Why HR strategy, not AI strategy, must be a priority for HR

Despite the rallying cry that every organization needs an AI strategy, that’s not correct. Sure, AI could end up being part of a corporate strategy, but some HR leaders have strategy, plans and technology all confused right now.

Yes, AI is a big deal these days, and it’s all many vendors talk about. But AI mania has too many people running around looking for an AI strategy or an AI digital transformation plan. Yes, AI can impact certain functions in interesting and potentially powerful ways, but just because AI is rolling out now doesn’t mean you just implement it without thinking things through first.

Too many leaders are using phrases like: “We need an AI strategy!” and that’s so wrong. Why? AI is a technology—it’s not a strategy.

A strategy takes goals, tactics and tools/technologies, and places them in an organized, thoughtful and focused effort. Anyone who has played the board game Risk knows you need an overall game plan to achieve global domination. Once the strategy is set, the decisions—the exact timetable, equipment, tactics, plans, etc.—are worked out next. The strategy sets the overall direction and goals to be achieved.

In HR parlance, HR strategies could be:

• winning the war for talent, permanently and convincingly;
• creating a competitive advantage by having the most efficient, low-cost and productive HR functions possible;
• creating a work environment that triggers employees to stay years longer than they would otherwise;
• eliminating PUREs (previously undetected recruiting errors);
• becoming an employer of such renown, consequence and desirability that the company will never want for job seekers;
• positively impacting all constituencies like job seekers, universities, rural markets, the communities we (or our suppliers) operate in; and more.

Setting strategic goals is critical, as some strategies may preclude other strategies. For example, you might not be able to have a low-cost, efficient HR set of processes while also delivering a world-class employee experience. It’s unlikely your firm can have it all so pick the strategic goal wisely and get concurrence from the executive committee or board before you get too invested in a strategy that lacks top-level support.

Once the strategic goal(s) has been decided, then it is time to flesh out the strategy. This addresses the “how” of the strategy. Here’s where the term AI might get a mention—but it isn’t necessarily a requirement. That is a key learning point: AI could play a major, minor or no part at all in HR strategies. That means that the hysteria about having an AI strategy today might be a reaction to current events and not something that is actually aligned with the strategic aims of the firm or HR.

For example, your organization may want highly efficient HR operations. The big tactic for this might be the consolidation of HR operations and the creation of a shared services center. That’s a business model change more than a deployment of an advanced technology. Alternatively, your firm might investigate a different tactic: the outsourcing of many tactical HR functions. Either way, AI may not be the top tactic to consider, although it will likely appear in some transaction-intensive processes.

AI, it turns out, may not be the all-pervasive technology to deploy in HR in every organization. The smart, strategic HR executive must be careful in choosing the pieces of AI technology that have compelling business value and solid economic and strategic contributions to make. This means that the detail behind a great HR strategy must be nuanced and company-specific.

The AI-related plans need to be evaluated closely, as some may carry significant long-tail costs. Smaller employers may question the economics of bringing on board new staff (e.g., data scientists, data integrators, etc.) to cleanse data, tune LLMs, investigate anomalous results, etc. Smaller firms may choose to limit their use of AI to one area like robotic process automation. It’s basic economics, as the cost to deploy these new capabilities—especially when usage might be light—could dwarf the expected value.

Some AI tactics/technologies might also carry with them significant environmental costs/concerns. Energy consumption needed to power AI compute loads (and data storage) is significant, as is the potential water consumption needed to cool the corresponding compute devices. Sustainability impact and the uncertainty of vendor pricing regarding new AI technologies further complicate matters. Does your HR strategy align with the company’s ESG goals?

Another reality check is crucial to the smart deployment of AI and other advanced technologies as almost every firm faces constraints on three fronts: time, people and capital. HR executives who think that these constraints don’t matter could be in for a really big shock. The current HR team may have little time to spare for these new efforts as they are already running quite lean from a staff perspective. Other parts of the firm may have tapped the firm’s technology budget and headcount. And there may not be time to get this done without disrupting year-end, payroll, benefits enrollment, campus recruiting or other scheduled activities.

AI discussions should lead to a frank discourse about which AI capabilities are the most desirable to implement. Your firm may never implement fully all of the latest advanced technologies coming from today’s HR vendors—and that’s quite acceptable. You and your firm must live within your time, people and capital constraints. And your firm might not need all of these capabilities based on what the strategy requires. Some HR strategies (like creating a great work experience or increasing retention) could require a small amount of input from AI capabilities but still be heavily dependent on leadership training, mentoring and other disciplines. AI use cases are therefore situational and resource-dependent.

Tactics must align with the available resources and the business’ economics. They also must consider matters like convergence (will this AI effort come online while it is still technically current and capable of delivering outsized value?) and precedence (does another project have to be completed before HR can move forward with its AI efforts?).

Tactics/technologies are the things that will make the strategy come to life. Plans are the orderly, thoughtful structure that helps HR teams realize the goals implicit in the strategy.

Overlooked HR strategy components

When developing an HR strategy, business leaders can make mistakes. For example, they may overlook matters such as:

• Is a new deployment model, like a center of excellence, for HR needed?
• Is the technical debt in all of HR’s current solutions something that must be dealt with first?
• Are critical integrations to/from HR applications missing or broken?
• Are key functions, such as campus recruiting, still not automated?
• Are there different data meanings and data repositories throughout the firm?
• Are there pockets of data that still aren’t real-time?
• What kinds of non-financial data (e.g., ESG) should be part of HR’s mandate but are not in a great state? For instance, the data is too old, too annualized or too averaged.

Slapping AI on top of this dysfunctionality is not a best practice. For AI tools, it will likely trigger the decades-old phenomena of “garbage in, garbage out.” The big overlooked AI consideration is the amount of cleanup or renovation work required to become AI-ready. That work takes time, money and people to complete. If AI is one of your HR strategy tactics, are you prepared to do the work to get everything ready?

What people likely mean when they say they need an AI in HR strategy

When people say this, I suspect they’re really expressing their need to get smarter about AI generally and how AI can impact (positively and negatively) HR. What they want to know are answers to questions like:

• What are the different flavors of AI—agents versus generative, for instance—and how are these best used in HR?
• What specific risks, data requirements and privacy concerns should we be bulletproof on?
• What AI activities should HR, HR IT, IT and legal be responsible for?
• How will vendor pricing of AI capabilities affect our HR IT budget?
• Where should we find AI tools embedded in HR application software?
• How do we capture, research and resolve aberrant AI behaviors/results?
• How do we protect the sensitive, personally identifiable information of our employees and job seekers?

Getting answers to these kinds of questions is a legitimate business need—and the answers are clearly requisites for developing a sound HR strategy.

AI isn’t the only business need people want ‘strategies’ for

Software vendors are always on the hunt for the next technology or innovation that will drive new software sales or trigger major product upgrades. Change is what drives their top line ever higher. They’ve certainly been busy the last two years flogging AI as an absolute business necessity, but don’t forget they also tried to get your firm to develop other “strategies.” It seems like just yesterday that your firm needed:

• a multi-cloud strategy;
• a modern cloud platform or architecture strategy;
• a single, global suite of application software strategy; and
• a digital transformation strategy;

Technology vendors will always be excited about new things, but company and HR strategies might need to stay relatively constant, with only some adjustments to the tactics and plans. That’s the key lesson in all of this: You really need to know what your strategy is and how to stay true to it while embracing some new tactics and innovations, as it makes sense to do so.

AI is not exclusive to your businesses, and your AI thinking needs to be broader.
You should never look at any new innovation in isolation. The best HR strategies will be those that look at AI as not just an advanced technology your firm can exploit but also as a technology that job seekers, regulators, customers, suppliers, contractors and more will use. And they’ll use AI in amazing, creative and business-altering ways. Any HR strategy needs to assess how citizen AI tools will forever alter processes like recruiting (e.g., AI tools that rewrite a job seeker’s resume to match your firm’s job description or permit a job seeker to apply to thousands of open positions every week). Is your HR strategy looking at AI in an expansive way?

Your HR strategy effort will need team members who are technically cosmopolitan, possess great EQ and use game theory to anticipate how others will react to the new capabilities that AI and other advanced technologies will bring to your firm’s doorstep. These are the team members who can help make your next HR strategy one that will be long-lived, relevant and capable of delivering the value your business case demands. Incremental thinking will not deliver to that standard.

Bottom line: If you start your strategy ideation effort with a technology like AI, you have a technology searching for a business problem to solve. That’s backwards: Start with where you’d like to drive your firm and build out the details from there.