Navigating the AI Revolution: The Future of the HR role

Introduction

Artificial Intelligence has permeated the fabric of various business functions, with HR being no exception. The integration of AI within HR practices is more than a trend and should be no longer considered just a set of auxiliary tools. Generative AI (GenAI) has the potential to become a central and integral part of the HR function in dealing with the increasing complexity of managing human capital. As HR executives grapple with this new reality, the implications for compensation and benefits are profound. AI's data-driven insights can lead to more equitable, performance-aligned, and market-responsive compensation structures. Moreover, benefits administration, traditionally complex, is now poised for transformative efficiency through AI's predictive analytics and automation capabilities.

However, the embrace of AI is not without its challenges. As the technology advances, so does the need for vigilance regarding ethical considerations, data security, and the potential for unintended biases. As AI reshapes the HR sector, executives face new challenges including ethical considerations, data privacy, and the mitigation of algorithmic bias. It is essential for HR leaders, especially in regions like Belgium with stringent labor regulations, to navigate AI integration with a focus on upholding employee rights and fostering a culture of trust and transparency.

In this article we will look at the intersection of AI and the HR sector, some of the challenges this brings for the modern HR professional, how this impacts the role of the HR professional, and some frameworks with guiding principles to keep in mind.
 

Trends in AI for HR Management

The integration of AI into the workplace is not a new phenomenon, yet its pace and scope have accelerated remarkably in recent years especially with the advent of generative AI. Historically, AI's role in business began with simple automation tasks. However, today's AI systems are capable of complex functions like data analysis, decision-making support, and predictive modeling. This evolution has significantly impacted various business functions, with HR being a prime example. Understanding these trends is crucial for HR executives to stay ahead in a rapidly changing environment. The EY Emerging Tech at Work 2023 survey [1] reveals that although a hesitance to embrace emergent technologies like AI persists among senior leaders, with 59% of employees noting a slow adoption rate in their organizations, the impact of these technologies on the professional value is becoming more apparent. Organizations are beginning to recognize the nuanced benefits of specialized technologies such as (Gen)AI, which, unlike the heavily publicized but less workplace-pervasive virtual reality and metaverse technologies, are carving a definitive niche in professional settings. Amidst the technological pivot, the workforce's reaction remains overwhelmingly positive. A staggering 90% of employees believe in the tangible benefits emerging technologies bring to their companies [1]. However, this enthusiasm is tinged with a sobering reality—a mere 23% of respondents are using AI to automate repetitive tasks [1], and an even smaller fraction, 18%, are leveraging GenAI for routine activities like drafting emails [1]. This gap between expectation and execution highlights an opportunity for HR executives, with support of their data & analytics colleagues, to lead a more aggressive pursuit of AI integration in these fundamental areas.

One of the most significant trends is the shift towards data-driven decision-making. AI algorithms can analyze vast amounts of data, providing HR professionals with insights that were previously inaccessible. This includes predictive analytics for talent acquisition, where AI can identify patterns in successful hires, and prescriptive analytics in employee retention, where AI suggests actions based on data trends. In addition, companies can use AI to tailor compensation to correlate more closely with an individual's performance and conform to market standards. The importance of utilizing pay as a strategic tool to retain employees cannot be overstated. Our 2023 Work Reimagined Survey reveals that 34% of employees say they’re willing to change jobs in the next 12 months (albeit a slight decrease from the 43% recorded in 2022 [2]). This high turnover intention rate raises concerns about talent retention in the country. Whereas before HR data would be limited in its sampling frequency (e.g. two or three times a year as linked to performance reviews) and scope (both in attributes tracked as in the period under consideration), there is now much more structured data available thanks to the prevalence of HR Information Systems (HRIS). In addition, the digital footprint and working habits of employees in the post-Covid hybridized way of working can now be tracked (with Viva Insights for example). As our own research shows, complementing such ‘direct’ HR data with ‘indirect’ data on employee working behavior and habits can provide a fertile basis for more nuance whereby AI can provide insights into employee morale and engagement levels, enabling HR executives to take proactive measures to maintain a positive work environment.

It is noteworthy that pay still consistently emerges as the foremost concern among employees, outranking all other factors, while employers tend to place it in third position in their assessments. This disconnect between employee priorities and employer perceptions underscores the central role of compensation in retaining top talent. The current fiscal climate in Belgium, however, is far from ideal for attracting and retaining the right talent based solely on salary or pay. Economic challenges may limit the capacity of organizations to offer substantial salary increases. Therefore, organizations must maintain a strong focus on comprehensive total rewards programs to attract and retain top talent in Belgium. And yet our 2023 Work Reimagined Survey indicated that employees (80%) and employers (79%) agree there is a need for moderate to extensive changes to their total rewards program. AI can help HR with benchmarking, designing, and updating a bespoke array of benefits that cater specifically to the varying needs of a diverse workforce. For example, the prevailing fiscal regime encourages the transition from Internal Combustion Engine (ICE) vehicles to Electric Vehicles (EVs)—a transformation that affects the total ownership cost of a fleet of company cars. At the same time, Belgium also boasts one of the highest income tax rates, which creates a challenge for employers seeking alternatives for this highly popular extralegal benefit (as evidenced by the lively discussions during our most recent Mobility Day). Our research has shown that 70% of companies in Belgium intend to review their mobility policy in Belgium and 80% want to increase sustainable mobility measures.  This growing need and demand for sustainable transport modes, propelled by the ever-present concerns of climate change, has translated into both positive incentives like EV subsidies and favorable reimbursement rates for two-wheelers, and negative ones such as the phasing out of benefits in kind for ICE vehicles. Promoting behavioral change through campaigns rooted in empirical data is imperative to warrant a significant and enduring shift, rather than a temporary trend. The importance of a flexible yet cost optimized mobility offering cannot be underestimated. Our same mobility research shows that barely 51% of all surveyed employees are satisfied with their company’s mobility solutions offer. With the right infrastructure and analytical competencies, monitoring commuting habits of employees (with appropriate safeguards with respect to data privacy and GDPR in place of course) can generate a wealth of data ripe for mining insights and creating timely projections, such as potential changes in transportation modes (which can affect the size and makeup of the mobility budget) based on weather forecasts.

Managing a payroll is a challenge in and of itself let alone in Belgium whereas a result of its aforementioned fiscal climate there exists a proliferation of extralegal benefits which are subjected to a complex legislation in which the evolution of the technology more often than not outpaces legislative clarity. The result is often a compromise between the resources necessary to create full clarity versus the subsequent fiscal exposure such approximations entail. An example is the reimbursement by employers of the electricity used by employees to charge their electric company car with a charging station at home. Here also advanced analytics platforms (with sensor fusion) infused with AI could bring more clarity on the 'actuals' and offer an alternative that is suited to all actors (including the government).  Understanding how a data-driven approach can identify opportunities for payroll optimization and risk exposure and how AI can (and most likely will) shape the future of flexible compensation and benefits and total rewards programs will be presented by our experts during our Reward Day.

AI is enabling a more personalized approach to employee management. From customized training and onboarding programs to individual career path planning, AI tools are equipping HR professionals with the ability to tailor their strategies to the unique needs and preferences of each employee. This personalization extends to potential candidates as well, with AI-driven recruitment processes offering a more tailored approach to attract top talent. Automation of routine and administrative tasks remains a key trend. AI-powered chatbots for HR are now becoming commonplace, handling often recurring queries related to leave policies, benefits, and other HR-related information. More mundane, yet crucial, tasks such as reviewing and approving expense notes can now be intelligently automated leading not only to operational efficiency (allowing HR teams to focus on more strategic aspects of their role) but also to another data source to be leveraged for insights.

Challenges in Modern HR

Amidst the benefits, AI introduces complex challenges that HR executives must navigate. As a business partner driving the adoption of AI based initiatives, HR decision makers are part of the group that which needs to safeguard the ethical use of AI use and data privacy (especially given the sensitive and personal data to which HR pertains and with the EU AI Act expected to go into force in the summer of 2024). AI systems can inadvertently perpetuate historical biases present in their training data, which can manifest in recruiting, performance evaluations, and career development processes. It is imperative for HR to implement checks and balances to ensure that AI aids, rather than hinders, fair and unbiased decision-making. These concerns necessitate a nuanced approach to technology adoption, with an emphasis on establishing robust frameworks that prioritize transparency and fairness. Executives must balance the efficiency gains from AI with the need for a human touch in HR practices as it adapts and changes to its new role. As our own research in collaboration with Saïd Business School, University of Oxford has shown, keeping the human capital at the center of any transformation whether it is organization or technological is a key success factor in any change management initiative [3].

The imperative for HR executives to prioritize upskilling and reskilling in AI for their employees becomes evident when considering the current attitudes toward GenAI. Our 2023 Work Reimagined Survey found both employees and employers to exhibit enthusiasm for GenAI, with a net positive sentiment of 33% anticipating enhanced productivity and novel work methodologies, along with a 44% net positive sentiment for its impact on flexible working arrangements. Paradoxically, both groups perceive GenAI training as a low-priority endeavor. However, insights from a study conducted by Harvard Business School underline the potential benefits of such training (even in dealing with complex tasks), revealing a significant net positive impact on productivity compared to using GenAI without training [4]. These findings suggest that despite the current reservations, HR executives should prioritize AI upskilling and reskilling initiatives to harness the considerable productivity and quality improvements that GenAI can offer. With GenAI's potential to influence job functions in both high- and low-skill roles, the importance of continuous learning and skill development is amplified. As HR roles evolve, there is a growing need to focus on strategic workforce planning that accounts for the changing skill requirements brought about by AI. The ability to upskill and reskill the workforce rapidly becomes a critical component of the HR executive's role. Moreover, the disconnect between employees and senior leaders' perceptions of technology adoption underscores the vital role HR executives play in driving organizational readiness for emerging technologies.
 

Evaluation Frameworks

The rapid evolution of technologies such as Generative AI (GenAI) poses both an opportunity and a conundrum for HR executives. The question is no longer about whether to adopt new technologies but how to do so judiciously. HR executives must first assess the potential of new technology to enhance or streamline HR functions. This involves evaluating its capacity to improve operational efficiency, employee engagement, and decision-making processes. However, it is also crucial to gauge the impact on the workforce, particularly in terms of job displacement and changes to job roles. As HR professionals consider incorporating AI technologies, ethical considerations must be paramount. IBM's five principles for ethical AI offer a foundational approach—ensuring explainability, fairness, robustness, transparency, and privacy [5]. These pillars serve as a guide through the AI lifecycle, from design to deployment, ensuring that AI practices align with human ethics and organizational values.

As AI will become more and more integrated into an augmenting role in the HR domain, any HR executive driving the implementation of new AI based solutions will need to become familiar with frameworks which provide guiding principles for evaluating the maturity of an idea through feasibility and business value criteria. Such balanced readiness approach enables HR executives, even if they do not necessarily possess a deep technical background, to score the maturity of AI technologies against factors such as technological reliability, organizational capability, market readiness, and the potential for cost optimization, operations improvement, risk mitigation, and overall benefits..
 

Conclusion

The emergence of AI and, more recently, Generative AI (GenAI), has introduced a dynamic and complex landscape for HR executives to navigate. The primary challenge for HR leaders is not merely in recognizing these emerging trends but in the strategic implementation of AI to fully harness its potential. The workforce, evidently ready to embrace change, depends on the adept leadership of HR executives to guide them through the intricacies of AI integration. This process necessitates a careful balance, ensuring that the quintessential human element intrinsic to HR is not only preserved but also augmented through technological means. The imperative lies in aligning technological advancements with a people-centric approach. It is essential that the workforce is not only equipped to adapt to the changes ushered in by AI but also feels supported and valued throughout this transformation. This approach requires fostering an environment where employees are agile, skilled, and ready to meet the evolving demands brought about by AI.

Interested in continuing this conversation? Then join us at our annual Reward Day, 'Explore the Future: AI in the Reward Landscape', taking place on the 20th of February 2024 in our new offices in Diegem (the Wings) where we will delve deeper into the role of AI in shaping the future of HR.

References

[1] EY Emerging Tech at Work 2023 Survey: How talent feels about emerging tech | EY - US

[2] EY 2023 Work Reimagined Survey: How can a rebalance of power help re-energize your workforce?

[3] “How do you harness the power of people to double transformation success?”: How do you harness the power of people to double transformation success?

[4] Dell'Acqua, F., McFowland, E., Mollick, E.R., Lifshitz-Assaf, H., Kellogg, K., Rajendran, S., Krayer, L., Candelon, F. and Lakhani, K.R., 2023. Navigating the jagged technological frontier: Field experimental evidence of the effects of AI on knowledge worker productivity and quality. Harvard Business School Technology & Operations Mgt. Unit Working Paper, (24-013).

[5] IBM's Five Principles for Ethical AI: https://www.ibm.com/impact/ai-ethics