Level Up With Gen AI – Insights From Top Human Resources Performers

Level Up With Gen AI - Insights From Top Human Resources Performers

In today's rapidly evolving landscape, generative artificial intelligence (Gen AI) stands at the forefront of transforming the human resources (HR) strategy as we know it. By challenging traditional paradigms and processes, Gen AI promises unprecedented opportunities for organizations bold enough to embrace it. Those who embrace Gen AI now are poised not just to keep pace with change, but to anticipate and shape the future.

As Digital World Class^® organizations exemplify, those at the forefront are already reaping substantial rewards: lowering costs, streamlining operations and elevating their strategic impact. However, the true promise of Gen AI lies not just in efficiency gains, but in its potential to redefine what success looks like in HR, pushing boundaries and setting new standards for performance and innovation. For those ready to seize the moment, Gen AI isn't just a tool - it's a catalyst for leadership in the digital age.

Top HR organizations invest in value creation

Our annual Digital World Class analysis reveals the characteristics of top performers, what differentiates them and how they achieve their advantage. Specifically, these organizations invest for value creation - leveraging technology and talent to deliver superior capabilities and enterprise support. Several traits stand out:

• They have value-adding talent, including more highly skilled and professional staff who apply valuable business skills more effectively. They invest more in training and developing their staff - particularly managers and professionals. They are also 67% more likely than the peer group to have a senior HR executive highly involved in business planning.
• They have an integrated organizational model that optimizes their cost structure and process capabilities. Their systematic use of global business services (GBS) and outsourcing, along with extensive process automation, enables them to focus a much higher percentage of resources on HR strategy, planning and the employee life cycle. Furthermore, global ownership and accountability drives consistency and delivery excellence.
• They harvest data-driven insights. That's because their skill set balances process expertise with business acumen, relationship management, strategic mindset, agility and change orientation, critical thinking and problem-solving, creativity and innovation, and data savviness. They equip talent with the right technologies - for example, they are two times more likely to provide analytical tools for strategic workforce planning (SWP).
• They have mature, digitally enabled service delivery. Their deployment of self-service capabilities is higher for all 11 activities measured - from personal/life event changes to job requisition submission. This boosts manager and employee productivity. They also invest in HR technology to drive HR staff productivity.

Understanding the Digital World Class advantage

Digital World Class HR organizations operate at a 32% lower cost than traditional HR organizations - an advantage that has held relatively steady over the past several years. Yet, they deliver more value than the peer group, extending their outperformance well beyond cost.

Prudent investment in technology has traditionally enabled top-performing HR organizations to increase operational efficiency and staff productivity. Greater spending on technology allows Digital World Class HR organizations to invest in modern architecture and emerging technologies that enable greater process automation, further reducing labor cost. These organizations are much more likely than the peer group to have automated key HR processes. Transaction automation levels exceed 85% for seven key processes measured and are at or near 100% for some, including time and attendance, payroll administration, and pension and savings. By contrast, peer group automation for these areas ranges from 35% to 78%.

It is important to note that not all technology investments are associated with labor-eliminating automation. As the HR services portfolio shifts toward higher-value services, leaders also invest to equip their knowledge workers with modern digital tools such as advanced analytics, and collaboration tools that improve productivity and augment their capacity to deliver business value. Digital World Class HR organizations spend two times more on technology per HR full-time equivalent (FTE) than the peer group and have a far more technology-intensive operating model, spending a larger component of HR process cost - 17% versus 9% for the peer group.

Digital World Class HR organizations have traditionally run with far fewer FTE staff than the peer group. In 2024, that gap stands at 39%. They spend 38% less on labor cost per employee, and they allocate 51% less cost to labor performing transactional tasks.

Systematic use of GBS and extensive process automation allows Digital World Class HR organizations to free up 12% of the team's effort from transactional activities to focus on value-added activities. Moreover, Digital World Class HR staff focus more than one-half of their functional efforts on attracting, retaining, developing and engaging employees, and creating an employee-centric experience for them. They also devote 33% more effort than the peer group to strategy and planning activities to prepare for the future. This shift of resources into higher-value roles explains their superior value contribution.

They outsource transactional activities more than the peer group - 44% to 29% - but are 17% less likely to outsource employee life cycle human capital management activities. Gen AI will increase the Digital World Class advantage. According to our analysis, Gen AI will reduce HR costs by 44% and boost HR staff productivity by 51% - if organizations know how best to deploy it. However, no one can adequately measure the exponential value of innovation driven by the most ambitious applications of Gen AI and the new possibilities it brings.

Superior business value

Digital World Class HR organizations deliver greater business value by outperforming the peer group in effectiveness, experience and enablement. Our analysis highlights areas of significant advantage. Gen AI will have a profound impact in these areas - quickly extending the performance advantage.

Operational excellence

Digital World Class HR organizations also outpace the peer group in key dimensions, including efficiency and automation. Our analysis found relevant examples in both areas - again, points of advantage that will grow along with the adoption of Gen AI.

Leading HR organizations are better prepared to capitalize on Gen AI

Capitalizing on Gen AI's potential requires modern architecture, a robust data foundation and clear value orientation. Our analysis shows that Digital World Class HR organizations are well ahead of the peer group in establishing these capabilities.

They have already taken significant steps to modernize their infrastructure - and not just by automating transactional processes. They have more mature deployment of self-service capabilities for both managers and employees - for example, they are 64% more likely to have fully deployed capabilities for recording personal/life event changes, and 60% more likely to have direct-access capabilities for submitting job requisitions. Superior technology enablement also means they can scale new capabilities faster and more effectively.

Digital World Class HR organizations are more likely to have global process ownership - a key factor in reducing complexity, including data complexity that inhibits digital transformation - and the ability to benefit from Gen AI and other smart technologies. That they are already more than twice as likely to provide a common set of SWP analytical tools is also evidence of a superior data foundation.

Finally, the combination of superior technology enablement and relevant skills enables Digital World Class HR organizations to devote more time to activities that matter - strategy and planning, as well as attracting, retaining, developing, and engaging employees. This is where Gen AI is really poised to enhance HR operations and create value for the enterprise.

These organizations aren't just building the foundation to capitalize on Gen AI, they are also moving quickly to explore and embed it into daily activities. In our 2024 Key Issues Study, about one-third of HR executives said their teams are already using Gen AI in a variety of ways, including creating job descriptions, drafting welcome emails and communications, identifying skills, answering common HR-related questions, and conducting research.

Accelerate your HR transformation

HR leaders are at a pivotal point. Those who wait for a Gen AI mandate from above or for information technology partners to catch up will see their performance fall further behind. On the other hand, those who act assertively and with speed to capitalize on the breakthrough potential of Gen AI can close the gap - and even leapfrog today's top performers. Following these essential principles will accelerate your transformation to Digital World Class HR performance:

Take the lead - don't follow. HR leaders have a unique opportunity to move beyond trusted business partners and become the catalyst for driving breakthrough performance for both the function and enterprise. But this requires more than incremental changes. HR leaders must reimagine how work gets done.

Your approach matters. To realize meaningful Gen AI-driven productivity gains, HR leaders must take a top-down enterprise approach to identify and prioritize use cases that will have the most significant impact on the business versus a bottoms-up approach that, at best, will yield incremental improvements.

Know where you stand. Successful transformation requires a strong understanding of your organization's strengths and weaknesses. To realize the full potential of Gen AI, your organization must know where you have gaps in strategy, technology, skills, data management and governance practices.

Create the capacity to focus on breakthrough performance. Dedicate resources responsible for driving change, and make sure they have the time to focus on it and the mandate to reimagine work that can lead to breakthrough performance. If you depend on people with other day jobs or the same resources that are supporting other key initiatives, you will struggle to build or maintain momentum. It is essential, but also incredibly difficult, to educate and mobilize the entire enterprise.

At the same time, Gen AI can free many other resources from the mundane to focus on more complex, strategic, value-added initiatives - if staff are prepared to take advantage of it. Train HR staff not only to get the most out of Gen AI capabilities, but also in complementary skills - critical thinking, strategic analysis, relationship management, business acumen and storytelling with data - that enable them to act as trusted advisers and change partners with business leaders and managers.

Architect your Gen AI future with confidence

The Hackett Group helps you explore, understand and implement Gen AI as part of a comprehensive, intelligent digital operations strategy. Learn about:

AI XPLR^™: Our groundbreaking AI XPLR^™ platform provides critical guidance for executives. Based on findings from hundreds of Gen AI assessments and deployments, AI XPLR^™ quantifies your Gen AI potential and produces a comprehensive readiness assessment and detailed road map.

Gen AI transformation services: Our consultants use leading-edge data, insights and metrics from AI XPLR^™ to architect your Gen AI journey. From ideation to implementation, we develop comprehensive plans to capture, deploy and mobilize your organization to capitalize on your best opportunities.

Executive Advisory programs: Our advisors counsel executives through their most critical and impactful decisions - exploring Gen AI opportunities, selecting providers, piloting solutions and more. Members have access to the collective knowledge of the world's best businesses and vendors through personalized, advisor-led guidance and cutting-edge Gen AI research in our member center, Hackett Connect^™.

Download the report to learn more about how Digital World Class HR organizations deliver greater business value and are better prepared to maximize the benefits of Gen AI.