Despite increased investments in AI upskilling, many HR professionals report that companies have not sufficiently adopted AI in a way that demonstrates impact and return on investment. This issue largely arises from organizations failing to integrate AI into their existing processes and workflows. 61% of HR professionals believe their departments have not yet successfully integrated AI into their work. Additionally, Gallup reports that only 22% of individuals feel comfortable or somewhat comfortable using AI in their roles.

That’s why upskilling alone will not lead to sustainable adoption. Instead, successful AI integration requires a combination of new skills and a clear strategy for applying AI in the HR function. 

In this article, we dive deeper into how organizations can practically bridge the gap between upskilling and real-world AI integration.

Contents
What is AI integration in HR?
What are the skills HR professionals need in the age of AI?
4 strategies to drive AI integration in HR

What is AI integration in HR?

AI integration in HR refers to the use of artificial intelligence technologies to automate, enhance, and optimize HR processes such as recruitment, employee engagement, performance management, and workforce analytics. It’s not just about developing AI-related skills but also about strategically implementing, scaling, and leveraging AI to optimize processes, enhance decision-making, and drive business impact.

I think there’s this expectation that when new technology comes out like it’s here and now, it’s going to change the world. And I believe it will, but not within 24 hours. With every major technological transformation—whether digital or even something like the printing press, you essentially have two components. You have the tech thing being invented, and then you have humans using it. And which one do you think is more difficult?

Sophia Matveeva, CEO & Founder of Tech For Non-Techies

What are the skills HR professionals need in the age of AI?

Our T-Shaped HR Competency Model defines five core competencies for HR professionals to succeed and remain relevant to meet the changing expectations of HR professionals:

• Business Acumen
• Data Literacy
• Digital Agility
• People Advocacy
• Execution Excellence. 

While HR professionals have made strides in Business Acumen, technical HR expertise, and People Advocacy, their ability to leverage data and technology effectively remains a persistent challenge.

One reason for this gap is historical exposure—many HR professionals simply haven’t had the same immersion in data and digital tools as their peers in other functions like Finance, Marketing, or Operations.

Another potential reason is that HR professionals do not stay abreast of technological changes over time as they mature in their careers. Unfortunately, this lack of competence and confidence leads to limited translation of skills development back to the day-to-day work of HR professionals.

In an AI-driven world, Data Literacy and Digital Agility are even more critical than before. Beyond technical expertise, HR professionals also have to develop the right mindset and behaviors to set themselves up for success. This includes developing curiosity, systemic thinking, and the ability to critically evaluate and consider ethical considerations when using AI. 

HR professionals are often hesitant to ask their employers for AI training. “I don’t want them to know I don’t understand this,” they say. But why would you? You work in HR—no one is born knowing AI. Yet, there’s a lot of shame around not instantly grasping digital transformation. In tech startups or big tech companies, there’s this unspoken expectation that you’ll absorb it when you walk in.

Sophia Matveeva, CEO & Founder of Tech For Non-Techies

A common misconception, however, is that all HR professionals require the same skills to use and apply AI. Context is essential, and we have found it helpful to think about skills requirements in three distinct categories. These categories help us understand how AI skills are developed and how HR professionals apply different skills within different roles.

Let’s take a closer look at these three skills categories.

Base skills for general users

The first skills category applies to most HR professionals who interact with AI-driven tools but do not build or maintain them. They use AI within their role in areas like talent acquisition, employee engagement, and workforce planning.

To do this effectively, the key requirements for this group of HR professionals are to have a basic understanding of how they can leverage AI, confidence in where and how to apply AI safely, and the ability to use essential AI tools. Some of the key skills required are:

• AI fundamentals and functionality: Understanding the core principles of AI, including how machine learning, natural language processing, and automation work and their applications in business and HR.
• Ethical and responsible AI usage: Ensuring AI is used transparently, fairly, and responsibly by addressing bias, data privacy, compliance, and ethical decision-making in AI-driven processes.
• Basic data literacy: The ability to read, interpret, and apply data insights, including understanding data sources, quality, and limitations, to support informed decision-making.
• Prompt design (for effective AI interaction): Crafting clear, structured, and strategic prompts to enhance interactions with AI tools, improving accuracy, relevance, and response efficiency.
• Adaptability, curiosity, and problem-solving: Cultivating a mindset that embraces change, exploring new possibilities, and applying critical thinking to solve challenges in dynamic and AI-enhanced environments.

Technical skills for builders and maintainers

The next category applies to fewer HR professionals. They are typically in roles that build, configure, manage, and optimize AI applications within HR functions. HR technology specialists, HRIS analysts, and some HR Center of Excellence functions fall into this category.

Applying AI at this level requires more specialized skills, including the following: 

• Machine learning fundamentals: Understanding key machine learning concepts, including algorithms, training models, and pattern recognition, to grasp how AI learns and improves over time.
• Business analysis and AI integration: Evaluating business needs, identifying AI opportunities, and aligning AI solutions with strategic goals to drive efficiency and innovation.
• Data management: Organizing, storing, and securing data effectively to ensure accuracy, accessibility, and compliance for AI-driven decision-making.
• Programming and system optimization: Applying coding skills and technical knowledge to develop, refine, and optimize AI systems for performance, scalability, and reliability.
• Communication and stakeholder collaboration: Translating AI concepts for diverse audiences, fostering cross-functional teamwork, and ensuring AI initiatives align with business priorities and user needs.

Advanced skills for developers and innovators

The last category applies to a small percentage of professionals who specialize in AI research, development, and security. These roles drive AI advancements, develop proprietary models, and ensure ethical and legal compliance.

Even though these skills will not be represented in most HR roles, HR professionals who are involved in developing HR technologies must be proficient in these advanced skills:

• Advanced AI model development: Designing and refining complex AI systems, including deep learning architectures and large language models, to enhance automation, prediction, and decision-making capabilities.
• Cybersecurity in AI-driven HR applications: Safeguarding HR data and AI systems by implementing security measures to prevent breaches, bias perpetuation, and unauthorized access while ensuring compliance with data protection regulations.
• Analytical and critical thinking: Evaluating AI-generated insights with a data-driven mindset, questioning assumptions, and making informed, strategic decisions based on evidence and logical reasoning.
• Problem-solving for AI optimization: Identifying inefficiencies, troubleshooting AI system errors, and enhancing AI performance through continuous refinement and innovative solutions.

To build these skills successfully and sustainably, we need to adopt a different approach beyond simply upskilling all HR professionals.

We discussed how to successfully integrate AI in HR and the business with Sophia Matveeva, CEO & Founder of Tech For Non-Techies. Watch the interview below:

4 strategies to drive AI integration in HR

When it comes to AI, most HR professionals upskill themselves through self-exploration, online resources, or vendor-driven training on specific platforms and tools. While developing AI-related skills is important, this unstructured approach has many limitations and can even hinder successful AI integration in HR.

A broader, more strategic approach is needed—one that goes beyond skill-building to focus on the structured implementation, scaling, and effective use of AI in HR.

We propose a structured, step-by-step approach to driving AI integration through four key phases that move HR professionals from awareness to being able to scale AI within the team.

1. Educate: Building AI awareness and understanding

Before HR professionals can effectively use AI, they need a strong foundational understanding of what AI is, what it can do, and how it applies to HR. Moreover, they need to have a strong grasp of the risks associated with AI use, specifically data security, where it should not be applied, and the technology’s limitations, such as hallucinations. This starts with structured learning and exposure to real-world applications.

How to start

• Create structured training programs: Offer learning paths that introduce HR professionals to AI fundamentals, ethics, and practical applications.
• Show clear and relevant use cases: Use real examples to illustrate AI’s role in recruitment, employee experience, talent management, and workforce planning.
• Implement AI literacy frameworks: Provide a structured learning journey, ensuring HR professionals understand:
  • What AI is good at (E.g., automation, pattern recognition, predictive analytics)
  • Where AI can be applied in HR (E.g., talent acquisition, employee engagement, workforce analytics)
  • How to approach AI in HR (Emphasizing ethics, data integrity, and responsible AI governance)

2. Equip: Providing the right tools and safe practice environments

Once HR professionals understand AI’s what and why, they need access to tools, guidelines, and structured opportunities to experiment. With the right tools, structured training, and a practice-first approach, they will gradually develop confidence and AI fluency. This phase focuses on practical application in a low-risk, supportive environment.

How to start

• Introduce AI tools progressively: Start with simple, user-friendly AI tools before moving to advanced applications. Generative AI tools can be a good starting point.
• Leverage familiar use cases: Begin with areas where HR professionals already have experience to build confidence.
• Create sandbox environments: Provide safe spaces where HR teams can experiment with AI without risk, allowing them to explore how AI generates insights, how AI adds value, and how to interpret AI-generated outputs. An example of this is using training HR data sets.
• Encourage reflection: Ensure users continuously reflect on what they are learning:
  • Where has AI been useful?
  • How does it enhance HR decision-making?
  • How can AI applications be expanded over time?

3. Expose: Integrating AI into daily work and encouraging collaboration

Once HR professionals are familiar with AI tools, the next step is to embed AI into their daily workflows in a structured way. This involves gradual adoption, social learning, and an environment encouraging knowledge-sharing.

How to start

• Create structured experiments: Allow HR teams to test AI applications in a controlled way, measuring their effectiveness and iterating based on results.
• Facilitate social learning: Encourage HR professionals to share their AI experiences, challenges, and best practices. Strategies include:
  • AI knowledge-sharing forums
  • HR learning groups focused on AI integration
  • Peer mentoring and collaborative problem-solving.
• Showcase success stories: Regularly share real-world examples of AI success within the organization. Highlight improvements in efficiency, candidate experience, or employee engagement.

By gradually integrating AI into real work scenarios, HR professionals will become more comfortable, confident, and willing to expand AI’s role in HR.

4. Elevate: Scaling AI across HR functions and strategy

The final step is to embed AI into the broader HR value chain, transforming HR from an AI adopter into an AI-enabled strategic function. This means moving from isolated use cases to a systematic and scalable AI-driven HR strategy.

How to start

• Expand AI applications across HR: Once AI proves its value in smaller projects, broaden its impact by embedding it into HR’s core processes and policies. Examples include:
  • AI-driven talent management (E.g., predicting future skills gaps and reskilling needs)
  • Intelligent automation of HR service delivery (E.g., AI-powered chatbots handling routine HR inquiries)
  • AI-assisted employee development (E.g., personalized learning recommendations).
• Start with HR processes before enterprise-wide AI adoption: Focus first on HR-specific AI applications, then expand AI into enterprise-wide HR decision-making (e.g., AI-driven workforce planning at the executive level).
• Establish governance and ethical frameworks: Ensure AI is used responsibly by implementing bias mitigation, compliance, and AI transparency policies.
• Measure impact and iterate: Continuously assess AI’s effectiveness in HR processes. Regularly gather feedback, refine AI applications, and stay updated on AI advancements.

Getting started

The first step is understanding the current state of AI skills in your HR department and across the business. Assess where your team and organization stand by asking key questions:

• How is AI currently used in HR processes?
• What level of data literacy exists within the team?
• Where are the biggest challenges or inefficiencies that AI could help solve?

Understanding these factors will clarify where AI can add value, ensuring that adoption aligns with business and talent strategies rather than becoming a disconnected initiative.

Once you have established a baseline, prioritize your starting point for the various roles that form part of your HR team based on the three levels of skills requirements. Next, structure a roadmap to guide activities based on the four strategies of Educate, Equip, Expose, and Elevate. 

AI adoption in HR is an ongoing journey, requiring continuous learning and iteration. Establish a system to monitor progress by tracking key HR metrics, gathering feedback from employees and HR stakeholders, and measuring the impact of AI-driven interventions. Regularly assess and refine your approach as AI capabilities evolve to ensure that AI strengthens HR’s role in driving business success rather than a one-time experiment.

The post AI Integration in HR: Educate, Equip, Expose and Elevate appeared first on AIHR.

The summit’s opening coincided with President Trump’s inauguration. Interestingly, CEOs who had funded the Trump campaign were notably absent from Davos, redirecting their attention to highlight their support for the new administration. President Trump also reiterated his “America First” narrative later in the week, signaling to the rest of the world that America was open for business as long as it benefits America.

This year’s theme of “Collaborating for the Intelligent Age” sparked various conversations on the impact of AI, its potential power for progress and division, the shifting labor landscape, and the continued battle against climate change.

As these transformations unfold, HR professionals face an urgent question: 

How do we adapt our strategies to remain relevant?

Three critical HR priorities must take precedence in 2025 and beyond.

1. The AI skills imperative

Artificial intelligence is reshaping industries at an unprecedented pace, yet the risk of unequal access to AI skills threatens to deepen economic disparities. A dual approach is needed—one that prioritizes skill-building across all workforce levels and ensures responsible AI adoption that enhances, rather than replaces, human potential.

HR must lead the design of inclusive AI upskilling programs strategically aligned with business needs. As highlighted in our 2025 Trends Report, organizations that adopt AI with a human-centric approach will be best positioned for long-term success. This requires equipping employees with AI literacy and embedding AI ethics and governance into workplace policies to safeguard against bias, unintended consequences, and workforce displacement.

2. Recommitting to DEIB beyond representation

Diversity, Equity, Inclusion, and Belonging (DEIB) initiatives are facing heightened scrutiny, with critics blaming them for operational failures that have little to do with their core intent. In some cases, DEIB has become a scapegoat for crises that stem from systemic inefficiencies—such as the LA Fire Department’s delayed response to devastating wildfires or the collision between an American Airlines jet and a Black Hawk aircraft.

While these claims lack evidence, they underscore the need for a shift in DEIB strategies.

Too often, organizations focus exclusively on representation, neglecting to address the deeper structural barriers that hinder true inclusion. To drive meaningful change, we advocate for a new approach—one that prioritizes systemic transformation over superficial actions.

3. HR’s expanding role in ESG

While sustainability teams often lead environmental, social, and governance (ESG) strategies, HR plays a crucial—yet underutilized—role in shaping the social and governance pillars. Organizations must move beyond reactive compliance and integrate ESG principles into workforce policies, leadership development, and ethical business practices.

HR leaders are mandated to drive ESG value creation—whether through responsible AI governance, employee wellbeing initiatives, or fostering a culture of accountability. Those who proactively embed ESG principles into talent strategies will enhance corporate reputation and future-proof their organizations against regulatory and societal shifts.

Where do we go from here?

AI disruption, geopolitical shifts, and changing workforce expectations demand a bold and strategic response. For HR leaders, this complexity is not merely a challenge but an opportunity to reshape the role of work in a rapidly changing world.

The year ahead will bring uncertainty, requiring HR leaders to act with courage, focus, and resolve. We must serve as a steady anchor for our organizations, guiding them through the complexities of change. As the future of work becomes increasingly human-centric, our role grows more critical than ever.

The question is: Will we rise to the occasion and champion humanity’s future in the face of uncertainty?

How we can help

At AIHR, we offer practical training programs to help your HR team tackle today’s challenges. Our courses are designed to build skills across various key areas. 

For example, our DEIB Certificate Program covers topics like inclusive communication and understanding cultural differences. This training equips your team to create a workplace where everyone feels valued and included.

We also provide training that aligns HR strategies with ESG principles. This includes responsible AI use, promoting employee wellbeing, and upholding ethical business practices. These courses prepare your team to support sustainable and responsible growth.

By partnering with AIHR, your HR team gains access to comprehensive training and resources. Our flexible programs are designed for immediate application, helping your team develop skills that drive business success.

The post The Future of Work: HR’s Priorities on AI, ESG and Global Shifts appeared first on AIHR.

At the same time, accusations against the Los Angeles Fire Department Chief, alleging that DEIB-focused hiring compromised operational readiness during the catastrophic fires in early 2025, have fueled debates about the role and impact of DEIB efforts. Even though these claims have no supporting evidence, they drive a negative perception of the value of DEIB.

Unfortunately, the debate about DEIB tends to focus on representation and equity at the expense of inclusion and belonging in the workplace. This view is limiting and leads to us getting caught up in debates on hiring and promotions. The evidence shows that representation in isolation does not lead to better performance, calling on us as HR to take a more holistic view of the end-to-end DEIB domain.

In this article, we provide a holistic framework to help HR professionals take a more holistic approach to inclusion and belonging and move beyond the focus on diversity and equity.

Contents
Defining inclusion and belonging beyond diversity and equity
What are organizations getting wrong with inclusion and belonging in the workplace?
A comprehensive framework for inclusion and belonging in the workplace
Getting started

Defining inclusion and belonging beyond diversity and equity

The acronym DEIB is commonly used today by HR and business professionals. Even though the term’s awareness has increased, the unintended consequence is that we have lost a deeper understanding of the details below each of the letters. Many see DEIB as one concept instead of acknowledging that the different parts of the acronym have significantly different objectives, strategies, and values. 

As mentioned earlier, a significant discrepancy is the perception that DEIB programs focus solely on representation, which means that most organizations ignore inclusion and belonging as an essential part of organizational culture.

Taking a step back, we need to understand that each part of the acronym is a domain in its own right, even though they are interrelated:

While closely related, inclusion and belonging address different aspects of the workplace and the relationship between the employee and employer.

Inclusion focuses on creating an environment where individuals feel empowered to contribute and is often influenced by a strong focus on access to the workplace, team relationships, and organizational culture. 

Belonging is the emotional counterpart to inclusion and reflects an individual’s sense of acceptance and connection within the organization. Belonging also refers to the extent to which employees feel seen, heard, and appreciated for who they are. It is often associated with employee engagement strategies, the team’s trust levels, and the quality of the relationship between employees and management.

It is important to note that inclusion and belonging are shared responsibilities between individuals and the organization. Individuals need to want to be included and also do their part to belong, while the organization has to create an environment that includes, celebrates differences, and allows individuals to contribute.

What are organizations getting wrong with inclusion and belonging in the workplace?

Many organizations have embarked on DEIB initiatives with noble intentions. Unfortunately, as is evident from the public sentiment about these practices, some common mistakes are preventing businesses from seeing the value that DEIB brings to the organization.

A few of the common pitfalls are:

Focusing on ethics, not impact

HR teams often frame DEIB initiatives as the “right thing to do” driven by a sense of social responsibility. While such an approach highlights the moral and ethical dimensions of DEIB, it risks positioning it as an external obligation rather than a key driver of organizational success. 

This narrow focus can lead stakeholders to view it as a “check-box” exercise without seeing its tangible connection to business value.

→ What organizations need: A more holistic way to explain the value to the business of the different elements of D, E, I, and B and link the outcomes to tangible business value substantiated by evidence. For example:

Overemphasis on representation

Many organizations reduce DEIB to focusing narrowly on demographic representation. This approach typically involves tracking metrics like the number of people from underrepresented groups hired, promoted, or represented at each level of the organization. While representation is critical, only focusing on these metrics often limits progress. 

Representation focuses on who is in the room, but if this is not balanced with inclusion and belonging, it becomes symbolic rather than transformative. Employees who are present but feel overlooked or undervalued may still struggle to thrive or to bring the creativity and perspectives that make diversity an asset.

→ What organizations need: Ensure that monitoring and tracking metrics are focused on all domains of DEIB, expanding the business conversation to go beyond the numbers and focus on aspects of culture and engagement.

Seeing inclusion and belonging as an outcome and not a focus

Many believe inclusion and belonging will follow if we focus on diversity and equity. As stated above, this is not true. For authentic and sustainable inclusion and belonging to occur, we must understand the differences between the areas and how they contribute value.

→ What organizations need: Strategies and frameworks that view each of these elements in its own right and target them appropriately to drive value.

Making DEIB only about justice

DEIB programs can inadvertently place significant focus on past injustices and emphasize who has been wronged. While raising awareness of inequities and acknowledging systemic barriers is important, framing these discussions primarily through a lens of victimization can be counterproductive.

→ What organizations need: Businesses need a “building” narrative focused on acknowledging and understanding history and context while seeking a way forward that includes all. A balanced approach that recognizes challenges while empowering individuals and fostering forward-looking solutions is more effective in driving meaningful change.

Avoiding the debate altogether

Some organizations have opted to avoid DEIB issues altogether to escape criticism. However, this neutrality often alienates employees, particularly younger generations, who value employers that take a stance on social and workplace problems.

→ What organizations need: Companies should participate in the discussion and express their perspectives on DEIB issues instead of abolishing these programs outright. We need more participation and sharing of what works, what does not, and how we should move the intent that sits DEIB forward.

A comprehensive framework for inclusion and belonging in the workplace

Considering these recommendations, we have provided a framework below that HR professionals can utilize to guide their DEIB practices to be broader and drive higher value. Before diving into the framework, we acknowledge that DEIB is highly contextual, and as such, we should always consider the external context to inform our initiatives and priorities.

The framework is divided into two layers. The inner layer reflects the various outcomes we want to achieve, or in simple terms, what success looks like. The outer layer showcases the enablers that need to be in place for these outcomes to be achieved.

Outcomes can be linked to the specific areas of diversity, equity, inclusion, and belonging. Below the line are the areas that focus specifically on diversity and equity, while the areas above the line strongly focus on inclusion and belonging.

Here are the outcomes for the organization to achieve:

• Representation and accessibility: The organization is accessible to individuals from all backgrounds and effectively represents the communities we serve and operate within.
• Fairness, transparency, and dignity: Consistently acting in ways that are fair, transparent, and aligned with employee needs, ensuring their dignity and humanity are upheld.
• Psychological safety and professional respect: Creating an environment where individuals feel psychologically safe to be themselves and engage professionally without fear of undue consequences.
• Employee voice and collaborative contribution: Employees can voice their perspectives formally and informally and collaborate to achieve shared goals.
• High levels of trust: Building a workplace where people trust each other and the intentions behind decisions and actions.

These outcomes can only become a reality if specific enablers are in place. These enablers range from systemic areas to interpersonal and behavioral dimensions. 

• Policies and processes: Robust policies and processes must be in place to dismantle barriers, promote consistency in actions, and create trust.
• Workplace practices: Day-to-day practices must reflect and reinforce inclusion, belonging, and equity, ensuring they are embedded in how work is designed and executed across the organization
• Leadership and management commitment: Managers and leaders must demonstrate a genuine commitment to driving inclusion and belonging, extending beyond surface-level support for diversity and equity.
• Team relationships: Teams must trust each other’s competence and build strong relationships.
• Culture and climate: The organization’s culture must set the foundation for inclusion and belonging, ensuring it aligns with and supports these values at every level.

The inner and outer layers work together to ensure a broader focus on DEIB, and although distinct, they are interrelated.

We discussed inclusion in the workplace with the inclusion strategist Amri B. Johnson. Watch the full interview below:

Getting started

To make the model practical, the first step is to evaluate the current work being done in the organization against the framework. It is helpful to categorize to what extent these realities are true for the organization and prioritize areas to focus on where the most significant discrepancies exist.

Below, we provide a series of questions that can be used as a starting point:

A final word

Amid the ongoing public debate about DEIB’s value, HR must adopt a more holistic approach that demonstrates clear business value and highlights its importance in the future of work. To do so, DEIB must move away from a narrow focus that only targets representation and expand on creating environments that actively foster inclusion and belonging for all employees.

The post Beyond Diversity & Equity: Focusing on Inclusion and Belonging in the Workplace appeared first on AIHR.

Our research examined how leading companies develop their HR strategies. These efforts typically bring order to chaos by establishing clear principles for decision-making. However, we found the strategy process is often flawed. HR strategies often lag behind business goals or are expected to be finalized before business strategies are complete.

It’s not just about fixing the process. The fast-changing external environment makes traditional strategies outdated.

Our HR Trends 2025 report introduced the concept of “Looming Organizational Anxiety,” highlighting how constant uncertainty creates new challenges. A scenario-focused approach to HR planning can better prepare professionals to adapt. And AI offers even more opportunities. It makes scenario planning practical and helps HR leaders craft proactive, resilient strategies, even with limited resources.

What is strategic scenario planning in HR?

Scenario planning is about envisioning possible future events and preparing possible responses in case they happen. This approach has been widely used, with companies like Shell famously applying it to plan for potential oil crises. Over the years, many other organizations have also relied on scenario planning. 

For example, climate crises have forced organizations to relocate people, introduce travel benefits for those in affected areas, or rethink workplace strategies. Using scenarios, HR could have been better prepared for these challenges, with well-thought-out responses already tested and monitored.

The benefits of scenario planning

Scenario planning brings the following benefits to HR:

• Future-proofing workforce needs: Anticipates talent requirements, skills gaps, and workforce dynamics under various future scenarios, ensuring alignment with organizational goals.
• Enhancing agility and risk mitigation: Enables flexible strategies to address disruptions like technological advances, economic shifts, or workforce shortages, reducing organizational risks.
• Adapting to technological and cultural shifts: Prepares HR for integrating AI, automation, and evolving employee expectations, including remote work, diversity, and inclusion.
• Improving employee experience and retention: Designs proactive policies for engagement, wellbeing, and inclusion tailored to potential changes in workforce composition and expectations.
• Strengthening organizational resilience: Supports leadership succession, crisis management, and collaboration across functions to prepare a workforce for uncertainty.

How to incorporate strategic scenario planning into the HR strategy process

Scenario planning can be incorporated into the HR strategy in two ways:

Technique 1: Using scenario planning to prepare HR for different outcomes 

Scenario planning can be a key part of analyzing external environmental trends. Most HR strategy processes follow these steps:

• Step 1: Analyze the external environment to understand trends affecting the business
• Step 2: Conduct an as-is analysis of the organization to identify strengths and threats
• Step 3: Interpret the business strategy and focus on identifying priorities and strategic choices
• Step 4: Align HR priorities with the business strategy
• Step 5: Develop HR objectives and key initiatives
• Step 6: Create an execution roadmap and determine resource needs. 

The external analysis should go beyond current trends and include a broader look at future scenarios to make scenario planning more effective. The difference between these approaches is explained below.

Traditional approach

Organizations leverage frameworks like the PESTLE analysis to assess their external environment and inform strategic decisions:

• Political: A newly elected political party plans to introduce trade tariffs and labor legislation over the next two years, requiring HR to adapt policies and ensure compliance.
• Economic: Rising exchange rates are set to increase manufacturing costs and squeeze profitability, pushing HR to explore cost-efficient workforce strategies.
• Social: Local youth unemployment urges organizations to invest in job creation and early-career development programs.
• Technological: Advances in sustainable packaging demand automation, prompting HR to reskill employees and attract talent skilled in automation technologies.
• Legal: New patent legislation will influence governance, necessitating HR-led compliance training and adjustments to IP-related roles.
• Environmental: Climate change’s impact on supply chains requires HR to support sustainability initiatives and address evolving workforce needs.

These insights drive HR’s strategic response, shaping workforce planning and capability building to align with emerging trends.

Scenario-focused approach

PESTLE analysis provides valuable insights, and integrating a scenario-based approach deepens strategic preparation. This approach asks forward-looking questions to develop actionable strategies based on the insights gathered through the PESTLE analysis:

• What actions should we take if trade tariffs are implemented?
• How do we adapt if manufacturing costs become unsustainable?
• How can we create meaningful job opportunities?
• What changes are needed if new legislation is enacted?
• How do we prepare for climate change’s impact?

By building on these questions, the analysis transitions from static input to dynamic scenario planning, producing tailored responses for multiple futures.

For example:

• Scenario A: Trade tariffs and labor legislation are enforced, requiring workforce restructuring.
• Scenario B: Manufacturing costs rise sharply, necessitating automation and global sourcing adjustments.
• Scenario C: Climate change disrupts supply chains, driving a shift toward local suppliers and sustainability-focused roles.

Incorporating scenario planning at the start of the strategy process allows organizations to become more adaptable, resilient, and prepared in their strategic responses, broadening the scope and depth of their strategy. Remember, the goal is not to fall into analysis paralysis but to foster the ability to ask “What if?” questions so that you can develop a range of potential responses that the strategy can accommodate.

After the planning phase, the second approach uses scenario planning as a key tool to review and test the adaptability of current HR strategies.

Technique 2: Stress testing the HR strategy for adaptability to future events 

In the second approach, scenario planning is used to stress-test existing HR strategies, making them more resilient and adaptable. By integrating strategic scenario planning into the strategic review process, HR leaders can pinpoint areas where the strategy needs to adapt to evolving external circumstances.

This approach helps leaders avoid rigid thinking, encouraging them to explore new possibilities beyond their immediate strategic focus and prepare for the future.

Practical example

Consider Company Y’s HR strategy, which focuses on these objectives:

• Objective 1: Driving digital transformation
• Objective 2: Building a talent brand to attract and retain employees
• Objective 3: Enabling a leadership community that drives business sustainability
• Objective 4: Fostering an inclusive and diverse workplace
• Objective 5: Streamlining HR services to reduce costs.

Using a process similar to defining scenarios in the first approach, Company Y can stress-test its HR strategy against different future scenarios to ensure it holds up under various conditions.

How does the HR strategy response align with each of the stated objectives:

Importantly, in this approach, scenario planning doesn’t change the strategy’s objectives but rather focuses on how the objectives will be achieved and approached, depending on changes in the environment. 

For many HR leaders, scenario planning has traditionally been out of reach due to a lack of technical expertise, limited time, and the inability to work with the extensive market data required for practical analysis. Fortunately, AI transforms this dynamic by making scenario planning more accessible, efficient, and user-friendly.

How AI can be used in strategic scenario planning

For many, the scenario planning process can feel overwhelming, especially when resources and expertise for building robust scenarios are limited. AI offers a transformative solution, simplifying the process by leveraging advanced analytics and automation to generate actionable insights. 

Here’s how AI can support and enhance the scenario planning process:

1. Data analysis

AI processes and analyzes vast amounts of structured and unstructured data from diverse sources, such as industry reports, economic forecasts, social media, and policy updates.

How it helps: Tools like Natural Language Processing (NLP) extract relevant trends and insights, while predictive analytics models forecast future developments, such as changes in labor markets or economic conditions.

2. Scenario generation

 AI creates dynamic simulations and “what-if” analyses, modeling how different external factors might interact to shape the future.

How it helps: Scenario generation allows organizations to test multiple scenarios, such as economic disruptions or regulatory changes, and visualize their impact on HR strategies, including workforce planning and digital transformation.

3. Decision support

AI translates scenario insights into actionable recommendations, helping organizations prioritize responses.

How it helps: By assessing potential outcomes, AI provides prescriptive guidance on initiatives like reskilling programs, compliance adjustments, or recruitment focus shifts, enabling HR teams to address challenges proactively.

4. Visualization

AI-powered tools present complex data and scenarios through intuitive dashboards and visualizations, making them easier to interpret.

How it helps: Stakeholders can quickly understand potential impacts and trade-offs, fostering alignment and informed team decision-making.

5. Real-time monitoring 

AI keeps scenarios up-to-date by continuously incorporating new data and identifying emerging risks or opportunities.

How it helps: This real-time adaptability ensures that strategies remain relevant and aligned with rapidly changing external conditions.

Getting started

Scenario planning empowers HR leaders to create more adaptable strategies by developing robust new approaches or stress-testing existing strategic objectives. With the integration of AI, scenario planning can and should become a fundamental tool in every HR leader’s strategic arsenal. Leveraging AI ensures that the HR strategy process evolves to meet the demands of an ever-changing world, elevating its relevance and impact.

How we can help

We help to empower you and your teams to develop and implement HR strategies that drive business impact. Our comprehensive programs, like the HR Business Partner 2.0 Certificate Program, focus on aligning HR initiatives with organizational goals, ensuring that HR functions contribute directly to company success.

Our Certificate Programs emphasize data-driven decision-making, equipping professionals with the skills to analyze workforce data, identify trends, and make informed choices that enhance performance. By integrating strategic alignment and analytics into the training, we enable HR teams to proactively address challenges and implement effective strategies.

The post 4 Strategic Scenario Planning Techniques To Build an Adaptive HR Strategy appeared first on AIHR.

To keep up, HR departments must develop new capabilities to adapt to current business needs while also anticipating future requirements. However, our State of HR report reveals that the growth of HR often lags behind that of the business. As such, many HR leaders struggle to identify which capabilities to prioritize at each stage of business growth. 

In this article, we explore how to identify, build, and scale HR capabilities in alignment with business growth and strategic objectives.

Contents
HR capabilities across business stages
HR capabilities vs. competencies
5 steps to develop HR capabilities that meet business needs

HR capabilities across business stages

Aligning HR capability development with the stages of business growth ensures that HR functions can consistently contribute to organizational goals.

The business life cycle model is a helpful framework for understanding the challenges and priorities businesses need to solve at each growth stage. Using the lifecycle stages as a guide, we can identify the requirements from HR, which in turn dictate the capability requirements.

Here’s a breakdown of how HR’s focus and capabilities might adapt across the different business lifecycle stages:

1. Startup stage

The company is focused on proving its value proposition and generating revenue. During this stage, the business consists of the founders and a core team with little structure and resources.

To prepare the business for the next phase, HR has to establish the basic policies, processes, and payroll while also focusing on talent acquisition as a critical priority.

→ Primary HR capabilities: Talent acquisition and setting up foundational HR processes and payroll.

2. Growth stage

The company increases its customer base and builds additional products or services to help scale further. The business starts to formalize, the headcount grows, and the organization begins introducing more structure in responsibilities and roles.

HR has to play a role in stretching current talent and driving a performance culture while also helping the business with the relevant organizational design to execute its growth ambitions.

→ Primary HR capabilities: Talent development, performance management, employer brand, HR Technology and Analytics, Total Rewards, and Organizational design.

We discussed how to structure your HR department for growth and what capabilities you need with Dr. JooBee Yeow, an adviser to start-ups, educator, speaker, writer, and entrepreneur at Learngility. Watch the full interview below:

3. Maturity stage

The company stabilizes operations, manages costs, and seeks new opportunities. At this stage, efficiency becomes a key focus, and HR is tasked with helping drive productivity through people, ensuring the health of the leadership pool, and developing succession and retention plans for critical talent.

Wellbeing becomes an important consideration, and HR has to formalize it as part of the business’s culture. Employee engagement and manager development remain key focus areas, and HR formalizes its strategy and priorities for the long term.

→ Primary HR capabilities: Operational efficiency, leadership development, employee experience and engagement, HR strategy, and succession planning.

4. Renewal or transformation stage

The company focuses on finding new avenues for growth, often engaging in activities such as mergers and acquisitions, aggressive expansion strategies, or developing new products and services.

HR drives these changes for the workforce, aligning workforce capabilities with new business directions and developing reskilling programs to enable execution.

→ Primary HR capabilities: Change management, strategic workforce planning, and reskilling/upskilling.

5. Decline stage (if applicable)

For many companies, this stage is characterized by declining sales, and resources are reallocated elsewhere to maintain profitability. If organizations act quickly, they can move back to the renewal phase, while a lack of action leads to business closure.

HR’s focus during this stage is on guiding employees through these transitions, retaining key talent for essential operations, and managing knowledge transfer to preserve critical organizational knowledge.

→ Primary HR capabilities: Outplacement, retention of critical talent, and knowledge transfer.

To summarize, at the different business lifecycle stages, specific HR capabilities become more important for developing and solving the business’s needs. Although this has to be adapted to the context and needs of each company, below is a generic view of how HR capabilities typically develop in alignment with the business lifecycle.

Capabilities developed during earlier stages remain relevant as the organization grows, serving as foundational elements. Maintaining these core capabilities is essential to keep the foundations supporting ongoing growth.

HR capabilities vs. competencies

A competency is a combination of skills, knowledge, and experiences that an individual needs to perform specific tasks or responsibilities. At AIHR, our T-shaped HR Competency Model outlines the key competencies we believe are essential for future HR professionals’ success.

Capabilities, on the other hand, are positioned at a functional or organizational level. They refer to the people, processes, and technology required to achieve strategic goals. Simply put, capabilities answer the question, “What do we, as a team, need to excel at to drive success?” while competencies address, “What skills, knowledge, and experience enable individuals to complete specific activities successfully?”

Understanding the differences between these two concepts is crucial, as building individual competencies is distinct from building functional capabilities. Many organizations mistakenly assume that developing competencies will automatically lead to strong capabilities. However, this limited view often results in highly skilled individuals who lack the necessary tools, processes, or infrastructure to achieve desired outcomes.

5 steps to develop HR capabilities that meet business needs

Building capabilities requires a structured approach that balances the business’s needs with the availability of HR resources and investments. Here are six steps to put the right HR capabilities in place.

Step 1: Identify the HR capabilities relevant to your business

To identify the HR capabilities the organization needs to succeed, it’s essential to clarify what’s expected from HR, understand strategic priorities, and determine how HR can deliver the most value.

The business life cycle stages mentioned above are a helpful starting point for determining which HR capabilities are relevant to the business. Still, it is important to validate which capabilities are relevant to your specific context.

A few guiding questions that can help identify the relevant capabilities are:

• How will we measure HR’s success? Establish key performance indicators (KPIs) to measure HR’s contributions and align them with business objectives.
• What are the business’s top priorities for HR? HR and business leaders should align to clarify which areas need focus, whether it’s talent acquisition, employee experience, or driving organizational change.
• Where can HR have the greatest impact? Identify the capabilities and initiatives that align with strategic goals and address the organization’s most pressing challenges.

Using these questions, the relevant capabilities can be identified and prioritized. Be careful of selecting too many capabilities; instead, focus on the essential capabilities that will drive the biggest business impact.

Implementation tip

If you struggle to identify HR capabilities, it is helpful to refer back to the various functions within HR. Start by focusing on the foundational pillars of HR, as described in this article.

Step 2: Describe your capabilities

After defining the capabilities, the next step is to describe the capabilities in terms of people, process, and technology requirements. This involves answering three key questions:

1. What competencies are essential for this capability?
2. What processes should be in place?
3. What systems and tools are required?

To illustrate how to do this, let’s consider the example of talent acquisition capability.

First, the capability is described in terms of the specific competencies required to source, recruit, and onboard talent. Second, the critical processes for implementing talent acquisition-related outcomes include candidate acquisition, onboarding, reference checks, and sourcing strategies. Third, regarding technology, an Applicant Tracking System (ATS) and the ability to integrate it into the core HRIS will be crucial.

Describing each capability clarifies what will be required to implement it effectively. Once all the necessary capabilities for this stage of the business have been clearly defined, the required capabilities can be prioritized based on their strategic importance to the business and the available resources to build them.

Step 3: Categorize your capabilities

Categorizing capabilities helps prioritize which ones to develop based on their strategic importance. While all capabilities add value, their significance can vary depending on the business’s current HR needs. So, put simply, even though all capabilities are required, some require more focus than others.

A helpful framework to use is to draw a capability map. A capability map ranks and prioritizes capabilities in terms of three categories:

1. Core essentials: These are essential, foundational capabilities necessary for day-to-day operations. They often cover governance, employee relations, and compliance—areas that require consistent investment to maintain functionality.
2. Industry standard: These capabilities align with standard industry practices, providing a solid baseline for HR service delivery. They help ensure that our HR offerings meet basic standards without necessarily exceeding them.
3. Strategic differentiators: These are the capabilities that distinguish the organization in the market. They might include a compelling employee value proposition, innovative compensation practices, or flexible work policies, reflecting areas where your business aims to stand out.

Let’s look at an example.

Company ABC is in a scale-up phase and has identified a need to develop capabilities in talent management, policies and procedures, and HR technologies. Given their business stage, they prioritize HR technologies that can effectively manage payroll and offer self-service. They’re not looking for best-in-market solutions but rather for technology that meets current needs without excessive features.

For policies and procedures, they aim to be “as good as the rest.” Practically, this means developing policies that are practical and fit for purpose, investing only as much as necessary to meet standard expectations. Their policies will be aligned with, but not necessarily exceed, those of competitors.

However, they see talent management as a critical capability that can provide a competitive advantage. Therefore, they prioritize building robust talent management processes and dedicated teams focused on attracting and developing top talent. They allocate more resources to the talent management function to fully realize the value.

Once ABC sets these priorities, it can visualize the capabilities through a capability map, which provides a clear overview of focus areas and investment levels.

Below is an example of a capability map drawn for an HR organization aligned to the needs of a business in the “Maturity” phase.

Step 4: Assess current capabilities and identify gaps

With the capability map in place, the next step is to assess the current state of each HR capability. This involves collecting comprehensive data on existing competencies, processes, and technologies using methods such as interviews, assessments, system data analysis, observational studies, and stakeholder feedback. Each capability should be evaluated against defined criteria like effectiveness, efficiency, and scalability.

This analysis should reveal gaps, strengths, and targeted actions to bridge areas needing improvement. For example, if talent acquisition technologies are found to be inadequate, this signals a priority for investment. Conversely, you can earmark capabilities assessed as strong for maintenance rather than further development.

By identifying these gaps and strengths, HR can make informed decisions to align capabilities with business goals and support long-term growth. Findings from this assessment will inform the next step in building a robust, future-ready HR function.

Below is an example of a capability analysis with identified strengths and gaps:

Step 5: Develop and implement capability-building initiatives

With the gaps identified, the next step is to outline a structured capability-building plan that details:

• Key initiatives: What specific actions are needed to strengthen each capability?
• Responsibility: Who will lead each initiative?
• Budget requirements: What financial resources are necessary to support these initiatives?
• Ownership: Who will take accountability for driving these initiatives forward?

Final words

Identifying, describing, and developing capabilities are crucial to the success of any HR team. Aligning these capabilities with the business lifecycle stages ensures that HR priorities evolve alongside the company’s needs, from startup to growth, maturity, or reinvention.

Ensuring a structured and holistic approach allows HR teams to execute sustainably and optimize the available resources to invest in capabilities that matter most at each stage of the business journey.

The post How HR Capabilities Evolve with Business Growth [+ 5 Tips for HR Leaders] appeared first on AIHR.

The AIHR AI Risk Framework is a strategic framework developed to assist HR professionals in safely and effectively adopting AI within their organizations. 

In this article, we share the AIHR Risk Framework, exploring its parts and providing guidance on implementation through practical examples.

Why is an AI risk framework needed?

All risk frameworks help ensure legislative compliance and risk management, but they are also strategic tools to guide adoption, prioritize implementation initiatives, and support decision-making. 

The purpose of the AIHR AI Risk Framework is threefold:

1. To guide HR professionals in making informed decisions about adopting AI
2. To provide a structured approach for risk monitoring and mitigation by providing an overview of risk exposure in the internal and external environment
3. To define the process of risk management required to drive adoption

Adopting and implementing the risk framework helps support the organization’s broader AI adoption strategy. It also leads to strategic outcomes for the safe, secure, and sustainable use of AI: 

• Safe: Using AI in a fit-for-purpose manner that does no harm and does not exclude or discriminate unfairly,
• Secure: Ensuring that AI is used in a secure way to avoid cyber attacks, data mismanagement, and compromises of confidentiality and privacy, and
• Sustainable: Adopting AI practices that can be repeated and scaled ensures the sustained adoption of AI at scale across the organization in a manner that provides value.

The AI risk framework explained

Using and adopting AI comes with specific risks that need careful monitoring and management. One of the most obvious risks is related to the nature and functionality of AI technologies, including issues like bias, fairness, explainability, and unintended consequences.

Another type of risk arises from how AI technologies are used in practice, which can stem from gaps in user knowledge, lead to reputational damage, or conflict with organizational values. Additionally, as AI becomes widespread across industries, important legislative requirements and standards must be followed, creating compliance-related risks that need active management.

The 4 parts of the framework

The AIHR AI Risk Framework consists of four interconnected parts, each addressing significant risks linked to AI’s use and adoption: 

1. The first two parts focus on external risks (external environment) and internal risks (internal environment) within organizations. 
2. The third component is data governance, which is crucial for addressing both external and internal risks and requires dedicated attention. 
3. Finally, the framework outlines the various levels at which these risks should be managed to guide policy, practices, and individual behaviors that support effective adoption. A clear risk management process supports the framework, helping manage different risks across various levels.

Risks related to the external environment

External risks are usually outside the organization’s direct control, so a proactive approach is essential when adopting and implementing AI. These risks include:

1. Reputational issues
2. Legislative challenges, and;
3. Concerns about transparency and explainability.

Reputational risk

The organization’s reputation depends on its approach to adopting AI. Risks arise from poorly implemented AI tools and practices, which can harm customers, partners, and the organization’s public image. Public sentiment towards AI in organizations also matters, especially considering the broader concerns about job losses, fears of future unemployment, and companies prioritizing AI over investing in their people.

Also, the increased computing power needed for AI raises environmental concerns about its carbon footprint, adding another layer of reputational risk. Organizations need to decide how to manage these risks, especially as sustainability worries grow.

Questions to ask:

• What will people think about our organization if we take this action?
• How will this affect the environment and our sustainability goals?
• How will these actions impact the communities we serve and our customers’ perceptions?

Legislative risk

As governments worldwide establish regulations on AI usage, organizations must remain vigilant to comply with changing legal requirements. For example, the EU AI Act and upcoming U.S. regulations require proactive compliance.

Companies may need to review their current AI practices to ensure they meet these new legal standards and avoid potential fines. In HR, areas like recruitment and rewards are already in focus, with significant penalties possible if AI is found to discriminate unfairly during these processes.

As AI laws develop, HR must understand their impact on practices and policies. Organizations could face serious legal and ethical issues when AI monitors employees and consumers.

Questions to consider:

• What local legislation do we need to comply with?
• How does global legislative sentiment affect our AI strategies and actions?

Transparency and explainability

Increased regulatory scrutiny is expected to push organizations toward greater transparency in AI adoption. Compliance with legal frameworks will require transparent reporting on AI usage. Moreover, companies must decide how transparent they will be about their AI strategies, particularly when disclosing such information may expose competitive advantages.

Beyond transparency, the concept of explainability also becomes a significant risk consideration. Explainability within the AI domain refers to the ability to explain the behavior and decisions made by AI algorithms and agents by a human subject matter expert. In other words, is AI acting as expected, and if not, can we explain why? 

Explainability of AI will become important for organizations to manage as this poses an inherent risk if organizations cannot showcase that AI model behavior is as expected or at least explainable.

Questions to ask:

• How would we explain the AI solution or output to someone unfamiliar with the technology?
• Would our actions pass the billboard test if pushed into the limelight or spotlight?
• Are we transparent about how we use data and for what purpose?
• Will our practices pass scrutiny from outside?

Risks related to the internal environment

Risks within the internal environment are often more controllable and can be directly addressed by how a business applies and uses AI. These risks include: 

1. Ethical considerations
2. Privacy and confidentiality, and; 
3. Bias and fairness.

Ethical considerations

Ethical considerations go beyond meeting legal requirements; organizations need to set clear principles for adopting AI. This means considering the effects of AI on job loss, the need for reskilling, and workforce changes. Having ethical guidelines can help navigate these challenges and ensure AI is used responsibly within the organization.

Questions to ask:

• Is this the right decision for our organization?
• Will these actions contradict our values and principles?
• What effect will these actions have on our culture?

Privacy and confidentiality

Data should always be handled with the utmost respect for privacy and confidentiality, whether it involves employees or customers. Organizations need to ensure that personal data is stored, processed, and managed according to legal standards and ethical practices. This includes how data is processed through AI tools and whether it influences AI-generated recommendations. 

Questions to ask:

• How are we keeping data secure?
• Are we transparent about how we use the data?
• Is our data protected and compliant with regulations?
• Are we transparent about how we use individual data?
• Have we informed consumers and employees about our use of personal information?

Bias and fairness

Using AI introduces risks related to bias, which need to be carefully mitigated. AI systems can interpret data in ways that inadvertently exclude certain groups or reinforce harmful stereotypes. For instance, AI tools in recruitment need close monitoring to ensure they don’t unfairly filter out candidates based on irrelevant criteria. It’s important to understand how AI makes decisions and ensure those decisions follow fairness principles to minimize bias.

A clear approach to managing bias begins with understanding where AI is used, for what purposes, and under what controls. Proper monitoring of AI algorithms is essential to ensure their behavior aligns with organizational goals and ethical standards.

Questions to ask:

• Do we have controls in place to monitor known biases?
• Do we have oversight to monitor how the AI model continues to learn?
• How frequently do we validate how AI performs in line with its intended purpose?

Data governance as the cornerstone

Data governance—which includes how data is used, stored, and eventually destroyed—is a key concern for both external and internal environments. Organizations need to ensure their data handling practices meet changing legal requirements and align with ethical decisions about data use, all while being transparent to build trust with stakeholders.

Good data governance should focus on the following aspects:

• Data quality and integrity: This means ensuring data is complete, consistent, valid, and accurate.
• Data collection practices: Organizations should clearly identify data sources, label data accurately for AI training, and work to reduce bias in data collection.
• Data privacy and security: Compliance with data privacy regulations and best practices, including techniques like anonymization, encryption, and access control, is essential.
• Data lifecycle management: This involves managing data retention, storage, and disposal, along with traceability and versioning of datasets to support reproducibility and auditing of AI models.

Managing risks across three levels

Risks related to the external and internal environment and data management can arise at various levels. Therefore, when considering how to manage AI-related risks best, this has to be done across three levels within the organization. 

Level 1: Individual behavior

At the individual level, HR practitioners must address how employees interact with AI tools. Proper education, clear guidelines, and regular training are necessary to ensure employees understand their ethical and legal obligations when using AI.

Level 2: Processes, practice, and systems

The second level involves the systems, processes, and practices for AI adoption. Organizations must carefully manage how AI is integrated into workflows, including monitoring third-party vendor systems to ensure alignment with internal policies.

Level 3: Organizational policies and philosophy

At the highest level, organizations should establish a formal AI policy outlining their AI governance approach. This policy should guide decision-making across all aspects of AI adoption, from risk mitigation to ethical considerations.

Implementing a unified and continuous risk management process 

Managing AI-related risks is not a once-off event but should be done through a continuous cycle that helps identify risks, outlines necessary actions to mitigate and manage, and monitors risks in the longer term. This includes four steps:

• Step 1 – Identify: Recognize existing and emerging risks within the framework.
• Step 2 – Mitigate: Develop and implement strategies to reduce identified risks.
• Step 3 – Monitor: Regularly review risks and the effectiveness of mitigation efforts.
• Step 4 – Audit: Conduct periodic audits to assess the framework’s performance and adjust as needed.

This approach surfaces and manages risks consistently and ensures that risk management is strategically aligned and responsive to internal and external changes. 

Take action

The adoption of AI opens the door to transformative possibilities for HR, empowering teams to drive innovation and efficiency like never before. Yet, with great potential comes great responsibility. 

By adopting a holistic risk framework, HR professionals can confidently navigate the complexities of AI, ensuring its adoption is secure, sustainable, and aligned with the ultimate goal: creating meaningful value for the organization and its people.

The post The AIHR AI Risk Framework for HR Professionals Explained appeared first on AIHR.

So, what’s the solution to this dilemma? Should we abandon performance management altogether?

In this article, we evaluate why performance management remains essential for business success, argue that current approaches are not suitable for all organizations, and show four innovative performance management approaches.

Contents
Do we still need performance management?
4 future-ready performance management approaches
1. The Retro Reflection Method
2. Client-Colleague-Manager Feedback Method
3. Mission-Based OKR Method
4. Continuous Dialogue Method
How to start innovating your performance management

Do we still need performance management?

When done correctly, performance management remains a critical process for aligning business objectives with employee development. The problem is that many performance management approaches are based on outdated principles designed for more predictable, repetitive work environments.

In the fast-paced world of work of today, where roles change and goals shift rapidly, performance management must evolve too. New approaches are required—ones that reflect the way work happens now.

Traditionally, performance management followed a structured process. Managers would set specific goals for employees, often aligning them with company objectives through a top-down approach known as goal cascading.

Throughout the year, managers would provide feedback, measure performance, and calibrate ratings to ensure consistency across teams. At the end of the cycle, these evaluations would be finalized, usually influencing decisions about promotions, raises, or development plans.

This method works well in organizations that meet the following five criteria:

1. There is a clear organizational structure, with accountability and goals defined at each level. In an organization like this, it’s easy to understand how each team member contributes to the manager’s goals.
2. The organization runs on an annual cycle, with plans set for each year. For example, there is a plan in place with targets, and goals are evaluated annually.
3. A traditional method works in organizations that can easily link successful output to performance impact. For example, call center agents can be assessed by the number of queries they resolve or sales consultants by the amount of products they sell. 
4. The organization has clear roles and responsibilities that define each individual’s contributions to organizational success. That means job descriptions or other statements of work for all roles. 
5. The organization uses precise rating scales describing work output at each level to quantify success. For example, a sales consultant must know that hitting 100% of their sales target is a 3, or a “meet expectations” rating, while 120% is a 5, or exceptional performance.

However, in today’s agile, fast-moving organizations, these assumptions no longer hold for all types of business. Many employees work across projects, collaborate with multiple teams, and juggle rapidly shifting priorities. Traditional performance management methods fail to account for the fluidity of modern work and the complexity of measuring success in such environments.

This is where alternative performance management methods come into play, offering more flexibility and a better fit for modern work demands.

4 future-ready performance management approaches

Modern performance management methods can be mapped across two key dimensions: flexibility vs. structure and internal vs. external focus.

• Flexible vs. structured: Flexible methods are adaptable and can be applied anytime, while structured methods follow a defined sequence with clear steps.
• Internal vs. external focus: Internal methods focus on the impact within the organization, while external methods emphasize outcomes that affect clients or external stakeholders.

1. The Retro Reflection Method

The Retro Reflection Method centers on continuous feedback and focuses on collaboration and behavior. It’s ideal for project-based or assignment-driven work, where clear goals are set at the outset and reviewed at the end of each project or cycle.

How it works:

• Step 1: Target impact statement: At the beginning of a project or assignment, the employee and their manager collaboratively craft a target impact statement. This statement clearly defines the work, success criteria, and expected impact. For example, if an employee is developing a new product feature, the statement would outline specific tasks, what success looks like, and how the feature will impact the business.
• Step 2: Retro reflection conversation: After the work is completed, the employee and manager meet to discuss the outcomes. Both parties reflect on successes, missed opportunities, and areas for improvement. Questions like “What could I have done differently?” and “Did I meet the impact targets?” guide the conversation.
• Step 3: Finalize reflections: After the conversation, the employee documents feedback and their own reflections. This creates a portfolio of evidence over time, which can be reviewed during formal performance evaluations.

When to use: The Retro Reflection Method is ideal for project-driven environments where employees move between teams or work on short- to medium-term assignments. It’s particularly effective for agile organizations or those with a heavy emphasis on team collaboration.

2. Client-Colleague-Manager Feedback Method

The Client-Colleague-Manager Feedback Method is designed to capture feedback from multiple perspectives, ensuring a holistic view of employee performance. It’s especially useful in client-facing roles where external relationships and service delivery are key performance indicators.

This method is similar to traditional 360-degree feedback, yet it differs in two important ways. First, the feedback frequency is higher for this method, focusing on asking shorter, more targeted questions more frequently. Second, the emphasis in this method is largely on the external client, and their feedback will be weighed higher than that of internal stakeholders. 

How it works:

• Step 1: Define feedback criteria: The employee and manager establish criteria for evaluating performance. These might include service quality, client satisfaction, and collaboration with colleagues. Each criterion is broken down into clear questions for feedback collection, such as “Did I meet your expectations?” or “What could I have done better?”
• Step 2: Identify key stakeholders: Feedback is gathered from a balanced mix of clients, colleagues, and managers. The employee selects stakeholders who have observed their work, ensuring that the feedback is comprehensive and unbiased.
• Step 3: Collect and analyze feedback: Feedback is clustered into themes, highlighting strengths, areas for improvement, and any surprises or blind spots. These insights are then reviewed in preparation for a feedback conversation.
• Step 4: Discuss and reflect: The final step involves a structured discussion between the employee and manager, focusing on the feedback themes and identifying development opportunities.

When to use: 

This method is ideal for service-oriented roles or environments where employees frequently collaborate with both internal and external stakeholders. It works well for organizations that value client feedback as a key measure of performance.

We discussed how organizations can innovate their performance management for business impact with Megan Bickle, Fractional Talent Management Strategist and performance management expert. Watch the full interview below:

3. Mission-Based OKR Method

The Mission-Based OKR (Objectives and Key Results) Method focuses on aligning individual and team objectives with broader organizational goals. This approach encourages flexibility and regular feedback, ensuring continuous alignment with the company’s mission.

How it works:

• Step 1: Set OKRs (Objectives and Key Results): Leadership sets high-level objectives for the organization or department, supported by measurable key results. These objectives are ambitious, focusing on key priorities that drive the business forward.
• Step 2: Teams define missions: Each team identifies specific missions that contribute to the overall objectives. For example, a marketing team might focus on increasing brand engagement, while a product team works on feature enhancements that support customer retention.
• Step 3: Align and adjust: Missions are regularly reviewed and adjusted based on progress and changing priorities. Teams collaborate to ensure their efforts align with the overall objectives and key results.
• Step 4: Feedback and reflection: At the end of the performance cycle, teams review their progress toward the key results, discussing what went well, what didn’t, and what could be improved for future missions.

When to use: 

This method is highly effective in fast-paced, growth-oriented organizations with constantly evolving objectives. It’s also ideal for organizations that value agility and flexibility in their performance management processes.

4. Continuous Dialogue Method

The Continuous Dialogue Method emphasizes ongoing conversations between employees and managers. Rather than focusing on specific goals, this method centers around behavior and contributions to team success.

How it works:

• Step 1: Hold regular conversations: Employees meet with their managers regularly to discuss their performance. During these conversations, the employee answers five key questions posed by the manager: “Where am I making the biggest impact?” “Where am I missing opportunities?” “How am I supporting the team?” “Where am I a stumbling block?” “What’s one thing I could change?”
• Step 2: Focus on behaviors: The conversations emphasize behaviors and how they contribute to the team’s and organization’s success, encouraging continuous improvement and self-reflection.
• Step 3: Conduct no formal review: This method does not involve formal performance reviews. Instead, it emphasizes regular, informal check-ins that promote growth and development.

When to use:

This method is well-suited to mature organizations with a culture of open feedback and collaboration. It works particularly well for senior employees or environments that prioritize continuous improvement over rigid performance metrics.

How to start innovating your performance management

If you’re ready to shift away from traditional performance management and explore these alternative methods, here’s how to begin:

1. Assess organizational needs: Determine which method aligns best with your company’s structure, culture, and goals. Do you need a more structured approach, or would a flexible method work better?
2. Pilot a method: Start with a small pilot group to test the selected method. Collect feedback and make adjustments as needed before rolling it out company-wide.
3. Train managers: Ensure managers have the skills to implement the new method effectively, particularly when it comes to giving feedback and facilitating discussions.
4. Create a feedback loop: Establish a system for gathering feedback on the performance management process, allowing continuous refinement and improvement.

Performance management remains a crucial process for business success, but you need to find the right approach that fits the context and realities of your business.

The post 4 Innovative Performance Management Approaches To Implement appeared first on AIHR.

Unfortunately, translating the employer brand promise into employees’ lived experiences has remained challenging for most. Employees have been left feeling disengaged and believing that the organization did not deliver on its promise of the workplace experience, leading to a lack of productivity and increased employee turnover.

In this article, we explore how ESPN uses its employer brand to drive employee experience and commitment. We share four actions any brand can take to achieve similar results and provide you with guiding questions to evaluate the connection between your employer brand and employee experience.

Contents
What is employer brand experience?
Mistakes companies make in shaping their employer brand experience
A story of employer brand experience at ESPN
4 things to learn from ESPN’s employer brand experience
Getting started in your organization

What is employer brand experience?

Employer brand experience refers to the perceptions, emotions, and overall experience that current and potential employees have with an organization as an employer. This concept encompasses every interaction and touchpoint that individuals have with the company, starting from recruitment and onboarding to everyday workplace culture, career development, and even the offboarding process.

A positive employer brand experience can lead to higher employee engagement, increased retention, and a stronger ability to attract top talent, while a negative experience can harm the company’s image, making it more challenging to recruit and retain skilled workers.

Mistakes companies make in shaping their employer brand experience

The past decade has seen a significant focus on employer branding, with many organizations spending vast resources to promote their employer brands to potential talent pools. Internally, the employer brand has been neglected. A lot of organizations have failed to deliver on the promises promoted by the external-facing employer brand.

Employees have taken to public platforms, such as Glassdoor and TikTok, to voice their discontent, often leading to a breakdown of trust and loyalty between employees and the organization.

Organizations have made four critical mistakes in employer brand initiatives:

Mistake 1: The external employer brand and internal employee experience do not align

For an employer brand to be effective, there needs to be alignment between its external messaging and positioning and how employees experience the brand in their day-to-day experiences.

For example, mortgage lender Better.com positioned itself as a tech-driven, employee-centric organization focusing on work-life balance, diversity, and inclusivity. However, employees reported a culture of micro-management, poor communication, abrupt layoffs, and little care for their wellbeing.

Besides the toxic workplace culture, this example highlights the mismatch between the externally promised experience and what employees encountered daily at the company.

Mistake 2: The employer brand is used as a talent marketing tool, as opposed to highlighting a realistic experience that the organization can deliver on

Many organizations believe their external-facing employer brand messages must stand out from their competitors, regardless of whether the brand can meet those expectations. For example, employer brands often highlight flexibility and choice as critical parts of their value proposition for employees. Yet, when employees join, they find rigid policies with limited flexibility to be the reality.

In contrast, consulting firm McKinsey explicitly states that working for them will require long hours, but in exchange, individuals will gain access to working on innovative projects with teams from across the world. In this example, the employer brand provides a realistic perspective of what talent can expect, enabling aspiring employees to decide if they want to pursue this opportunity.

Mistake 3: Employer brand is used to drive awareness and talent attraction, as opposed to a focus on engagement, productivity and retention

A large number of employers measure the success of the employer brand by the ability to create awareness in target talent pools. Although this is important, it only highlights one objective of the employer brand. Employer brand needs to focus both externally and internally, and a clear link to employees’ lived experiences is crucial.

For employer brands to be effective, the same amount of focus is required internally to keep employees committed to the promise of the employer brand. There has to be a strong relationship between employer brand (what we promise), employee value proposition (what we offer), and employee experience (how we deliver). If these three practices are not aligned, employer brands lose all credibility. 

Mistake 4: The employer brand is not connected to the consumer brand and its promise

Often, there is a disconnect between the employer and consumer brands. This is problematic, as employees should be aligned with the overall brand promise. Where this is not the case, employees experience the employer brand as inauthentic.

For example, Boeing’s consumer brand promises safety and sustainability while striving for engineering excellence. Recent events, however, have highlighted that internally, employees were asked to take shortcuts, compromising the safety of their consumers and not living up to the set standards they promote.

A story of employer brand experience at ESPN

ESPN has lived up to its promise as a consumer and employer brand. In the interview with Dayana Falcon, Talent Mobility Manager at ESPN below, we unpack how ESPN authentically and sustainably made its employees fall in love with its brand:

ESPN faced the challenge of increasing internal mobility and making employees more aware of career opportunities within the company. They wanted to help their employees manage their careers effectively while staying true to the essence of the ESPN brand.

As a global leader in sports media, ESPN’s brand focuses on the power of sports to bring people together and showcase how sports can be for everyone. Their goal was to create a strategy that would align this core message with their internal employee experience, helping employees navigate career development within the company.

To address this, the team created a solution that would resonate with their unique brand identity by “gamifying” careers. They developed an immersive ESPN Career Center where employees could visualize their career paths using sports metaphors. For example, career starters were likened to track and field athletes sprinting toward fast growth. In contrast, career shifters were compared to NASCAR drivers preparing for a new race. This approach allowed employees to see their career development through a sports lens, reinforcing ESPN’s identity while offering practical career navigation tools.

In addition to these engaging metaphors, ESPN introduced an “All Stars” program, encouraging employees to submit their best work and have it voted on by their peers. Similar to how fans upvote top sports highlights, this initiative allowed the top 16 entries to receive recognition. 

This program celebrated employee achievements and fostered a competitive spirit, mimicking the excitement and energy found in sports. This alignment of the ESPN employer brand with its consumer brand created a seamless experience for employees, where the essence of ESPN was present in all aspects of their work lives.

Rewards tied into the core ESPN product further reinforced this connection. Employees were given opportunities to earn sport-related experiences, such as VIP tickets to major events like the Masters, making the rewards as exciting and relevant as the content they produced. These incentives were not just workplace perks; they were experiences that mirrored the same passion for sports that ESPN delivers to its audience. By integrating these rewards, ESPN effectively bridged its consumer brand with its internal culture.

Furthermore, ESPN used its own media platforms to celebrate these initiatives, creating the same hype and excitement typically seen around sporting events. Integrating new media channels to share employee successes and initiatives made the internal employee experience as thrilling as the on-air content. This strategy, centered on aligning the ESPN consumer and employer brand with the employee experience, successfully motivated employees and drove internal mobility, creating a workplace that lived and breathed the ESPN identity.

4 actions to implement from ESPN’s employer brand experience

Any brand can use a similar approach to make employees authentically experience their brand. Using the ESPN case as an example, we highlight four actions that all organizations can implement to make their employees experience their brand authentically:

Action 1: Understand the core promise of your consumer and your employer brand

Adopting this approach starts by understanding what your consumer brand promises to clients and how the business delivers on that promise.

For example, Nike’s consumer brand focuses on wellbeing and fitness, prompting consumers of Nike Products to “Just Do It.” Their employer brand uses these same principles by ensuring employees access health facilities and wellness programs and promoting work-life balance.

Action 2: Translate the promise into the employee experiences you want to create

Once you understand the consumer and employer brand experience, you must translate it into set employee experiences.

A good example is HubSpot, which promises technology that helps organizations attract, engage, and delight customers. Their employee experience is based on these same principles and includes specific experiences that drive these principles. Their culture code is a publicly available document, and they use the same techniques to share best practices with their customers and information with their employees.

Action 3: Create a compelling narrative that aligns employees with brand values

To effectively manage the internal employer brand, it’s essential to develop a clear and engaging story that resonates with employees. This narrative should serve as a tool to translate key moments that matter to employees into tangible experiences.

It should also emphasize the core elements of the employer brand promise and demonstrate how the organization is actively turning that promise into a reality within the workplace. This approach helps foster a deeper connection between employees and the brand.

For example, a fast-growing tech company could craft a compelling internal narrative around the theme “Shaping the Future Together” to align employees with its core values of innovation, collaboration, and wellbeing. By highlighting real examples of team-driven innovation, cross-functional collaboration, and initiatives supporting employee wellbeing, the company makes its employer brand promise tangible.

Sharing this narrative through onboarding, internal communications, and employee testimonials helps employees feel emotionally connected to the brand and reinforces their engagement with the organization.

Action 4: Reinforce the critical message through various media channels and testimonials

Once in place, these messages need to be reinforced, and “proof points” need to be found to back up these claims. Employee testimonials are a great way of showcasing how employees experience the employer brand. If done well, they can carry more credibility than formal communication campaigns. 

Getting started in your organization

Reshaping your employer brand experience may seem daunting, but improved employee engagement, retention, and talent attraction make it worth it. Here are guiding questions that HR professionals can use to get started:

• What type of business are we and what do we offer?
• What do we promise our customers and candidates?
• How can we translate this promise to our employees?
• Which HR priority can we use to drive this promise and experience?
• What does this experience look like for employees regarding what they think, feel, and do?
• Who do we need around the table to get started?

Final words

Creating an authentic employer brand experience is crucial to ensuring the engagement and loyalty of your workforce. It’s no longer enough for the employer brand to serve solely as a promise to potential hires—it must be reflected in the daily experiences of current employees. When companies successfully translate what they promise customers into how they design and deliver the employee experience, they are well on their way to creating a fulfilling work environment.

The post How To Create an Authentic Employer Brand Experience: Lessons from ESPN appeared first on AIHR.

Based on our analysis of 50 top-performing companies, we recommend four shifts HR leaders must adopt in the strategy development process:

• Shift 1: Move from linear to iterative strategy development
• Shift 2: Align HR strategy beyond the business
• Shift 3: Align HR strategies to the business strategy approach
• Shift 4: Communicate using a stakeholder-needs approach

Our analysis of 50 top-performing companies reveals that they have successfully avoided two common pitfalls in HR strategy development that often lead to HR strategy failures.

First, these successful companies don’t just respond to immediate business needs; they also consider other factors, such as changing labor markets, new technologies, and the political climate, when shaping their HR strategy. Second, they successfully convey HR objectives to stakeholders at all levels in a way that demonstrates their strategic value.

The insights highlight that HR must navigate a new paradox in HR strategy development. On the one hand, it must closely align with the business to understand its needs and communicate HR’s impact. On the other hand, it also needs to consider the broader external environment and the increasingly complex landscape of stakeholders beyond the business.

To tackle these challenges, we recommend four shifts in the strategy development process that HR leaders can adopt to make their strategies more relatable, relevant, and credible.

Shift 1: Move from linear to iterative strategy development

Developing an HR strategy has traditionally been a linear, reactive process designed to respond to the business’s needs. This usually means the CHRO actively participates in the business strategy process and then creates the HR strategy based on those outcomes.

However, this reactive approach comes with several challenges.

Additionally, CHROs point out that this method often ignores external influencing factors, leaving HR unprepared for changes in the environment or unexpected events.

On the other hand, when the HR strategy is developed after the business strategy process, HR is positioned as a business strategy enabler, not a co-creator or partner. As a result, HR initiatives are not included in the core business strategy, and key business stakeholders are not involved. This lack of involvement often results in a lack of buy-in and investment in HR initiatives.

To address this issue, we suggest a more iterative approach to strategy creation. This means developing HR and business strategies collaboratively, ensuring that HR provides input into business strategy while business leaders actively help shape HR strategies.

By adopting this iterative approach, HR strategy development can occur alongside business strategy development rather than afterward. This concurrent process fosters better alignment and integration of both strategies, leading to a more cohesive and effective business strategy.

This approach encourages HR leaders to develop their strategy in collaboration with the business. It fosters higher levels of buy-in, essential input during the HR strategy process, and more clarity from business leaders on the focus areas for HR.

Shift 2: Align HR strategy beyond the business

To be more adaptable, the HR strategy should extend beyond just the focus areas of the current business strategy. We propose incorporating two additional inputs:

1. Strategic positioning considerations; and,
2. External and workforce trends.

Approach 1: Strategic positioning

Strategic positioning means aligning the HR strategy with the organization’s core principles that guide decisions and priorities. Organizations have different positioning options regarding markets, products, and clients. 

While all three are important for success, how they are prioritized affects the focus of business strategies and how HR can influence business objectives. Let’s further expand on this:

The priority: Product > Client > Market

• The implications: We build outstanding products for specific markets, with a competitive advantage rooted in product design and senior-level technical expertise. However, this focus may create a blind spot in client service and sales engagement despite having a superior product suite compared to competitors.
• The impact on HR strategy: HR strategy should focus on people, talent, and skills as the key differentiators, including the long-term impact of innovation on the industry.

The priority: Client >Product>Market

• The implications: A client-centric organization closely aligned with the client ecosystem competes primarily in client service and sales. Its expertise lies in client engagement, focusing on clients rather than product features. While its products are competitive, the organization may have a blind spot in product innovation and is unlikely to achieve a first-mover advantage.
• The impact on HR strategy: HR strategy should focus on developing and retaining client-facing employees, ensuring a high-performance sales and client relationship-driven culture.

The priority: Market>Product>Client

• The implications: This organization specializes in serving a specific market persona, such as high-income individuals, by developing niche products tailored exclusively to this segment. These products meet the needs of this particular client type but are not designed for other segments. This organization’s potential blind spot is its limited ability to expand into different segments or create scalable products. Additionally, they may focus on protecting their client segment from competitors rather than pursuing broader growth. Their value proposition is rooted in exclusivity rather than scale.
• The impact on HR strategy: HR strategy should focus on differentiating through the performance of the workforce and how to make the organization attractive in the market for critical and scarce talent

By understanding these choices, HR can better prioritize and assess the importance of specific strategic priorities, ensuring they align with the core principles that will underpin the business strategy. This, ultimately, ensures alignment between the organization’s purpose and identity and what is prioritized and communicated in the HR strategy.

2. External trends and workforce

A proactive HR strategy needs a deeper understanding of external trends that directly impact HR and the business. For example, shifts in labor markets, an aging population, and advancements in generative AI bring new risks that will shape HR strategies in various business contexts.

These trends also impact workforce regulations, which HR must include in their plans. Also, the growing emphasis on environmental, social, and governance (ESG) factors requires a robust HR response and a proactive role in shaping business strategy with these mandates in mind.

This can change how HR engages in the business strategy process, providing valuable perspectives that inform business decision-making related to strategic priorities.

Shift 3: Align HR strategies to the business strategy approach

Business strategies can take different forms and are designed to address specific goals or challenges using a defined approach. This sets the direction for the strategy development, guides organizational actions, and ensures effective execution.

It’s essential that the HR strategy aligns with the business’s strategic approach and type to ensure effective integration and alignment.

For instance:

• A business that adopts a visionary strategy approach will require an HR strategy that emphasizes innovation. This means embracing non-traditional talent and performance strategies that reward innovative behaviors and delivery. In contrast, a cost containment strategy will focus on HR efficiency metrics like the cost of hire, turnover, and HR service delivery.  
• A strategy centered on diversification will incorporate metrics related to measuring new project initiatives, the increased impact of innovation through HR practices, and how well the company culture fosters new product development.

Here’s an overview of some of the more known business strategic approaches and how HR strategies should adapt to them:

L’Oréal USA harnesses its diverse workforce to drive product innovation

At L’Oréal USA, product innovation is a key pillar of their business strategy. This means the business focuses on finding new and unique ideas that can drive product innovations and gain access to new markets.

The HR strategy is focused on Diversity, Equity, Inclusion, and Belonging in response to the business strategy. Recognizing that a diverse workforce is a key driver of innovation, L’Oréal has strategically incorporated diverse perspectives into all aspects of its business.

This focus is reflected in how they bring new talent on board as well as gaining diverse perspectives from employees to inform their product innovation.

L’Oréal’s commitment to diversity and inclusion is encapsulated in their formula: DIVERSITY + INCLUSION = INNOVATION & SUCCESS®.

Two of their key strategies include:

1. Diverse talent recruitment: L’Oréal actively recruits diverse talent through campus engagements, strategic partnerships, and participation in national diversity recruitment fairs. This includes connecting with over 3,000 students annually and maintaining networks with groups such as Junior Military Officers and women in science.
2. Utilizing diverse perspectives: L’Oréal recognizes the importance of using its diverse workforce in product development. For example, a research project led by Balanda Atis focused on creating suitable foundation shades for women of color. This led to the development of products like the True Texture line for natural curly hair, which arose from extensive research on different hair types.

By making Diversity and Inclusion central to their HR strategy, they foster a diverse and inclusive workforce and harness their unique perspectives to meet the varied needs of their consumers. This strategic alignment of HR and business goals ensures ongoing innovation and success in reaching new markets.

Shift 4: Communicate using a stakeholder-needs approach

As HR’s role and scope have changed, there is an increasing need to navigate a complex stakeholder environment. In the past, communicating HR strategies has often been tough. Many strategies were mired in jargon or failed to clearly connect HR activities to business objectives.

To improve this, HR strategies should be communicated by focusing on a stakeholder-needs approach. This means that the specific needs and interests of the relevant stakeholder groups should shape how HR communicates its strategies. HR can simplify its messaging to be clear and concise, making sure it connects with each stakeholder effectively. 

In practice, the HR strategy should consider the needs of the following stakeholders:

Keeping a consistent overarching message is key for strategic communication. but it needs to be tailored to the target audience. This should be evident in the overarching strategy, the strategic objectives relevant to the stakeholder group, and how success is measured. No matter the audience, the HR strategy must clearly articulate value to them.

Walmart is a great example of this approach, especially in how it outlines its ESG impact.

Walmart adopts a stakeholder-needs approach to Human Capital and ESG

One of Walmart’s strategic focus areas is ESG. They describe this strategic focus area as “Good Jobs & Advancement for Associates,” which reflects their commitment to developing skills within their organization and the communities they represent.

They have translated this strategic focus area for their stakeholder landscape based on their needs, interests, and definition of success.

• Society and investors: They describe the relevance of this focus area to business and society by focusing on their workforce’s role in delivering their overall mission to help people save money and live better. To address this audience, they focus on the number of employees within their workforce and the importance of investing in their development and overall careers. They discuss investments, creating value beyond Walmart, and sustaining local economies.
• Executives: They further translate this strategic focus area to describe the cost-benefit associated with upskilling and how this approach mitigates and manages the very prominent risk of skills shortages. They reflect their efforts against key performance indicators (KPIs) and progress measures by reporting on upskilling initiatives in quantifiable terms.
• Leaders: They distill this strategic focus area into distinct principles, including upward mobility, to address barriers within the workforce. These principles shape the shared priorities of HR and leadership to create a culture that supports this strategic focus area. They highlight belonging, well-being, growth, and strengthening their frontline workforce.
• Employees: These core principles are translated into practices that shape the overall employee experience and employer brand. A critical practice that is highlighted is ‘access to employment.’ They outline various processes related to the hiring process that bring this to life. In this case, they include streamlining the application process, valuing skills and knowledge, countering degree inflation, and committing to second-chance employment of formerly incarcerated applicants. A prospective or current employee can see what this HR strategic focus area means to them.

Final words

Redesigning HR strategy needs an iterative and integrated approach that matches business needs and the external environment. By shifting from a linear to an iterative process, HR can actively shape business strategies and adapt to changes in the labor market and regulations.

It’s important to customize HR initiatives to fit specific business goals and clearly communicate these strategies to stakeholders to gain their support and improve execution. By making these strategic changes, HR leaders can enhance alignment and contribute to long-term success for the organization.

The post Redesigning the HR Strategy Process: 4 Shifts for Improved Impact appeared first on AIHR.

In partnership with Revelio Labs, our analysis of 50 top-performing companies on what sets their HR investments apart revealed four insights:

• Insight 1: The HR function size reflects investment priorities
• Insight 2: HR skills composition reflects investment in HR’s strategic focus areas
• Insight 3: HR salaries are lower than other roles
• Insight 4: HR is expected to do more with less investment in the function

Execution is the Achilles’ heel of strategy. Over 90% of strategies fail to materialize as planned. 

HR leaders, in particular, encounter significant hurdles when executing their strategic initiatives. These challenges stem from issues, including a lack of stakeholder buy-in, failure to adapt to changing circumstances, and insufficient investment in enabling the strategy’s success. This harms HR’s perceived value and contribution to the business, and impacts its credibility, as well as the perception of HR as a strategic partner. 

In this article, we examine the gaps in current HR investments and propose three actions organizations can take to close these gaps. We also share insights from our analysis of 50 top-performing companies to highlight what sets their HR investments apart and what we can learn from their approaches.

The flaws in current HR investment strategies 

Outdated methodologies

The nature of work has drastically changed over the years. Yet, the approach to HR investment has largely remained the same. Organizations often stick to outdated methodologies that don’t reflect the complexities of today’s workplace. Traditional strategies for investing in HR rely on archaic HR-to-employee ratio guidelines, inflation-adjusted budgets, and a lack of attention to the changing scope and skills required in modern HR teams.

Despite significant advancements in HR technology, many organizations still view these innovations mainly as tools for reducing headcount and cutting costs rather than as platforms for enhancing HR capabilities and expanding the scope of HR services.

This narrow view overlooks the greater potential of technology to drive strategic value. By using technology to scale HR functions, organizations can better support talent management, improve employee engagement, and build a more adaptable and resilient workforce.

Outdated workforce planning

Current approaches to HR workforce planning also fail to reflect today’s work environment. Outdated full-time equivalent (FTE) ratios are still being used for today’s varied and complex roles. 

Effective HR investment requires understanding key factors: the specific roles within the workforce, the importance of skills, the geographic and operational distribution of employees, and the efficiency and productivity of work processes. For example, remote and digital workforces need different HR solutions, which an employee-to-HR ratio cost calculation cannot determine.

Overlooked HR capabilities

There’s also a persistent lag in investments in developing HR skills. While many organizations prioritize reskilling roles directly impacted by digitization and automation, they often overlook the critical need to build HR capabilities.

This gap limits HR’s effectiveness since HR professionals aren’t equipped with the skills needed to navigate and lead through technological and organizational changes. 

To address these challenges, we analyzed 50 top-performing organizations to understand their HR investment strategies and identify opportunities to improve how organizations invest in HR.

A call for change in the strategic HR investment approach

We will unpack four key insights from the data and propose actions HR leaders must adopt in their organizations.

Insight 1: The HR function size reflects investment priorities

Our data reveals that successful organizations typically have larger HR teams compared to their counterparts in the U.S. In these organizations, HR accounts for 1.9% of the workforce versus 1.3% in other organizations. 

Even though HR teams are relatively small compared to the broader workforce, successful organizations show a clear commitment to investing in growing their HR teams proportionately with their workforce. This differs from the general trend, where the growth of the HR function often lags behind overall business growth.

The size of the organization also plays a significant role in the growth of the HR team headcount. In smaller organizations, HR remains one of the least represented functions compared to other functions like sales and operations, with little variation between companies. However, in larger enterprises, successful companies significantly invest in growing their HR teams. 

This investment is crucial for managing the increased complexity of a large workforce, often spread across multiple geographies, which requires sophisticated HR strategies to address diverse and distributed workforce needs.

The strategic investment in HR helps manage the complexities of a vast, multi-geographic workforce and ensures that HR strategies are effectively put into action. Our findings highlight that investing strategically in HR can significantly impact organizational long-term success.

Insight 2: HR skills composition reflects investment in HR’s strategic focus areas

Our data indicates that successful organizations prioritize investment in transformational HR skills, like leadership development, talent management, and performance management. Notably, these organizations don’t sacrifice operational skills for transformational ones. Instead, they build robust capabilities in both areas. This ensures that they maintain strong transactional HR skills in areas such as employee relations, talent acquisition, onboarding, and training.

This dual investment approach highlights that HR strategy success depends on balancing strong transactional skill sets with adequate transformational skills. The findings align with data indicating that top-performing companies invest substantially in employee engagement, Environmental, Social, and Governance (ESG) initiatives, and Diversity, Equity, Inclusion, and Belonging (DEIB) as core components of their HR strategy.

Achieving these objectives depends on a combination of transactional and transformational HR skills, demonstrating that neither set of skills is inherently superior.

By investing comprehensively in HR capabilities, organizations can develop a dynamic and responsive HR function that supports current and future business objectives. Valuing transactional and transformational skills equally ensures that organizations are well-equipped to handle the diverse challenges of today’s workplace while positioning themselves for sustained success.

Insight 3: HR salaries are lower than other roles

Our analysis of the 50 companies found that HR salaries have decreased over the past five years, while salaries in other roles have seen significant growth.

Specifically, HR salaries within these companies have decreased by 2%, whereas other roles have increased by almost 8% during the same period. This trend is also consistent with trends across the U.S. beyond the 50 companies we studied.

HR pay equity remains a contentious issue. At the executive level, organizations often pay their Chief Human Resources Officer (CHRO) less than other executives, reflecting ongoing remnants of historical pay disparities. Since 65% of HR professionals are women, this pay discrepancy could also be linked to the broader gender pay gap that still needs to be addressed within HR.

However, the gender pay gap alone doesn’t fully explain the decline in HR salaries. Several factors are at play:

• Cautious workforce investment: Organizations have become more conservative in their workforce investments, often targeting HR departments for cost savings. This is evident in recent reductions in Diversity, Equity, Inclusion, and Belonging (DEIB) departments and widespread layoffs in the tech sector that have also affected HR professionals. Hiring freezes also reduce the demand for talent acquisition roles, creating a more competitive environment for recruiters and leading to more commission-based pay structures.
• Changing HR role composition: There may be a shift in the types of HR roles organizations invest in, which could lower the average salary base. There has been an increase in investing in more generalist skills instead of deep-seated specialist expertise, which could contribute towards the decreasing average salary in HR.
• Legacy perceptions: Some companies still don’t see HR as a strategic priority, viewing HR salaries as less critical from a retention perspective. In a tight economic labor market, this perception could contribute to a lack of salary growth for HR professionals.
• Rise of fractional HR roles: An increase in fractional HR roles, where organizations opt for part-time or contract HR talent instead of full-time employees, also contributes to the decline in average HR salaries.

Given the increasing pressure on HR teams and the expanding scope of their work and expectations, we believe that organizations aiming for success should approach HR remuneration with the same rigor as they do for other critical skills within the business. There is a tendency to overlook the market rate for crucial and scarce HR skills, which, if not addressed, could result in a future shortage of qualified HR professionals.

Insight 4: HR is expected to do more with less investment in the function

While top-performing companies effectively leverage HR teams, it often comes at a significant cost. HR teams in these organizations tend to have shorter average tenures and a 4% higher turnover rate compared to other roles. Reports also indicate burnout levels as high as 98% among HR professionals, signaling potential issues ahead. Additionally, 71% of HR leaders say that burnout within their teams is becoming an increasingly critical issue.

These insights highlight the need for organizations to rethink how they support and retain HR talent, emphasizing the importance of a more comprehensive approach to managing HR careers. 

The insights from successful companies reveal a paradox in their approach to HR strategy. They are investing in a balanced mix of transactional and transformational skills, aligning their HR team growth with overall workforce expansion. However, this success is marred by overshadowed HR turnover rates, relatively small HR teams compared to the total workforce, declining salaries, and potential retention issues. 

This raises a crucial question: is short-term success paving the way for long-term challenges?

The potential cost of this approach could be significant, measured in HR burnout, insufficient infrastructure for HR professionals, and a continued undervaluation of HR roles in terms of salaries. This scenario is unsustainable given HR professionals’ increasing responsibilities in a changing workplace, and it doesn’t reflect the true value HR brings to organizations. 

Many would mention that HR technology is the answer to solving these capacity challenges. While we firmly support the role that HR technology needs to play in the future to drive efficiencies and impact, our research showed no significant investment in HR technologies beyond standard HRIS and ERP systems. We believe that HR technology has a role to play, but it won’t be the silver bullet many believe it could be. Responsible organizations will take a more holistic approach to investing in technology, talent, and skills.

Final words

Given HR’s changing role and scope in today’s workplace, it’s crucial to invest in strategic initiatives for successful execution. While HR leaders face tough challenges, they can be overcome. This requires a deliberate focus on positioning the HR function effectively, investing holistically in HR in alignment with other business disciplines, developing the skills needed to meet strategic objectives, and prioritizing HR talent and wellbeing. 

Currently, HR strategy execution is falling short of delivering the desired value. If we continue on this trajectory, we risk significantly diminishing HR’s impact, now and in the future — missing opportunities for the function to drive meaningful change.

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