Amidst tough economic conditions, business leaders see the potential for AI and automation to revolutionise HR and make businesses more efficient. But leaders will only be successful if they keep HR’s human touch.

That’s according to new research*, which surveyed 500 C-suite level executives and 1000 HR decision makers at SMEs in the UK and Ireland. The data reveals that with nearly three quarters (74%) of business leaders reporting there is a need for their business to become more efficient and productive, two thirds (66%) believe AI and automation have a lot of potential to deliver this within the HR department.

Three in five (60%) business leaders intend to incorporate more AI and automation into their HR department in the next 5 years. And, in light of recent technological advances with generative AI, like Chat GPT, a similar number (61%) even believe HR will be taken over by AI in the future.

However, these sweeping statements about the future of HR may be a symptom of a basic misunderstanding of the value that HR teams deliver to organisations. In fact the survey uncovered a clear knowledge gap, with two thirds (67%) of business leaders admitting they’d like to have a better understanding about what their HR team does.

Ross Seychell, Chief People Officer at Personio, comments: “Emerging technologies such as generative AI tools, like Chat GPT, have the potential to revolutionise workplaces, and the HR department is no exception. But will HR be ‘replaced’ one day by AI? I certainly don’t believe so, and the business leaders that say it is possible are short sighted and worryingly misinformed about the role that effective HR plays in businesses. Instead we can expect to see AI make HR more important, by allowing a hard-pressed department to focus more on business critical issues like building a great culture or solving retention challenges, while new technology will make admin tasks more efficient .”

It’s not just business leaders that predict the growth of AI and automation in the HR department. HR managers themselves can also see an increasing role for digital tools like AI and automation to change the HR function, and many feel uncertain about what this means for the future. Two fifths (43%) say they’re worried they’ll lose their job as more of the HR function is automated.

The good news is that nearly three quarters (73%) of business leaders say HR will be more important to the business in the future. And there is a clear opportunity for HR departments to harness AI and automation to free up time to focus on supporting businesses with long term goals – something that is recognised by almost two thirds (64%) of HR managers.

Seychell continues: “Business leaders tell us that HR is only set to become more important in the future, not less. But despite this, and the importance of the function over recent turbulent years, they also admit they don’t fully understand where the role begins and ends. This challenge needs to be met head-on. HR teams will only be able to unlock their full potential if they continue to work with business leaders directly to show them the value they can bring. Meanwhile, leaders must focus their time on understanding the true value of great HR teams – after all, people are the most important, and often most invested, asset in an organisation.”

*Research from Personio