Situatie
Two recent pieces provide a high-level view of generative AI in HR. In a piece from May 2023, the Conference Board looks at key questions and impact areas. The piece suggests that, through the strategic application of AI, HR has an opportunity to impact financial outcomes in the company in relation to job design, organizational processes, analytics, talent acquisition, rewards, DEI, and employee engagement. In a June 2023 podcast, talent leaders Bryan Hancock and Bill Schaninger talk with McKinsey about the opportunities and risks of generative AI in HR, particularly in recruiting, performance management, and talent development. Taken together, the two pieces provide an up-to-date perspective.
AI, and in particular generative AI, has the potential to radically enhance HR processes and decision-making by sourcing, selecting, negotiating with, and then hiring candidates; generating custom
individual development plans and performance evaluations; monitoring worker productivity; writing reports; and conducting research on HR trends or legislative developments, all while controlling for suspicious activity and alerting managers to potential turnover risks. If done correctly, the ROI can be tremendous. At the same time, there are legal, reputation, and business risks, especially around bias and transparency.
Insights for What’s Ahead
• Besides enhancing HR processes and decision-making, generative AI has the potential to change the way work gets done and the way workers are managed. Sixty-five percent of CHROs expect AI to have a positive impact on the HR function over the next two years, according to The Conference Board CHRO Confidence Index, making proficiency in this technology a high priority for the function that is responsible for talent in the organization.
• However, risks associated with generative AI must be carefully considered and managed to avoid potential damage to an organization’s reputation, customer relationships, and strategic plans. It must be vetted through the same rigorous process as all business risk decisions.
• With people-related costs representing roughly half of most organizations’ operating budgets, the HR function has a tremendous opportunity to impact financial outcomes. CHROs will need to prioritize investments in new HR technology. Making the business case by articulating the longer-term positive impacts to the organization—whether those are in job redesign, organizational processes, information, analytics, markets, and employer brand—is critical.
• Generative AI offers significant opportunities for talent acquisition; total rewards; diversity, equity & inclusion; and employee engagement—the functions most likely to experience significant disruption. This is because of AI’s ability to analyze vast amounts of data, identify patterns, and make predictions about the likelihood of a candidate’s success or an employee’s likelihood of leaving.
• When adopting this new technology, CHROs will need to determine how workers and leaders are engaging with generative AI and developing guidelines to leverage this technology. HR serves a critical role in protecting the assets, strategic plans, client data, and intellectual property of the organization. Mastering the use of generative AI will become table stakes for successful employment and be considered a core skill for HR leaders.
• Asking the right questions before adoption will be critical to optimizing the implementation of generative AI applications. For CHROs the goal is to supervise its adoption in HR, implement it successfully and ethically, monitor its use, manage the impact of technology on job design and organization processes, and protect and upskill workers and those who lead them.
Generative AI: The Promise and the Peril
Many HR organizations already employ several types of AI in their processes, such as chat bots, to address benefit questions and applicant tracking systems (ATS) to sift through thousands of resumes to find the closest match to open job criteria. In a recent study by Eightfold AI, HR leaders reported they use AI to support many core functions, with at least 64 percent reporting that they use some form of AI as support for employee records management, payroll processing and benefits administration, recruitment and hiring, performance management, onboarding new employees, retaining current employees, cross-skilling and reskilling employees, company culture and rewards management, and managing talent mobility.
However, it is important to note a vast array of digital solutions, many of which are touted as artificial intelligence (AI), are already available to the HR function, yet, strictly speaking, few of those products qualify as AI. The term AI is often applied more loosely to mean the use of computer systems or agents to perform any task that, up until now, humans had to do. The disconnect between the expert’s view and the popular one often causes some confusion in the business world. (See our report AI for HR: Separating the Potential from the Hype.)
Estimates vary, but as many 70 percent or more of workers are already using generative AI citing higher productivity, speed, or the ability to get a jump start on a topic or project; few have had training on it, and most are keeping their usage very low key with employers.2 3 4 5Looking ahead, Microsoft expects to integrate generative AI into its suite of office applications used by most businesses today.
Other common HR platforms will likely do the same
The second quarter 2023 edition of The Conference Board CHRO Confidence Index found that 65 percent of CHROs expect AI in all forms to have a positive impact on their function within the next two years. To contrast, our C-Suite Outlook 2023 reported that CEOs are more focused on enterprise-wide digital transformation and less on enhancing AI and analytics competencies in the HR function, despite the increasing demand from investors and regulators for evidence-based, quantitative human capital disclosures. According to the survey, CEOs do not place a high priority on investing in improving skills in HR data analytics or implementing AI/generative AI in optimizing human capital management efficiencies.7 This creates an even bigger challenge for CHROs seeking to introduce this technology. CEOs must have a clear understanding of the technology’s value and be able to demonstrate the payback for the incremental cost.
Generative AI has the potential to radically enhance HR processes and decisions. Generative AI’s impact on the HR function, and by extension, workers and the workplace, is a game changer. Potential applications include the ability to source, select, communicate/negotiate with and then hire candidates; create jobs; write behavior-based interview questions; generate custom individual development plans and performance evaluations; and monitor worker productivity, thus augmenting the productivity of HR professionals. In addition, generative AI has the potential to change the way work gets done (including job design and human capital deployment) and the way workers are managed (including leadership and accountability).
Generative AI will offer workers (in most professions or jobs) options that will improve efficiency and speed as well as productivity. This new technology can create personalized marketing and social media campaigns for marketing pros, write or review code for IT professionals, support pharmaceutical research and development efforts in the creation of new medications, draft annual reports for corporate communication professionals, draft legal documents for general counsels, and analyze vast amounts of customer feedback for every organization.8 Every HR process is an opportunity for generative AI. For example, AI-driven pay transparency and equity audits provide greater insights and enable faster decision-making. The functions where generative AI can provide almost limitless opportunities for efficiency include talent acquisition, total rewards, DEI, and employee engagement.
While the HR function has a tremendous opportunity to impact financial outcomes, CHROs will need to not only make a strong business case for investments in new HR technology but also articulate the longer-term positive impacts to the organization—whether those are in job redesign, organizational processes, information, analytics, markets, and employer brand—and ultimately evaluate the risks/rewards associated with any new technology. Generative AI introduces new risks to organizations, workers, and those who lead them.
In its current state, information and analysis offered by generative AI may reflect the biases of a society—either coded by flawed humans or built from biased or incomplete information used to “train” it. In some cases, the data itself may be dated or reflect a history of decisions that, looking back, we would not want to repeat or codify. Current shortcomings include:
• Based on inaccurate information and dependent on the sources used to train it, AI sometimes “hallucinates,” meaning it confidently generates inaccurate information9 without flagging that shift for the user of the app;
• Uploading proprietary data into the AI apps for processing could pose organizational risks that include forfeiting ownership of information, intellectual property, patents, and copyrights;
• Confidentiality and data privacy policies may not be verifiable;
• Generative AI does not (currently) understand concepts and frameworks; it simply gathers data and makes predictions and/or creates a narrative;
• Transparency may be lacking about how algorithms work and how important safety, privacy, and fairness guidelines are to protect the organization, its people, its customers, and other stakeholders.
Don’t underestimate legal and ethical issues.
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