The profession has rocketed in size and stature. Will AI shrink it?
Bit by bit, HR is taking over corporate life. The ranks of human-resources professionals across the rich world are swelling. Their roles are expanding. And some are still insisting that you complete your unconscious-bias training.
In 2024 American businesses employed about 1.3m HR professionals, up by 64% in ten years and well above the 14% growth in overall employment in that time (see chart 1). The increase is particularly pronounced in white-collar firms: in the professional-services and technology industries the number of HR workers has doubled since 2014. A similar rise is evident in Australia, Britain and Germany.
HR has moved up the office pecking order, too. A study by Nick Bloom and Mert Akan of Stanford University shows that the pay of chief human-resources officers (CHROs) has grown relative to other senior executives. In 1992 their total compensation (including bonuses and stock options) was 40% of the average director’s salary (excluding chief executives). By 2022 that figure had risen to 70%. More CHROs are also moving into the corner office. Mary Barra, the boss of General Motors, previously held the carmaker’s top HR job. Firms such as Dunkin’ Brands, a doughnut specialist, and Chanel, a luxury-fashion house, have also given the top job to HR gurus.
Various forces are behind HR’s rise. One is the growing realisation of the value of top talent. In an annual global survey by Manpower Group, a recruiter, 74% of companies responding said this year that they were experiencing a shortage of skilled labour, up from 38% a decade ago. Ageing populations and technologies such as artificial intelligence, which require new skills, are among the contributing factors.
Another reason for HR’s growing importance is a string of disruptions to work. It has been a “non-stop game day for HR”, says Emilie Petrone of Korn Ferry, a consultancy. The “Me Too” movement shone a spotlight on office harassment. The covid-19 pandemic meant HR staff had to manage a shift to remote working, as well as monitor employees’ safety and wellbeing. Work-from-home policies and return-to-office mandates followed. Then came the rise of diversity, equity and inclusivity (DEI) initiatives. For an “insecure” profession that is “prone to scramble around for fashions and fads”, in the words of one HR director, DEI brought plenty to keep busy with, from micro-aggressions to non-gendered toilets.
Other factors have also contributed to growing demand for HR professionals. State governments in America are enacting more rules about employee relations, such as those that govern sick leave and minimum wages, increasing the compliance burden for companies. Employees seem better informed about their rights as well—and happier to complain. In American workplaces the average number of allegations of discrimination or harassment jumped from six per 1,000 employees in 2021 to 15 last year, according to a survey by HR Acuity, a software provider.
Yet there are signs that the HR boom could soon turn to bust. America’s labour market has been characterised by low hiring and low firing for much of the past year, meaning less work for HR. Now layoffs have jumped. According to Challenger, Gray & Christmas, an outplacement firm, the number of lay-offs announced reached more than 153,000 in October, the highest since the pandemic. While that may give HR teams plenty of paperwork to do, some are finding themselves part of the cull. Amazon, an e-commerce giant, reportedly included many HR roles in the 14,000 jobs it cut last month. Meanwhile, at least in America, enthusiasm for DEI has faded amid criticism that companies have become too “woke”.
AI may make matters worse. At the moment HR staff are busy helping businesses retrain their employees and hire AI experts. Some companies are going even further. Moderna, a pharmaceutical company, has merged its IT and HR departments, under the leadership of the former CHRO.
In the long run, however, many HR tasks may be farmed out to AI. Companies already use the technology to scan through piles of CVs and create chatbots that can answer employees’ questions. In a survey published this month, McKinsey, another consultancy, asked companies how headcount had changed across various business functions over the past year as a result of AI. Fully 22% of respondents said that it had led to a decrease in the number of HR workers, more than for any other function, with only 5% saying it had led to an increase (see chart 2). For the people people, the rise of the machines looks like bad news.
