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Hackett: HR Organizations Feeling Increased Pressure in the Face of Global Uncertainty

Generative AI and Other Technology Are Key to Improving HR Efficiency and Effectiveness

As companies face significant uncertainty, including the potential for stalled global economic growth, high interest rates and possible labor and skills shortages, human resources (HR) teams expect to feel increased pressure, including a growing workload and the need to enable the success of business stakeholders, according to new HR Key Issues research from The Hackett Group, Inc.. HR leaders also see generative AI (Gen AI) and other technologies as key to improving efficiency and effectiveness.

In 2024, developing effective leaders remains the top priority for HR, marking its second consecutive year in the top spot, according to The Hackett Group®. The need to create and maintain a high-performing organizational culture climbed three spots in 2024 to become priority No. 2. As organizations navigate these priorities, it is crucial to recognize the emerging need for HR business partners to incorporate leadership coaching at the highest levels. The Hackett Group’s research recommends that organizations carefully deliberate on how leadership development is integrated into the broader HR operating model. In light of these trends, the research calls for HR organizations to take proactive measures to align workforce planning and strategy with business planning, and enhance the experiences of employees, managers, and candidates – both critical considerations newly introduced to the top 10 priorities list for 2024.

A complimentary version of The Hackett Group’s 2024 Human Resources Key Issues research – The CHRO Agenda – is available, with registration, at https://go.poweredbyhackett.com/ush.

While HR workload volume is expected to rise by 7%, cost reduction is also a focus. The research found that both HR operating budgets and staff are expected to drop slightly in 2024, creating significant efficiency and productivity gaps. Technology spending, which is expected to rise by 4%, is one way HR organizations are hoping to bridge those gaps. More HR work will also be apportioned to fully automated and self-service systems’ functionality, and HR executives expect global business services (GBS)/HR shared services units to handle 3.5% more work, while centers of excellence, corporate HR and business unit HR will see over 2% increases in overall workload.

The research recommends that HR organizations explore generative artificial intelligence (AI) as part of their HR operations digital transformation efforts. Although adoption is still maturing, generative AI has huge promise. Our recent research found that generative AI could yield a 40% reduction in selling, general and administrative (SG&A) costs and a 40% reduction in SG&A staff over the next five to seven years. The research found that 41% of HR organizations have implemented pilots or small-scale generative AI deployments, and a 7% growth rate is expected in 2024 – higher than any other emerging technology.

According to The Hackett Group Senior Research Director Tony DiRomualdo, “A pressing need to equip managers to guide the organization through the challenges posed by continued business disruption and workplace transformation has made leadership the top HR issue for the second year in a row. The people skills of leaders can make a difference in today’s volatile markets and disrupted workplaces. To succeed, leaders must sharpen seminal competencies while mastering new management techniques.”

“HR executives clearly see the importance of this objective,” continued DiRomualdo. “The percentage of study respondents with a major 2024 initiative planned to address this objective is 65% – higher than for any other objective in the top 10. HR executives not only must commit resources to leadership development but also sustain their focus to achieve this objective. But the opportunity is significant. Our functional HR benchmarking results show that Digital World Class® HR organizations – those that perform in the top quartile in both business value and operational excellence – spend 27% more HR business partner time focused on organizational and leadership development.”

According to The Hackett Group Principal and Global HR Advisory Practice Leader Harry Osle, “HR organizations are placing increasing focus on using technology to improve efficiency and productivity, with a 19% growth rate expected in the adoption of cloud-based human capital management applications and significant growth expected in adoption of HR point solutions, generative AI, and agile orchestration.”

“Adoption of emerging technologies enabled by AI is picking up, albeit at a smaller scale for now,” Osle continued. “As part of their digital transformation efforts, HR organizations are already cautiously trying out generative AI, particularly for low-risk activities such as answering common HR-related questions, chat-bots and creating consistent job descriptions. But the areas where generative AI will be used to streamline HR are numerous and include talent acquisition, onboarding, learning and development, employee engagement, and communications, which will free up HR resources to expedite strategic initiatives aligned to business needs. The effect is going to be tremendous.”