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AI for HR: Next up – performance reviews
Having already disrupted much of HR operations, AI is now poised to reshape performance reviews, suggests HR research specialist Stacia Garr.
Stacia Garr is at the center of the HR tech revolution. From its base in Silicon Valley, RedThread Research – the business Garr co-founded in 2018 – provides CHROs with access to the latest research on technology trends and innovation. She also educates tech businesses such as Workday, UKG, and Qualtrics on the evolving demands of the HR function.
Here, she explains how AI could change the nature of HR and why CHROs must spearhead the revolution.
If HR leaders can get comfortable with the risks, the next most fruitful AI use case would be performance reviews.
The risks and rewards of AI deployment
Currently, most HR teams use AI in high-impact, low-risk applications, such as CV screening, HR ticketing, personalized learning, and chatbots that respond directly to employees’ questions about pay and benefits. Most of this is supplied by major software vendors such as Workday or Oracle, as part of their HR offerings.
With respect to learning, for example, AI can create personalized plans and indicate suitable career paths based on an individual’s strengths and weaknesses, and the projected future needs of the business.
“If HR leaders can get comfortable with the risks, the next most fruitful AI use case would be performance reviews,” suggests Garr. “Some vendors already offer this, and HR leaders are beginning to get excited about it.”
To assist with performance reviews, the technology can pull information from multiple sources, including manager notes, peer comments, and quantitative performance measures such as sales volume, customer feedback like net promoter score (NPS), or task completion. It can then summarize this information and produce a first draft of the review, which a human manager could check, amend as required, and then approve, with considerable time saved.
However, biased, incomplete, or inaccurate information could lead to an unfair review. This could, in turn, demotivate those affected or, in extreme cases, even result in a legal dispute. Strong governance of the technology is, therefore, imperative.
Time to take the plunge
Pressure from CEOs and CFOs to drive efficiencies in HR and across the business means CHROs should familiarize themselves with the risks and decide which they can live with. They should begin experimenting with AI in new areas, working closely with technology providers and risk and compliance teams within the business to foresee and mitigate any downsides.
“We’re under pretty intense pressure from CEOs to achieve greater efficiency, as businesses are not seeing the growth that was expected at the beginning of the year,” says Garr. “So, despite the risks, CHROs can’t wait to get involved in AI. They should lead the charge because plans to invest in AI are accompanied by conversations about skills, tasks, and creating the future workforce. You can’t just leave this to the CIO or CFO.”
But CHROs should be aware that dropping AI into the HR function like a stone into a pool might create ripples without generating immediate efficiencies. “CHROs are aware that automation can create efficiencies but also work,” continues Garr. “HR will still need people to manage AI agents and deal with unusual or sensitive cases. How can you create a pipeline of future HR leaders if AI takes away all the tasks that used to go to junior roles? AI will be critical, but a significant reduction in headcount may not be the outcome that most benefits the business.”
HR departments fall into two broad categories. The first primarily facilitates the basics of HR: hiring, firing, promotions and manages disputes. The second does that but also helps the business achieve its strategic objectives.
Want a budget? Demonstrate strategic value
All technology, and AI in particular, costs money. Convincing other leaders to view HR technology as a sound business investment can be a delicate task. CHROs can fall into the trap of thinking that a compelling ROI calculation will unlock funding. While important, even more vital is the extent to which it will support the business in attaining its strategic objectives.
Garr believes HR departments fall into two broad categories. The first primarily facilitates the basics of HR: hiring, firing, promotions, and managing disputes. The second does that, but also helps the business achieve its strategic objectives. It recruits highly talented individuals who differentiate the business from the competition. It ensures individual objectives align with business goals. And it thinks strategically about execution and performance.
“Those in the first group will always struggle to secure a budget for any technology investment that goes beyond increasing efficiency, because senior executives will just view them as a cost center,” says Garr. “Counterintuitively, CHROs of the second type won’t face constant demands for data because they are trusted and probably already provide it.”
Beware benchmarks
Many CHROs struggle to demonstrate the value of people and the HR function itself. Producing targeted people performance metrics can help justify investments in the HR function and give CHROs more leverage in executive-level strategic discussions.
But measuring the value of HR is not easy. HR leaders often resort to employee engagement surveys that benchmark workforce satisfaction against that of their peers. While they can provide some basic information, focusing on the benchmarking aspect of these data sets is inherently flawed. Comparing completely different ways of working is nonsensical.
Benchmarks can also emphasize certain criteria that may not feature prominently in every business strategy. Ideally, the reverse should be the case, with the strategy determining which metrics are used. For example, an organization prioritizing the launch of new products should measure its people’s ability to create and innovate, whereas a business intent on optimizing costs should focus on productivity metrics.
“I suggest we use benchmarks with extreme caution because they drag everyone to the middle and discourage CHROs from thinking about what businesses actually need from their people to achieve their strategy,” says Garr. “They make executives feel better but rarely help meaningfully drive the business forward.”
By regularly providing metrics that align with business strategy, CHROs underline their value in contributing to strategic business objectives. Once that becomes clear, other senior leaders – and those with the purse strings – will be the CHRO’s allies.
Expert
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