step back and take the opportunity to reinvent how work can be delivered with AI. Rather than tweaking at the edges, the process of incorporating AI should start with a blank slate. When redesigning for speed and growth, starting with an “AI + human” mindset might deliver results that are two, five or even ten times the impact of limited, bespoke projects. When HR steps into strategy, HR can architect the future of work.
Over the next two years, we expect to see a more prevalent shift to HR models that incorporate a fully enabled digital AI layer. AI-led HR operating model transformation requires embedding AI across the entire lifecycle, redesigning roles and workflows, simplifying processes and shifting transactional work to technology and self-service. Rethinking how work can be done for AI is where more significant potential for savings and improved business results exists beyond discrete AI use cases.
The leaders of AI will put HR at the center of their strategy. Isolated examples have emerged of organizations combining HR and IT into a single “People and Digital Technology” function. Whether the functions ultimately converge or simply enjoy an enhanced partnership, putting HR at the center of the AI strategy from the start can turn it from simply deploying impressive AI technology into a catalyst for stronger team performance, better employee experiences and improved business impact. The organizations that recognize this—and empower HR accordingly—will be the ones that move fastest and compete strongest in the years ahead.
Credit: Source link
