Is the Future of HR — AI? Part 3

The next page of the HR story

Dr Reg Butterfield © 2023
A lengthy discussion. 1-hour read

Welcome back to the third part of our discussion about the future of HR and its relationship with AI. The response from our subscribers and readers is important to us and we seem to have hit a crucial and challenging subject for a large number of you. Thank you for your feedback and emails. Please let us know your thoughts and questions in the comments section below. You can also link to us on our Futocracy.network platform and our LinkedIn discussion threads.

The following indented section is an overview of parts one and two as a reminder of the key areas that we covered.

In part one we discussed the history of HR, outlined some of the technology currently used to support HR, and concluded that the preferred popular model for HR operations seems to be the Prof. Dave Ulrich approach known as the “HR Business Partner Model”. The model is focused on three operating groups within the HR function: Strategic Business Partner; Centres of Excellence; and Shared Service Centre. These are based on four key roles that HR professionals can adopt: Strategic partner, Change agent; Administrative expert; and Employee champion.

We brought the newsletter to a conclusion by illustrating how the work of HR fits within the three categories of “administrating”, “optimising”, and “connecting activities”: each requiring a different form of thinking and behaving. This is important to understand for part three’s discussion.

As a “taster” for the second newsletter, we also suggested that it is important to harness AI to provide a “New Era HR business model”. In doing so, provided a short discussion around Bots; chatbots and voicebots.

However, the relationship between AI and HR is far more complex than just introducing an AI model or two. We have to understand where to start, and the relationships we want to create between people, technology, and AI, which requires us to start thinking about HR in a different way than most people have to date. This was the focus of part two.

Part two laid the foundations and thinking that are necessary to meet the challenges that HR is currently facing when introducing AI, and a few that people have yet to realise will be part of the future HR landscape. In doing so, we suggested that the new core work of HR will include breaking away from many of the old models that have been used to motivate, train, and retain employees. We gave the example, “strategic HRM” (sHRM) to highlight this need, there are many others.

Our discussion provided an overview of the activities approach to the work of HR currently in operation, which are administrative and transactional within the boundaries of a predominant expert functional linear organisation. We highlighted the difficult tensions within which HR operates today and suggested that HR is in an identity crisis and that now is an excellent opportunity to re-visit how HR operates. In reviewing what HR needs to do and how it does it, provides an excellent platform to develop a meaningful strategic relationship with the digital and AI landscape across the whole organisation and not just a focus on HR. This leads us to part three, today’s newsletter.

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Reminder

Before going into the detail of today’s newsletter, it is important to remind readers of our aim in writing this series of three newsletters about HR and AI.

We are focusing on the relationship of HR operations (administrating, optimising, and connecting activities) and AI (which includes digitalisation) to develop effective organisations in the New Era of work and what that means to management and employees.

In doing so, HR can better strategically support and enable organisations to achieve their purpose. This is whether they are using traditional hierarchical organisational structures and management systems or have moved to New Era network organisational styles of design and management.

It is not our aim to provide a “perfect” HR model or operational design, it is to provide a discussion around achieving this important relationship in a rapidly changing technical and social world.

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Today’s newsletter is in two sections. Section A is a brief discussion around the role and approach of HR and section B is focused more on how digitalisation and AI can help and support HR operations to move forward and demonstrate its strategic, administrative, and transactional relevance for now and the future.

Section A sets the scene and demonstrates that the more traditionalist HR functional expert approach is one where the demands of day-to-day HR may be crowding out the focus, passion and spirit that are necessary if HR practitioners are to take a leading role in helping organisations capitalise on opportunities offered by the emerging trends of technology and the changing social and employee expectations. In turn, this could hinder an organisation’s perennial quest to maximise productivity and be competitive.

There has been a lot of work and personal energy in the HR profession to meet this changing landscape and yet the question remains, “Is the HR profession moving fast enough or even in the right direction to capture the opportunities in emerging trends?”

Evidence is accruing and our current view is that the answer is no. If this is the case, the changes by HR thus far mean that it is still at risk of spending so much of its resources on the day-to-day activities that it risks missing the big opportunities. The big opportunities include demonstrating the strategic changes that HR operations can and will bring about in organisations. These will not only attract and retain the knowledge workers necessary for future success, but also support the development and sustainability of a collaborative work environment where the idea of coming to work is a source of personal satisfaction, which in turn leads to delighted customers.

Section B invites HR operations to enter a world where the rapid development and deployment of Artificial Intelligence (AI), particularly generative AI (G-AI) can support HR in fulfilling its strategic role in all areas of organisational work and life. There are no prescriptions or “perfect models” and as such we refrain from trying to design any.

We will be introducing a new and somewhat radical perspective of HR using AI in a future newsletter in late October, here we discuss what needs to change so that HR can be aware of what they must do at both a strategic and operational level both inside and outside of the organisation. Without this different perspective of the connectedness of HR, we suggest that things will not change, and that HR will still be bound up in its daily administrative tasks.

Section A

The Handcuffs of the Past Bind the Victims of Today

To make sense of the way things work today, let’s step back for brief moment to the late 19th and early 20th centuries and the Industrial Revolution. It was a period when the emergence of large-scale manufacturing and business enterprises gave birth to modern approaches to specialisation and functional approaches to organisational design. Two of the key figures of that time who still have an impact on almost every organisation today were Frederick Winslow Taylor and Henri Fayol.

Taylor published his infamous book, “The Principles of Scientific Management” in 1911, which laid the foundation for the specialisation of labour, where workers would be assigned specific, narrowly defined tasks that they would repeatedly perform. At the same time, Fayol was developing his own ideas about organisational management. Fayol is known for his “14 Principles of Management,” which included concepts such as division of labour, unity of command, and specialisation. Fayol’s principles emphasised the importance of clear roles and responsibilities within an organisation to ensure effective coordination and management.

These early thinkers and their contributions, together with others, set the stage for the specialisation and functional approach to organisational design that has been refined and adapted over the years. This approach involves dividing an organisation into specialised units or departments, each responsible for a specific function or set of tasks.

This design aims to improve efficiency, coordination, and expertise within each functional area, but it also requires two important conditions for success, 1. effective communication and 2. coordination between the different units to ensure overall organisational success.

Organisational experience has demonstrated that both are illusive save in exceptional organisations, hence the development of top-down power and controls beyond those associated with formal position and expertise. It is normally referred to as “performance management”, which tends to be designed, ‘driven’ and to a large extent controlled by HR, albeit managers complete the content during the process. This approach creates compliance, which is being rejected by the modern workforce.

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The irony is that Fayol said, “In the past the man has been first; in the future the system must be first.” We suggest that today, the reverse is being applied in response to the employee kick-back that we discussed in part two of this newsletter last month.

A major challenge for the strategic future of HR is to ensure that both communication and coordination work across the whole organisation if it is to create an inclusive and collaborative way of working. This inclusive collaborative approach and an environment that encourages the intrinsic motivation of the workforce is a pre-requisite for any future changes in the way that HR operates and uses AI.

We discussed the subject of power in organisations in detail in our 26 June 2022 newsletter, “Control of Organisations”, suffice to say here that one form of power that is not normally identified or discussed is what my colleagues and I call “Collaborative Power”.

When discussing the role of HR operations in the future, irrespective of the organisational structural design, we posit that collaborative power is essential for future success, particularly as HR has no formal power within the constraints of current organisational thinking. When we discuss the use of technology in section B later, this will be uppermost in our minds.

As a brief aside, we also contend that as New Era organisations are increasingly based on different forms of networks within networks, collaborative power will become “the-way-we-do-business-here”.

The quality of the relationships developed over time is what provides an organisational network with its power (the rapport and mutual trust — mutuality — that is cited so often as being crucial for employee engagement). This collective collaborative form of power is irrespective of the individual formal organisational positional power of the people involved.

A challenge for HR is to support the optimisation of the use of people skills in a strategic manner to meet the purpose and objectives of the organisation.

We suggest that mutuality is necessary. Mutuality emphasises a shared sense of purpose and a commitment to working together harmoniously, with less emphasis on tit-for-tat exchanges, which reciprocity encourages.

In essence, it is mutuality as opposed to reciprocal relations that emphasises more than the interconnectedness and interdependence of various parts of an organisation. Mutuality helps break down silos, promote effective communication, and ensure that knowledge, expertise, and resources flow smoothly across different functional areas where they exist or within the networks of networks of New Era organisational designs. It also helps to ensure that the right people with the right skills are available in the right place when needed, because HR has the necessary information to proactively support managers in developing a strategic approach to work.

This need for mutuality as opposed to reciprocity calls for HR to work with management to review the way that performance is measured, what engagement really means, and how AI and other technology can be used to measure and encourage such relationships.

When identifying the technology for HR, it is seldom, if ever, that the feedback loops and information from across the organisation’s operations link directly to any of the HR systems. The information may be accessible by HR if they elect to access it from the other systems and yet HR seldom takes up this option. This is because they are extremely busy undertaking increasing workloads in their specialist and/or expert function or administrative activity and there is seldom an incentive to do otherwise. On the contrary, the pressure is on them to deliver in the existing model of functional experts; what gets measured, gets done.

In our work with organisations and examining the literature and discussions on the Web, so often skills that seem to be considered necessary are based on old habits or a lack of understanding what has changed at the organisation’s customer level. When was the last time an HR specialist expert went to a customer to understand their business? We have asked our HR clients this question over the years and almost all of them look at us with a quizzical look as if we are not quite in touch with reality.

It is ironical that HR is asked to strategically focus on the people of the organisation delivering the purpose and objectives without really understanding the nature of the service or product required by the end external customer.

The relationship with customers is about organisations providing a service and trust. The role of HR is to provide the people to create that outcome.

The current HR approach, particularly in SMEs is normally based on reacting to requests for recruits and development as opposed to HR strategically understanding the business situation and actively working with management to ensure that they have what is needed and, where possible, advising and promoting solutions and ways forward.

Reflection

Thus far in this section, we have suggested the need for HR organisations to encourage and support collaboration across the whole business in the form of mutuality if it is to achieve its primary objective of being a strategic business partner. To achieve this aim and meet the other HR administrative and transactional work, we argue that it will be necessary to re-think how HR operations work. Our suggestion throughout this newsletter, and previously in parts one and two, is to view HR operations in three specific areas. These areas require specific ways of working: administrating, optimising, and connecting activities, and the appropriate people skills to undertake this work. We have used Figure 1 in the previous newsletters to illustrate these areas and an historical timeline suggesting the evolving changes.

Section B

The use of AI and in particular the more recent Generative AI (G-AI) has had little benefit from academic research and so the increasing range of surveys from leading consultancies and HR researchers are beginning to shine a light on its use and effectiveness. The surveys by McKinsey, PwC, BCG, and others indicate that organisations that are technology and AI aware are already experimenting with G-AI and that around 40% of respondents say that they will be increasing their investment in G-AI. The risks of using G-AI are still not understood and this is holding back some organisations. However, it is clear that G-AI is here to stay and that its use across HR will increase as the technology improves and begins to mature.

This section of today’s newsletter is focused on discussing how AI can support HR operations irrespective of the organisation’s operating structure, albeit we suggest that the New Era type of organisation with its network approach is likely to benefit more in the immediate future. The use of G-AI is probably the biggest catalyst for change in the way that HR works than anything else in its long history of change. It is an opportunity to move HR from its historical development of functional expert and administrative way of operating into an organisation’s strategic business partner for now and the future.

To discuss this journey, we focus on HR’s strategic, administrative, and transactional relevance through the three areas of “administrating”, “optimising”, and “connecting” activities that we discussed in the first newsletter of this series published on 23 July 2023.

We discuss how G-AI will reduce the time-consuming work of HR and enable that time to be either removed from HR or used to provide a more strategic and individually focused service across all aspects of current HR operations and more.

Remember the importance of putting in place a “resilience or transformation infrastructure” (think process, roles and relationships) — this does not necessarily happen on its own.

Our map

Our challenge here is to create for our readers a meaningful route through what is a very complex bundle of interwoven activities and technological opportunities. We do this by initially following the Deloitte elements discussed in our previous newsletter as far as is possible.

We then bring all three elements together to demonstrate the importance of HR connecting with the overall organisational digital platform irrespective of the approach used by the other parts of the organisation.

It is only through such an approach that HR can be proactive at three critical areas of service:

1. strategic planning and support for the delivery of the organisation’s business objectives,

2. provide real-time flexibility and timeliness of operational skills as and where needed, and

3. ensure individual support and development of the workforce throughout the lifecycle of employment.

These three approaches by HR operations will ensure that the people-side of the business not only meets current needs, but also identifies and provides the skills for the future.

Traditionally, this organisation-wide connection has not been a priority for management, and we suggest it is THE priority for their technology platform. We say this because G-AI enables a rich connection across all aspects of the business in ways that can reduce costs, improve the productivity and use of all people skills and other resources, and increase motivation.

The Deloitte elements are shown below in bold, together with how we use them as signposts during our journey:

The future enterprise — what this means for HR.

The Future of the workforce — understanding what this means and its implications.

The future of how work gets done — the main focus of all technology used by HR.

The future enterprise

In last month’s newsletter we mentioned that organisations are becoming one-team or one-firm through an increased range of team working and shared platforms. One-firm organisations also place great emphasis on organisation-wide coordination of decision-making, group identity, cooperative teamwork, and institutional commitment. This is irrespective of how an organisation is structured and however its management system is designed, traditional hierarchies or New Era network approaches.

If we examine what is happening in organisations currently, the decisions about the design of the workplace and its location are increasingly being dictated by the workforce in most areas of work. Yes, some service sectors such as utilities, research laboratories, production lines, and similar, by their nature restrict design and location choices. However, the majority of influence is increasingly from workers and not management. Even the more restricted workplaces such as those just mentioned have support workers who are able to work from elsewhere.

This means that there is no longer a specific type of building, room, or location for a lot of organisational work. We now need to understand that irrespective of the preferred approach by management, the workplace will be designed around the simple requirements of being able to cope with and support the ability for people to work from any place, at almost anytime, using the “tools of choice”; anywhere, anytime, any platform.

At the same time, organisations are being judged on their ‘green’ credentials, their moral and ethical behaviour in their supply chains and employment practices, and more. Social media is now a powerful influence in determining which organisations thrive and survive these changes.

Where, How, and Who of Work

This means that future enterprises need to reconsider three areas that dictate their success in harnessing the work of people in flexible work arrangements and activity. These are, physical (where), digital (how), and human (who), all of which need to be integrated successfully; this is uncharted territory for most organisations, we suggest. The blueprints of the past no longer fit this landscape and no two organisations will opt for the same approach as they seek their own DNA for success.

Management textbooks and their business models are rapidly becoming ‘history’ books as this new organisational design and behaviour moves forward trying to keep up with the changes in society and technology.

If HR is to have strategic impact and provide appropriate services for an organisation, HR will need to understand what this means for the people who work in such an evolving environment.

The future of the workforce

It means that the nature of work and careers are changing. It is seductive to list the types of skills and behaviour that people will have in the future workforce, such as tech-savvy, data-literate, empowered, and so on. We will not go down this route as it is a well-trodden path with ample examples on the Internet for readers to find and debate. However, the majority of discussions revolve around the concepts of the past skill sets and/or roles being “modified” or updated to meet the current and perceived future needs of organisations and individuals.

“Don’t make this about employees; make this about customers.”

No organisation — no work — no employment.

For the purpose of this newsletter, we will move in a different direction. We argue that it is necessary to break away from the prioritisation of individual perspectives and focus more on the strategic survival and long-term sustainability of organisations and the impact that this will inevitably have on the individual at work. No organisation — no work — no employment.

Last month we wrote that it is crucial to remember, “Don’t make this about employees; make this about customers.” We wrote this because the role of an organisation and its employees is to focus on the customer. Together, they must deliver value to customers (B2B and B2C) in ways that ensure their organisation becomes the customers’ preferred supplier of goods and/or services. This need to delight customers is becoming increasingly difficult as societal behaviours and values are changing in ways never considered before.

Organisations need to become agile (ability to move quickly and smoothly) in the way that they interact with their customers, and this has a direct influence on the type of people and skills that they need. It also impacts on the notion of what a career may mean, which is certainly dissimilar to the historical context of a career. Yet employees themselves ironically often look for an “old style” career and how employers can support their aspirations.

Much has been written about the need to re-train people and enable them to cross occupational boundaries at different stages of a “career” and this is reinforced by the World Economic Forum’s (WEF) “Future of Jobs Report, 2023”.

“[The survey] estimates a mean structural labour-market churn of 23% for surveyed companies across sectors and countries over the next five years [2023–2027]. This indicates that total expected job movement, including both new roles being created, and existing ones being destroyed, represents 23% of the current workforce.”

Careers in traditional fields rely on projected hierarchical and/or specialist roles and timelines to reach them, yet many may not exist when it is time to move. For example, work areas such as managers, services, and sales are changing significantly at a speed that defies prediction as a result of technological and market changes. The social services sector is an increasing field of opportunity for new careers to flourish and yet people and education establishments are not moving in this direction sufficiently.

There is confusion about what a career means today and in the future. It is time for HR to deliver an answer that is a strategic force for the organisation to attract and retain people.

The workforce of the future will be a challenging thing to describe as it is an emerging process of significant change. It will be for each organisation to identify what this means for them in the knowledge that some skills will be scarce, some will need to be updated, and a significant number will be replaced by as yet unknown demands as technology moves forward.

Currently, re-skilling, up-skilling, life-long learning, and career change are seen as necessary to try and meet this challenge and HR is required to advise organisations in developing strategies and support for these to happen. However, the WEF’s 2023 report found that the choices of subject being undertaken by individuals motivated for self-learning often differ from the current organisational priorities.

Historically, individuals have prioritised developing technical or “hard” skills associated with lucrative careers in programming and data analytics, for example. Increasingly, however, emerging technologies such as generative AI are reshaping workforce demands, and employers are placing greater emphasis on “soft” skills. These skills allow organisations to respond to change and are currently more resistant to automation. Early evidence suggests that the supply side of the market is equalising itself: socio-emotional skills have steadily increased their share of learning hours during the period 2017 to 2023, with the exception of a brief increase in technical skills during the 2020 global Covid lockdowns period, which makes sense.

This moving workforce landscape is the challenge for the HR operations of all organisations, large or small; local or global. This means that it is important to re-visit “how the work gets done” to see if there are ways of strategically and proactively, with the support of AI, overcoming this uncertainty around the future workforce.

The Future of How Work Gets Done

A lot has been written about the era of Industry 4.0 and the associated initiatives to develop organisations through the integration of intelligent digital technologies into manufacturing and industrial processes. In doing so, Industry 4.0 uses a set of technologies that include industrial IoT networks, AI, Big Data, robotics, and automation. As was the case with the previous industrial revolutions of the 18th, 19th, and 20th Centuries, technology changes the nature of what work is, how and where it is done, and by whom.

Industry 4.0 is built on nine technology pillars and its full potential only comes to life when they’re used together. Successful Industry 4.0 initiatives also look to develop symbiotic and rewarding collaborations between people and technology. This is where the HR operations play a critical strategic role.

HR bridges the gap between technology and the people. In doing so, brings into play the creativity, talent, and innovation of the people needed to create the unique DNA required for competitive advantage and delighted customers.

The speed and efficiency of the technology alone cannot achieve this. It is at this stage of creating appropriate relationships between technology, AI, and automation that the organisation’s operations become more efficient and productive, and their teams are relieved of a lot of mundane and repetitive tasks. This then provides the people with an opportunity to collaborate with smart technologies and better equip themselves for the evolving technological landscape and the AI-powered future of work.

The more recent advances in Generative-AI demonstrate the speed at which technology is moving into areas just a few years ago the people were considered as “safe’ from being replaced by technology. For example, who would have thought that your coach or counsellor would be AI and not a person? This is now happening and the feedback thus far is that the clients prefer the AI to a person because the clients feel ‘safer’ that they will not be judged by a human or their issues passed on to other people or the organisation, even though people in these roles are also bound by the rules of confidentiality. Whilst this activity of AI coaching and counselling is at an early stage, it is a taste of the rapid emergence of G-AI in the soft skills arena, the very area of personal development that organisations are focusing on.

In addition to Industry 4.0, several other generic changes are contributing to the transformation of how organisations work. These other changes are interconnected and often synergistic with the principles of Industry 4.0. For readers who are less versed in these, some of the key areas are described in the indented section below:

· Digital Transformation: This involves the comprehensive integration of digital technologies across all aspects of an organisation, from operations to customer interactions. It includes adopting cloud computing, big data analytics, Internet of Things (IoT), and other digital tools to improve efficiency, agility, and decision-making.

· Remote Work and Collaboration: The COVID-19 pandemic accelerated the adoption of remote work and virtual collaboration tools. Organisations are realising the benefits of flexible work arrangements, which can improve work-life balance and tap into a global talent pool.

· Data-Driven Decision Making: Organisations are increasingly relying on data analytics and business intelligence to make informed decisions. Data-driven insights help improve operational efficiency, optimise processes, and identify new opportunities.

· Artificial Intelligence and Machine Learning: AI and ML technologies are being used to automate tasks, enhance customer experiences, and uncover patterns in large datasets that can inform strategic decisions.

· Agile and Lean Methodologies: Agile and lean approaches, borrowed from software development, are being adopted in various industries. These methodologies emphasise iterative development, flexibility, and continuous improvement, leading to faster innovation cycles.

· Customer-Centricity: Organisations are placing a stronger emphasis on understanding and meeting customer needs. This involves gathering customer feedback, personalising experiences, and using data to create products and services that align with customer preferences.

· Sustainability and Corporate Social Responsibility (CSR): Organisations are recognising the importance of environmental and social sustainability. Adopting sustainable practices and communicating CSR efforts are becoming crucial for reputation management and attracting environmentally conscious consumers.

· E-commerce and Digital Marketing: The rise of e-commerce and digital marketing has transformed how organisations reach and engage with customers. Online platforms offer new avenues for sales, branding, and customer interactions.

· Cybersecurity and Privacy: As organisations rely more on digital tools and data, the need for robust cybersecurity measures and protection of customer privacy has grown significantly. It is one of the reasons for organisations not taking up many new technological innovations and opportunities.

· Collaborative Platforms and Tools: Collaboration platforms, such as project management software, video conferencing tools, and shared document repositories, are streamlining teamwork and communication across distributed teams.

· Skills Development and Upskilling: Organisations are investing in training and upskilling programs to ensure their workforce has the skills necessary to navigate the digital landscape and handle new technologies.

· Flexibility and Adaptability: The pace of change requires organisations to be flexible and adaptable to new market conditions, technological advancements, and customer expectations.

· Blockchain Technology: Blockchain is finding applications beyond cryptocurrencies, such as in supply chain management, digital identity verification, and secure transactions.

It is seldom that organisations have managed to bring all of this technology-led change together into one platform that serves as a foundation for intelligent use of the data across the whole organisation. Each function tending to identify what it wants to achieve its functional outcome, as opposed to what is needed to create collaboration and one-team or one-organisation approach. This is understandable from at least two levels, first the functions are measured on their performance as opposed to overall organisational outcomes, and second, it was cost-prohibitive until the use of cloud-based platforms and associated technology enabled it to become more affordable. To move from existing piecemeal systems to integrated systems is now challenging, often expensive, and a lengthy process. It may require a total new system transplant to overcome this situation in some cases.

Given the recent speed of transition from people-based work to technological solutions and activities, it is important to reconsider what this means for HR. For example, who “owns” the robots and AI? Is this a technical responsibility or HR’s? Questions around what the laws of liability are, interpretation of workplace regulations to maintain compliance during these changes, and more, are beginning to surface.

Thus far the technology people have dominated the design of the HR processes and systems with “standard packages” and some areas for “fine-tuning” by HR and other clients. We suggest that it is now time to reappraise this and put HR back in control of their strategic approach as to how they do business, which means breaking away from the linear expert approach to whole systems strategic thinking and operating.

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Strategic HR — Administrating, Optimising, and Connecting

In this era of significant operational change through technology the HR operations are not immune. They too are heavily involved in changes to their own ways of working. In our previous newsletters, we have discussed the various forms of technology that have predominated within HR activities to date, which are typically data analysis (DA) and machine learning (ML) systems and processes.

HR’s approach to using technology has been focused within the expert linear functions such as recruitment, salary, training, and so on, which made sense at the early stages of automating activities and processes. Our preceding newsletters and the discussion above, suggests that this traditional linear approach has reached its end of life and that a more holistic systematic approach, together with the activities of the organisation’s operations, needs to be considered.

Rather than think this is what HR does, this is what finance does, and this is what operations does, think about end-to-end processes. For example, procure to pay or hire to retire, and then just start to think about why we hand this off to different functions within linear progression. Why do multiple approvals need to take place? Why is this information being entered in multiple places by different colleagues? Just taking an end-to-end view can not only unlock digital opportunities, but it can also change processes, the ways of interaction, and speed up decision making to streamline the organisation. BCG (2023) identified that 30% productivity gains can be achieved just by re-thinking how HR delivers its business.

This alternative perspective requires management to consider things differently. The first thought is which roles can be augmented using AI? Next, consider which roles can be accelerated using AI. This is followed by which roles can be automated altogether? Finally, what are the new roles that we do not have today that will be crucial to get the full benefit of AI and G-AI? We will answer these questions later in this newsletter.

Strategic HR

For HR to be strategic in their way of working requires HR leadership who have a deep understanding of not only the financial, operational, and functional aspects of the business, but also the passion for what the organisation actually does. After all, this passion is what is looked for in the workforce and senior management should be no exception. Just “doing it” will not lead to success.

The ability to discuss any area of the organisation’s situation and key drivers of success with senior managers is a pre-requisite for acceptance of HR at the organisation’s top table.

This extends to knowing what the external customers’ needs, interests, concerns, and expectations (NICE) are and what needs to be done to delight them. To date, this has seldom been the case, particularly in SMEs and those organisations where HR is operating a more a reactive and “policing” role, which is currently what most organisations expect based on historical structures and activity. In some large organisations there has been a degree of movement by HR in this business direction and yet it is still not mainstream HR.

To achieve this level of credibility means that it is imperative for HR to not only have access to all the organisation’s management and operational IT systems, but also a reporting system that links them all to the HR platform. This platform link is then able to assist HR in gaining a comprehensive understanding of how the systems and processes are working, where the bottle necks are, the impact of the spread of skills across the different activities, and so on.

Generative AI (G-AI) will be a major element of this process. G-AI will summarise the complex data into manageable information to alert HR not only about what is happening now, but also where future attention may need to be made for things such as mismatched or shortages of skills, training needs, and other information for strategic decision-making.

For example, if delays are occurring because of a lack of engineers, or customer complaints are made about delays, product quality, poor communication, and so on, the data are analysed by G-AI, summarised, and reported to HR. This means that areas such as training needs, recruitment, skills allocation, and communication issues can be understood, developed, and managed more effectively by HR, who then approach management colleagues with options to resolve the current situation and aim to prevent recurrence with a longer-term strategic approach. The responsibility for delivery of the work still sits with management supported by HR.

It is not only important for the CHRO to be of this high calibre “businessperson”, but it will also mean that the HR operations and the people who currently work in this role will almost certainly need to change.

As we will see in the following sections the changes require HR people with technical awareness, holistic thinking and behaviour, and an understanding of the NICE of their customers both internal and external to the organisation. What this means will become clearer as we discuss the new way of thinking about HR’s activities: administrating, optimising, and connecting.

Administrating

Earlier we suggested that HR needs to be able to move quickly and smoothly (agile) so that it can respond to the changes and also delight customers, internal and external. One way of supporting this need is the removal or reduction of the significant amount of administrative work that is necessary to support current HR operations. It can be no surprise that this is where technology and AI have been their most active to date.

The technology companies were very quick to realise that there was a lot of money to be made in providing such a service, initially with relationship databases and subsequently more sophisticated systems using ML. Today some are using early versions of AI algorithms to sort information against pre-specified criteria in areas such as recruitment where large volumes of applications are reduced to manageable numbers before a person views them.

The use of early technology in HR has led to a mixed bag of praise, complaints, and concerns. These can be found in a wide range of surveys and papers on the Internet and as such we are not repeating them here. A review of the issues leads us to the conclusion that most are a result of poor initial design and the remainder a sense of laissez-fair on the part of the HR operations, which may seem unfair and yet is probably based on too much blame on the “system” and not enough focus on the customer.

For HR to be truly agile in the sense mentioned above, their people must focus on customer delight, which is more than just satisfaction, and deliver value to them, internal and external. However, since the HR function is not typically designed to provide direct incentives to the customer, it is often criticised for being slow to respond, which leads to dissatisfaction among its customers.

Whilst HR will continue to use technology and, increasingly G-AI, in all of its administrative areas, it must be done in a different approach that requires a deeper level of agile understanding. Initially, develop the ability to quickly and efficiently identify issues that need to be addressed in the existing systems whilst ensuring HR has the ability to reduce the time it takes to develop and implement a response to those issues.

The second and more important task is to move away from segmented areas of administrative use of AI into a coordinated and integrated approach that optimises the overall use and impact of AI at the whole system level beyond the boundaries of HR operations. It must move away from the linear HR subject orientation that is the current approach of most HR systems used today.

Figure 1: Integrated Organisational Management System

Figure 1 is our general schematic of an integrated management system that connects the operational and support processes required to provide the customer product or service. There are numerous administrative functions being undertaken throughout the whole system, currently by different functions and roles. As we mentioned earlier, the various functions must be monitored and managed within the organisation’s “global” management system with HR being “fed” the information to provide a workforce able to ensure sustainable business outcomes.

As we have demonstrated across all three editions of this important subject of HR and AI, the rapid development of technology and the implementation of AI in HR has already brought about changes in HR practices and processes. However, it is also crucial to understand the use and ability of AI on the different aspects of HR operations beyond administrative areas.

Optimising

In general terms the word optimising is an act, process, or methodology of making something (such as a design, system, or decision) as fully perfect, functional, or effective as possible.

For decades HR has sought to optimise its various functions and processes to achieve better outcomes and results for both the organisation and its people. It has sought to do so by focusing on creating a more efficient, effective, and productive workforce while also ensuring that employees’ well-being and needs are met.

This focus on the workforce has led to a delineated set of expert functions such as recruitment, training and development, payroll, health, and well-being, and so on. Each has a well-defined set of linear processes that have been fine-tuned over the years. Technology has been used to ensure that the function is optimised in concert with the function experts wherever possible. However, the vertical interaction with other linear expert HR functions is limited at best and missing in most cases, which has led to difficulties in dealing with non-standard situations or rapid changes within the environment of one or more specialist functions.

For example, the recent trend for hybrid working is one area that has caused tensions and “in-fighting” between the different HR functions and their respective policies and processes. These cross-policy challenges manifest themselves as to how to deal with the impact on financial allowances, place of work for tax purposes, safety of work equipment for remote workers, performance management and links to payroll, and much more. There is seldom a “joined up thinking” policy process for these segmented linear elements of HR operations.

This stresses the need to view optimisation of HR activities beyond the traditional functional linear approach. More than ever before, it is about creating a dynamic and adaptive strategy that continually evolves to meet the changing needs of the organisation and not only its employees but also the external customers. This reinforces the proactive strategic approach that needs to be inherent to the role of all HR management that we discussed earlier with the CHRO position.

To achieve optimisation across the whole organisation is probably a step too far for almost all HR operations currently. The challenge is to ensure that all future technology and AI considered by the CHRO, and C-suite colleagues is able to break away from this linearity and move towards a model of mutuality-based collaboration that connects directly with the other organisational operational and management systems we mentioned earlier.

The risk of having a top-down approach is that whilst it has the power to drive implementation it often lacks a diversity of ideas; grassroots models have ideas and yet often lack power. If true optimisation is to occur, then it is crucial to unite these models.

Whilst technological innovation is moving fast across all organisational landscapes and activities, the ability of organisations to consider and understand its collective impact often moves too slow. McKinsey (2023) identified that 24% of organisations not used to using AI struggled with developing a strategy for its implementation, whereas those who were more experienced struggled more with finding best practices for AI.

HR is in a strong position to change this development process and reduce the gulf between the different applications through proactive change together with employee support and feedback processes.

Whatever the methods used in administrating and optimising the work and impact of HR operations, there is still one outstanding and crucial element missing, “connecting”.

Connecting

Throughout this series of newsletters, we have either alluded to, or specifically written, that the segmentation of AI and associated technology by work functions, operational divisions, or areas of role expertise needs to be removed as far as is possible. If an organisation is to operate wholly through mutuality-based collaboration to achieve its “statement of purpose” and associated business objectives, then its operational and support strategy needs to be aligned and collaborate accordingly.

The HR operations are the link between all the technology such as automation, robotics, AI, and IT activities because the only way most of this cacophony of functionality can be brought to some order is through the effective use of people who use or are integrated within this melee of individual activity.

For an organisation to produce results and thrive it needs a way of connecting the various activities so that harmony is achieved and maintained when a part changes other parts respond accordingly. Currently, the major process to assist in achieving this connectivity is the “technical process” that is designed to provide a flow of activity from conception to delivery of a product or service. What such a process does not consider is the human aspects of the procedures within the process.

For example, the technical process may require a decision to be made. It normally shows the role and/or position of the decision-maker and yet seldom, if ever, considers or describes the actual decision-making process itself. It assumes that the relevant role has the knowledge, experience, and authority to make the decision, which is not always the case and escalation to another level or more experienced person is often the result. This adds time to the process that is not accounted for. The process also relies on the correct level of information and detail being given to the decision-maker. When this detail is lacking there is then a process of iteration between the holders of the information and the decision-maker to provide what is needed. Often, this includes external parties, which makes the process even more complicated and slower.

For this kind of situation to be improved, and there are many others, we argue that there needs to be a “smarter” connection between the people side of the process and the technical work schedule and specification of events in the linear value-chain activities.

Where such a smart connection is installed, HR operations will have information about the slow decision-making, the areas that lack the necessary knowledge or experience, where to focus on people allocation at various stages of the work activity and more. HR can then have real-time conversations with management on how to connect the resources across the organisation at specific times to assist management in maintaining effective operations. You can understand this as the variable work shifts of yesterday on steroids.

In a world of hybrid working conditions, this flexible use of skills as opposed to roles is much easier to manage than the traditional hierarchical job-based approach still being used by the majority of organisations. Technology is catching up and offering a wider range of options once management understands how to use it.

HR and AI — its relationship and use

As we have discussed throughout this 3-part series of newsletters, HR operations are already using a range of digital and AI methods to support their work. The majority of it is focused on achieving the work of individual expert specialised functions, almost none of which are linked to the operational and other support systems across the organisation. Where there is some connectivity, typically between HR and Finance, it is usually very limited in terms of information available to management because bringing different technical solutions together is not easy and management still sees them as two separate functions, albeit they work together on some aspects of their business such as pay, budgets, and expenses.

However, there is some movement in the industry to change this through the use of Application Programming Interfaces (API). Even then, the wide choice and different levels of reliability make it difficult to decide on the most appropriate API and it can be expensive to implement, which means that SMEs may not find it feasible currently.

Major app providers such as Microsoft ® (MS) are beginning to pull together their separate apps into an integrated platform, which may offer a more sustainable route in the current climate. For example, MS is currently phasing in the integration of their major apps [Dynamics 365 Human Resources, Dynamics 365 Finance, Dynamics 365 Supply Chain Management, and Dynamics 365 Project Operations] onto one platform.

Whilst we have no knowledge or vested interest in MS policy or products, we use it here to illustrate that the need for this connection between the different parts of the business has been identified as a commercial need if true collaboration, mutuality, and management of resources is to be achieved. The use of technology for the management and improvement of isolated functions is the legacy of the industrial age and is now being cast aside for New Era operations and support.

Integration of existing systems is just the first phase and one part of the jigsaw of supporting integration and using digitalisation and AI to change the whole process of how organisations work, and HR is part of that change.

The jigsaw puzzle.

The Boston Consulting Group (BCG) published an article on 24 August 2023 “How Generative AI Will Transform HR”. It is an excellent thought-provoking presentation of a fundamental transformation of HR into a more strategic, value-added, insight-driven organisation. It discusses how G-AI’s capabilities will unlock a new level of productivity while transforming the HR service model. We wholeheartedly agree with this statement.

It reinforces the main thrust of our discussion throughout this series of three newsletters. That is, G-AI will enable HR to shift its focus from administrative work to helping lead the company-wide strategic transformation and response to the changes in society, business, and technology.

It will do this through a process of optimising and connecting the organisation’s activities in a radically new way of real-time information-based skills, deployment, and management, accompanied by predictive strategic approaches to getting the work done in an evolving business and technology landscape.

Using G-AI should not just optimise the productivity of existing processes and activities. G-AI lets HR and the organisation overall reimagine how it operates and delivers all of its mandated activities whilst exploring areas hitherto not part of their remit. For example, figure 2 is an illustration from the BCG article, which provides an example of the BCG analysis of the changes in proportional time on specific areas of the work of HR. The “enterprise partner” aspect of the future scenario to a large extent relates to an increased portfolio in the area bringing about change in the overall organisation — HR as change leader.

Figure 2: The Impact of G-AI on HR.

Conclusion

Throughout this series of three newsletters, we have endeavoured to show that the HR operations in organisations large and small, local, or global, have been slowly developing into effective expert linear solution providers. These expert functions have served organisations well, particularly during periods of continuous yet slow pace of change in both technology and social environments. Since towards the end of the 20th Century the pace and type of changes have increased, which placed a lot of additional stress on the organisational operations and support functions.

We outlined how organisations are changing, what this means for the workforce, and dipped into the future of how work gets done. A mainstay of the new approaches to work is that of mutuality and collaboration across the whole organisation, irrespective of the business management system and organisational structure. Technology has been an ally in achieving this where organisations have adopted this approach.

Early versions of IT technology helped bridge some of the gaps and reduce many of the emerging issues around collaboration, timeliness, and accessibility of functionality; they also brought some problems with them. AI and G-AI has now changed the landscape significantly. For organisations to keep up with the changes it now requires them to re-think how they work across the whole business as opposed to individual changes in varying functions within the business, the old change model.

HR operations are a key set of activities that provide the people who form the bridge between technology and successful operations. We discussed how their modus operandi needs to change significantly if they are to provide the people and associated support activities needed for operational success and delighted customers in the future.

A major plank in our argument for the future is the provision of a technology platform that brings together the front and back-office activities in a proactive and strategic fashion. In doing so, provides HR with the information and tools that they need for their future operations. This change for HR also means a different type of expertise and ways of working, which includes a more strategic approach to their work.

The BCG article mentioned earlier, is but one of the emerging perspectives of how G-AI can develop HR into the strategic force that people such as Prof. Dave Ulrich have postulated for some decades. It is an opportunity that will require significant changes in both the skill set and behaviour of most HR people across the three areas of administrating, optimising, and connecting activities.

In making this move, HR will also need to help drive this change across the broader organisation even as its own function evolves. It will be a process of complete re-education around how business operations work and the skills that it needs from the workforce.

It is an opportunity to move from the bureaucratic hierarchical command and control of people approach of the industrial age into an organisation that truly values people and focuses on supporting the achievement of actual work itself.

We have not proposed any one type of organisation or specific form of G-AI. We hope that this more generic discussion will enable readers to come to their own conclusions and make their own decisions about HR, its purpose, operations, and use of technology.

In a future newsletter we will describe a totally different type of HR operation based on the comprehensive use of G-AI. Look out for our announcement in the next weeks.

Major references for this discussion are available from the author, Dr Reg Butterfield via LinkedIn.