Why HR Needs an AI-First Mentality

Every large organization seems to be going through an HR transformation. But what has the constant refrain of transformation achieved, and has it really fixed anything?

This article was originally published on the blog at HiredScore.com on Dec. 28, 2023.

HR transformation is hot . . . again? In a time of economic uncertainty, a focus on productivity across all boardrooms, significant changes in employee-employer relationships, and the AI hype cycle in full swing, it makes sense that organizations are turning to the CHRO and asking, “What should we do?” 

As a result, every large organization seems to be going through an HR transformation initiative. Organizations realize that something needs to change, but can’t yet put their finger on what it is. 

So they continue to focus on tangible actions from previous HR transformations, such as implementing new technology, upskilling HR professionals with analytical skills, creating a shared service model, or focusing on employee experience. But what has the constant refrain of transformation achieved? And has it really fixed anything?

If productivity hasn’t really increased much and most employees remain neutral about their engagement at work, what is going on within HR?

What the Data Says About HR Transformation

The Bureau of Labor Statistics (BLS) has found that long-term labor productivity in the nonfarm business sector is at its lowest since 1947.

Employee engagement continues to slump and regress toward the mean, with only 32% of U.S. employees feeling engaged.

So if productivity hasn’t really increased much and most employees remain neutral about their engagement at work, what is going on within HR? Despite all the effort, HR transformation outcomes remain relatively minor. Why is that?

McKinsey has found in its “Reimagining HR” report from 2022 that transformation looks primarily like digitalization, agility, and prioritization.

And if you read McKinsey’s articles from the 2010s, including “Questions for your HR chief” from 2011 and its report on the state of human capital from 2012, or Deloitte’s report “Business-Driven HR Transformation” from 2011, those HR priorities haven’t changed much. It’s no wonder HR employees are getting disillusioned by HR transformation initiatives. They have been hearing and doing the same things for over a decade.

HR Evolution or HR Transformation? The Differences

Perhaps our mentality when it comes to HR transformation is flawed. Gartner has described HR transformation as “the evolution of the HR function to drive operational excellence and create greater business value.” And these days, Gartner has added “in a world of hybrid work” at the end to make the topic hot again.

Can you spot the slight disconnect in the definition? “Evolution” and “transformation” are both terms used to describe change, and when it comes to HR transformation, they tend to be used interchangeably. But they don’t mean the same thing.

Let’s examine the differences. 

A transformation is a more sudden and dramatic change that tends to be caused by major events or changes in circumstances, resulting in a significant change in the way something works. Contrast this with evolution, which is more gradual and incremental and caused by a series of small changes over long periods of time. So when we think about our HR transformation priorities, are we transforming or are we evolving?

It seems that all these initiatives are evolutionary—making incremental changes and shifting work around, but doing the same thing. Nothing is fundamentally changing in the way something works, and perhaps that’s why employee outcomes haven’t changed much.

But a transformational technology has entered the arena, and an evolutionary mindset is going to make your HR procedures obsolete. I recently had a discussion with Joe Fuller, a professor at Harvard Business School, who is also the co-director of the “Managing the Future of Work” initiative. Fuller highlighted that the AI-driven transformation of the business world is unprecedented, and that there are no recent transformations in history that compare to its global reach and magnitude. 

The models of change that were pertinent during the industrial and information eras are no longer predictive in the current era of business, which is predominantly driven by AI. This new era is expected to follow a J-curve trajectory—meaning a trend line that shows a quick loss, then a big gain—as illustrated by the widespread adoption of tools such as ChatGPT.‍

So What Does a J-Curve Transformation Look Like in the Adoption of AI?

In moonlighting as a graduate school professor of human resources management, I’ve found that technology has been gradually rolling out better tools for educators to evaluate learning outcomes—from tools that check for plagiarism, allow for the online submission of papers, and enable discussion boards, to solutions for digitizing the education experience (in many ways similar to the digitization agenda of many organizations). This slow rollout over the past decade has allowed teachers and students alike to adjust and basically digitize the classroom experience.

Nonetheless, no one is quite prepared for the level of disruption that ChatGPT will have on the educational world. Every written assignment can be run through ChatGPT to be completed, and with the right prompt engineering, no tool that checks for plagiarism can detect it. If that’s the case, especially in remote and online education, can we really determine whether learning outcomes have been achieved for students? How do employers trust these programs with credentialing? Can they trust that students have the knowledge they have been credentialed for if there’s no assurance that all assignments weren’t completed by ChatGPT? In fact, many people hypothesize that the 10% to 15% drop in ChatGPT usage in the second quarter of 2023 was because schools were out of session! Adding to this, if most of the answers and learning in the curriculum can be found on ChatGPT, can’t you rely on ChatGPT instead of a person who was supposed to learn that curriculum? That’s a J-curve transition. You are left with little time to prepare and respond before your whole business model gets disrupted.

A transformational technology has entered the arena, and an evolutionary mindset is going to make your HR procedures obsolete.

What It Takes to Achieve an HR Transformation

At the core of every HR transformation lies technology, people, processes, and culture. So this begs the question: are our HR transformation initiatives adequately preparing you for this J-curve AI transformation? Here are some points to ponder:

  • Are the technologies we are implementing or considering in fact transformational, or are we merely repeating the same practices with different tools and interfaces?

  • Do we have people who actually understand this technology and can help force us out of an evolutionary mindset into a transformational mindset? Do we have the people who are willing to think transformationally versus evolutionarily?

  • Are we thinking about our processes in a way that allows us to have different AI-enabled operating models for different situations? 

  • Are these initiatives really going to change how the business, employees, and candidates value HR? How do we get our organizational culture ready for the rapid pace of change ahead?

If you are about to embark on your own HR transformation journey or are in the middle of one, it’s not too late to ask these questions. When I think about them, I think about a recent conversation I had with another great professor Dave Ulrich who posed this question to my students:

What is the most important thing HR or business leaders can give to an employee? (Choose one.)

  1. Physical and psychological safety

  2. A sense of belief (meaning or purpose)

  3. A feeling of belonging (community and relationships)

  4. All of the above

  5. None of the above

More than 90% of the 150 students chose “all of the above,” but Ulrich’s answer was “none of the above.” It was a trick question. Most HR professionals think about HR-related concepts, and these HR graduate students have been learning about all these concepts. But from Ulrich’s perspective, the most important thing HR or a business leader can give an employee is an organization that is groomed for success in the marketplace.

Orchestration is about making all these elements work in concert to tune that organizational noise into a harmony that will ultimately leapfrog you into true transformation.

So when you think about HR transformation, are the initiatives really changes that will allow your organization to succeed in this new AI-driven marketplace, or are they going to inhibit the delivery of business value? Are you spending too much time contemplating the advantages and disadvantages of position management versus job management and the new processes that will be necessary if you switch without considering whether they’re consistent with your go-to-market needs or product development process? Are you trying to simplify complex organizational requirements and needs because of real process inefficiencies or technology platform configuration limitations? Is the technology leading your decisions, or is the technology supporting your organizational needs?

Moreover, are you taking this opportunity to learn from others’ experiences and leapfrog all the traditional evolutionary steps into this future state? The promise of AI is that you do not need to make those trade-offs, and that is a true transformation. Technology fades to the background, people are augmented by AI, the complexities of your organization and business are celebrated, and a culture of innovation thrives.

At HiredScore, a Workday company, we refer to this as “orchestration.” 

Simply put, “orchestration” refers to the combination of several automated tasks into one streamlined process.

In the context of HR technology, orchestration means: 

  1. Where business value, not technology, is at the forefront. It’s not about change management surrounding technology platform adoption, it’s about delivering value to employees by meeting them where they already work.

  2. Where employees’ attention is maximized to create, innovate, and connect rather than worry about following tasks within a process. It’s not about replacing employees, it’s about assisting employees so their valuable time and attention are spent on the most important things.

  3. Where organizational and operational differences are embraced, not erased. Instead of simplifying or aligning to one HR operating model, it’s about intelligently accommodating the intricacies and variance that always occur in a dynamic, complex system.

Orchestration is about making all these elements work in concert to tune that organizational noise into a harmony that will ultimately leapfrog you into true transformation. And nothing compares to that in terms of delivering true results and business value.

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