New frontiers for HR: Artificial Intelligence changes the rules of the game

On 5 February, the second workshop of the 2024-2025 edition of the HR Innovation Practice Observatorywas held, entitled ""New frontiers for HR: Artificial Intelligence (AI) changes the rules of the game".”. Through the presentation of data from the Observatory's Research and a workshop activity in working groups, the workshop delved into the impact of Artificial Intelligence on HR Departments and the main challenges for the future.

THE OBSERVATORY'S RESEARCH

Introduction to Artificial Intelligence (AI)

In 2024, the Artificial Intelligence (AI) market in Italy reached a record value of 1.2 billion, registering a growth of 58% compared to the previous year and highlighting how much the AI revolution is indeed changing the game for many organisations. But what is meant by Artificial Intelligence and why is it so much talked about today? AI is defined as a branch of computer science that studies the development of hardware and software systems endowed with specific human-like capabilities and capable of autonomously pursuing decisions usually entrusted to humans. The concept of AI was born in 1956 with the Dartmouth Conference, when John MacCarthy and other scholars began to define the goal of creating machines capable of imitating human intelligence. In the following years, the main theoretical and logical foundations were then developed, such as Frank Rosemberg's neural networks or symbolic learning algorithms. However, the limited computing capacity of the time prevented their effective practical application. The real 'artificial' revolution started between 2000 and 2010, when the exponential development of powerful computing systems (e.g., Graphic Processing Units) made the training of complex algorithms and deep neural networks (e.g., Deep Learning) possible. Since 2020, the technological evolution and the huge investments of the major economic and technological powers (e.g., Google, Microsofot, OpenAI) have led to the creation of AI solutions that are easily accessible to everyone: Chat GPT4o collects more than 200 million active users every week and provides people all over the world with various functionalities that were unthinkable just a few years before. This massive diffusion has a pervasive and transversal impact on society, organisations and their people, bringing with it possible positive as well as negative effects. On the one hand, Artificial Intelligence has the potential to completely revolutionise the world of work. By 2025, the Word Economic Forum has predicted that AI will have replaced some 75 million jobs, while creating another 133 million new ones. On the other hand, the spread of AI will also greatly influence the ways of working and the skills needed in tomorrow's organisations. A study conducted by IBM, for example, showed that more than 40 per cent of their workforce will need to upgrade their skills due to the introduction of AI tools, a percentage that rises to 77 per cent when considering new hires. Upgrading skills is especially necessary when considering the degree to which workers use these solutions. In Italy, according to the Observatory's 2024 data, in fact, 26% of workers admit to using Generative AI solutions - i.e. artificial intelligence systems that use available data to create new content or solve new problems - on a daily basis for their work activities (i.e. 52% if Generation Z is considered), reporting a positive impact on the way they work. However, 77% of them are also concerned that the advancement of AI will make their work precarious, obsolete, and less relevant. artificial intelligence systems that use available data to create new content or solve new problems - for their work activities (i.e. 52% when considering Generation Z), reporting a positive impact on the way they work. However, 77% of them are also concerned that the advancement of AI may make their work precarious, obsolete, and less relevant. To control its development and try to limit its negative effects on humans, most countries have started to set guidelines to regulate the development of AI. In Europe, on 13 March 2024, the European Parliament approved the text of the AI Act, an EU regulation introducing a set of rules in the use and development of Artificial Intelligence. In Italy, moreover, the Transparency Decree (Legislative Decree no. 104/2022) and the Draft Law on Artificial Intelligence, two pieces of legislation regulating the introduction of automated systems and AI solutions, came into force. Despite efforts to regulate its development, the impact of Artificial Intelligence on society and the world of work is still uncertain and characterised by several still open debates. Within this radical change, the role of HR departments becomes crucial.They must support the technological change within their organisations while seizing the innovation opportunities offered by AI solutions.

HR Directorate Research

The workshop continued with the presentation of some data from the HR Innovation Practice Observatory research on HR Departments. The first findings of the 2024-2025 survey show the growing interest of HR Departments in Artificial Intelligence, with about 70 per cent of the sample having experiments within the HR department. Despite the interest, our data also show a partial lack of awareness and knowledge on the subject: a not insignificant percentage of companies reported having invested in new digital tools without knowing whether these were AI-enabled. The same trend is recorded when analysing future intentions, with half of HR departments reporting that they would like to increase their investments in AI and around a quarter not knowing what to do, highlighting a lack of long-term planning of the long term. The limited knowledge and planning is also reflected in the goals HR departments set for themselves with regard to AI solutions. Most of the companies surveyed (i.e. around 4 out of 5) stated that they had implemented AI tools to improve the operational efficiency of HR processes, reducing time and costs and automating repetitive tasks. The strategic dimension, on the other hand, is still underestimated: using AI to improve one's ability to respond to the evolution of skills required of employees, to improve the services offered to be more attractive internally and externally, and to assume a more strategic role with top-management thanks to the evidence derived from the analysis of HR process data. The Observatory also mapped the deployment of AI solutions against the five main HR macro-processes. Regarding the processes of employer branding, and search and selectionprocesses, the most popular AI tools offer solutions to optimise brand communication to potential candidates and analyse and classify CVs received in various formats, also reporting excellent levels of effectiveness. For solutions analysing verbal, non-verbal, and paralinguistic language during the selection process, on the other hand, there has been an abrupt slowdown due to the AI Act, which classifies many of these systems as possibly unacceptable given the high risk of discrimination, control, and invasion of privacy. Considering, , on the other hand, onboarding, training, development, and career management processesHR departments have preferred to invest in AI solutions that facilitate the creation of training content with gamification logic or that suggest courses and development paths based on people's skills gaps, roles, and interests. Moreover, with respect to the future, there is a growing interest in tools that enable the creation of training content and/or learning tests and a comprehensive mapping of employees' skills and potential. Finally, solutions supporting performance management, administrative, safety, and employee welfare management of workers. Among the most popular among HR departments are virtual assistants to guide the creation of structured feedback to colleagues and/or collaborators, tools to support individual, team, and organisational goal-setting, and different types of chatbots, from those that answer questions on regulatory, contractual, and administrative aspects to those designed to support HR professionals in managing administrative and back-office activities. But what are the main benefits brought about by these solutions? In line with the implementation targets, more than half of the HR departments with active experiments report positive effects on departmental efficiency and productivity, as well as on innovation and creativity. Still limited, unfortunately, are the direct effects on employee well-being. Finally, the research analysed how AI projects are managed within HR departments, considering the four main phases highlighted in the literature: risk analysis, drafting of policies and guidelines, training, and impact monitoring. With regard to risk analysisconcerned, the majority of HR departments perform an analysis related to compliance with current regulations, while less than half perform an analysis that also considers ethical, security and privacy implications. The immaturity in risk analysis is also reflected in the drafting of policies and guidelines, which are defined by less than half of the HR departments surveyed. Also with regard to skills development, the majority of HR Departments organised meetings to raise awareness of the impact of AI in their business and organisation, to provide a common language for the organisation to work groups, and to present the product adopted by AI, showing its use and purpose, while actual training courses are still uncommon, especially on prompting and/or usage techniques, regulations and protection of sensitive data, and the ethical implications of AI in their work. The latest data from the 2024-2025 survey also show that most HR departments have not yet planned formal monitoring activities with respect to the effects that AI solutions may have on the organisation and employees.

What prospects then for the future?

In the concluding phase of the presentation, the Observatory emphasised the dual role that HR Management plays within the transformation brought about by Artificial Intelligence. On the one hand, it is crucial that HR Departments enable and support technological change within the organisation, spreading culture, knowledge, and awareness of AI issues among employees and HR professionals. On the other hand, HR Departments must be able to seize the innovation opportunities offered by AI solutions, innovating and improving their services and developing the skills to understand their impacts and possible evolutions.

Artificial Intelligence therefore offers HR departments an unprecedented opportunity: to drive technological change and innovate services for more efficient and strategic human resources management.

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Source: HR Innovation Practice Observatory