AI is changing more than individual jobs and workflows—it is expanding the strategic role of HR, according to Lattice’s 2027 State of People Strategy Report. Based on responses from more than 1,300 HR professionals worldwide, the report finds that performance management, AI adoption, culture and workforce capability are increasingly being treated as business priorities rather than functions owned by HR alone.
The rise of artificial intelligence is forcing companies to reconsider what HR is responsible for—and where the function sits in the business.
Lattice’s 2027 State of People Strategy Report, based on survey responses from more than 1,300 HR professionals collected in 2026, argues that people strategy is moving from a supporting function toward a core component of business strategy.
The shift is being driven by a simple reality: many of the questions organizations face as AI adoption accelerates are fundamentally questions about people.
How will jobs change? Which skills will employees need? How should productivity be measured? How quickly can workers adopt AI? What does high performance look like when software can perform tasks previously handled by employees?
Those questions put HR closer to decisions about operating models, organizational design and competitive performance.
The report found that performance management remains the top priority for HR leaders globally, while organizations are also increasing the frequency of performance reviews. Forty-five percent now conduct monthly or quarterly reviews.
At the same time, AI is beginning to take over some of the administrative burden associated with performance management. Seventy-four percent of HR leaders said managers are already using AI to write performance reviews. Among those surveyed, 76% viewed faster completion as a benefit, while 64% cited improved review quality and another 64% pointed to higher completion rates.
The implication is not necessarily that AI should replace managers in performance decisions. Instead, the technology is creating an opportunity to change the role of the manager.
If AI can help generate documentation and summarize performance information, managers can potentially spend more time on coaching, feedback and development. Lattice argues that performance management is consequently shifting from a periodic administrative process toward a continuous cycle of feedback and development.
That transition is important as companies attempt to translate AI investment into measurable workforce productivity.
The broader AI adoption figures show that HR leaders are becoming more comfortable with the technology. Eighty-three percent said they are somewhat or very excited about AI, while organizations are increasingly moving from informal use of general-purpose large language models toward AI embedded directly in enterprise software.
Forty-four percent of organizations surveyed use enterprise platforms with built-in AI, while 58% use productivity software that includes AI capabilities.
But adoption is not happening without tension.
More than half of HR leaders—51%—said they are under pressure from the C-suite to increase AI usage. At the same time, 60% identified ethical concerns around AI, and 71% said they had discussed those concerns directly with leadership.
That combination suggests HR’s role is evolving beyond encouraging employee adoption. People teams are increasingly participating in decisions about how AI should be deployed, governed and incorporated into work.
There are notable regional differences. In Europe, 59% of HR leaders reported using specialized AI-powered tools, compared with 41% in the U.S. European HR leaders were also more likely to have discussed AI ethics directly with leadership, at 83% versus 71%.
U.S. HR leaders, meanwhile, were more likely to believe that AI promises around productivity are overstated, with 77% expressing that view compared with 64% of European respondents.
For HR technology vendors, these differences highlight a growing challenge: organizations do not simply need more AI features. They need technology that fits existing processes, governance structures and management practices.
Lattice’s findings on culture reinforce that point.
Organizations that consistently demonstrate their core values reported significantly stronger employee engagement: 89% of employees were highly engaged at companies that consistently demonstrate their values, compared with 53% where that consistency was absent.
Employees at those organizations were also twice as likely to be able to articulate company goals, at 44% versus 22%.
Culture, therefore, is increasingly being positioned as operational infrastructure rather than an employee-experience initiative sitting separately from business performance.
But the report also exposes a gap between technology investment and technology outcomes.
Nearly 47% of HR teams said at least one HR technology solution purchased during the previous two years failed to meet expectations. The most frequently cited problems were functionality falling short of requirements, integration challenges and poor usability.
Interestingly, high-performing HR teams were more than twice as likely to attribute technology failures to internal process gaps rather than the technology itself—45% compared with 22%.
That finding has implications for how HR technology is purchased.
As AI becomes embedded throughout HR software, buyers may increasingly need to evaluate implementation readiness, data quality, workflow design and manager adoption alongside feature sets. Buying an AI-enabled platform does not automatically create an AI-enabled organization.
The pressure on HR leaders themselves is another concern.
Fifty-five percent said they had considered leaving the profession during the previous year. Feeling undervalued was cited by 39%, operating in crisis mode by 35%, and burnout by 34%. Concerns about being replaced by AI were cited by 21%.
Yet HR resources could be moving in the opposite direction. Fifty-two percent of respondents expect HR headcount to increase during the next six to 12 months, while 54% anticipate larger budgets.
That combination—greater responsibility alongside increased investment—could mark a significant change in the function’s position within organizations.
The broader labor market is already reinforcing the need for a more strategic approach to workforce capability. The World Economic Forum’s Future of Jobs Report 2025 estimates that 39% of workers’ existing skill sets will be transformed or become outdated between 2025 and 2030, underscoring the need for reskilling alongside technology adoption.
The emerging HR model is therefore less about administering people programs and more about connecting people, technology and business performance.
That does not make HR the sole owner of AI transformation. Technology, finance, operations and IT remain critical participants. But HR increasingly has responsibility for the human systems that determine whether transformation actually works: skills, management, incentives, performance, culture and employee adoption.
The Lattice report’s central argument is consequently broader than the future of HR software.
As AI changes how work gets done, organizations may increasingly compete on their ability to convert technological capability into human and organizational capability.
In that environment, people strategy is no longer simply about supporting the business.
It becomes part of how the business operates.
Market Landscape
The HR technology market is moving from digitizing HR processes toward managing organizational performance in an AI-enabled workplace.
Traditional HR suites focused heavily on systems of record—employee data, payroll, recruiting, performance cycles and compliance. Newer platforms increasingly layer AI across those systems to support managers, identify workforce patterns and automate administrative work.
The competitive question is now shifting from “Does the platform have AI?” to “Can the platform help the organization change how work gets done?”
That creates opportunities across:
- AI-powered performance management
- Workforce and skills intelligence
- Employee listening and engagement analytics
- Manager enablement
- Internal mobility and career development
- AI governance and responsible-use frameworks
- Workforce planning and organizational design
- People analytics and productivity measurement
The Lattice findings also highlight a persistent implementation problem. HR technology buyers can purchase sophisticated platforms while still failing to redesign the processes around them. Integration, usability, data quality and manager adoption therefore remain critical differentiators.
Top Insights
- AI is expanding HR’s strategic mandate, placing workforce capability, performance, culture and technology adoption closer to executive-level business decisions.
- Performance management is becoming continuous, with AI increasingly reducing administrative work while managers remain accountable for judgment, coaching and feedback.
- AI enthusiasm is high but not unconditional, as 60% of HR leaders continue to identify ethical concerns around workplace AI.
- Culture has measurable business relevance, with consistently demonstrated company values associated with substantially higher employee engagement and stronger goal clarity.
- Technology investment requires organizational readiness, with nearly half of HR teams reporting at least one recent technology purchase failed to meet expectations.
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