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AI Insights: How It's Revolutionizing Human Capital Management

The intersection of AI and Human Capital Management (HCM) is relevant to services, technology and tech-enabled services companies alike. What are the implications of the rise of AI in HCM, and what should companies and investors keep top of mind as the technology continues to advance?

Baird Global Investment Banking’s Inside the AI Transformation series explores these questions. Our team recently hosted a discussion with three AI experts, who shared their insights on the state of AI in HCM: Steve Kurtz, Ernst & Young LLP; Jamaal Justice, Ernst & Young LLP; and Dr. Yves-Alexandre de Montjoye, Imperial College of London.

The trio discussed what companies and investors in the space should consider as AI continues to shape HCM and key lessons learned from companies implementing AI in their organizations.

Thank You to Our Panelists

The State of AI: A Tale of Two Revolutions

AI is evolving in real time, at an increasingly rapid pace. Dr. de Montjoye highlighted two concurrent revolutions unfolding within the space. The first is a deep learning revolution. “That has really led to dramatic improvement in their production capabilities, because now models can basically learn directly from raw, unlabeled data and have been able to basically transfer knowledge from one task to the other,” he shared. The second revolution is that of generative AI, which has advanced from prediction to content generation – emblematic of the dramatic changes in how AI models are built and how they can be useful.

Key Themes for Investors

There’s no shortage of change happening in – or capital pouring into – the AI space. Organizations are investing because they see the potential, and they’re eager to experiment and find ways to realize true business value from AI. Justice highlighted three key trends emerging around business investment in AI:

  1. Business opportunity, whether operational, cost efficiency, process efficiency or other
  1. Competitive considerations. As Justice called out, “Whether you choose to go on this journey or you don't choose to go on this journey, there's an impact and companies that are able to leverage AI effectively to improve their services, products or operations are going to have an opportunity to be at a significant advantage from those who don't.”
  1. Risk. Organizations need to consider regulatory compliance, data privacy and other considerations as they work to incorporate AI into their business.

AI has meaningful implications for many dimensions of HCM. Generative AI can handle lower-value tasks, freeing up talent and resources for higher-value strategic work. As Kurtz said, “Generative AI is not just transforming day-to-day or business as usual activities, but it really is, it's reshaping the role of HR as strategic partner in the organization.” AI also has clear applications in disciplines such as workforce planning, recruiting, talent management, payroll and skills development.

Where are Companies Focusing Their AI Attentions?

Personalization of content is a major area of focus for many companies. “What we're working on as a firm and what others are working on is accelerating the personalization of that content,” said Kurtz. Generative AI is emerging as a powerful tool to this end. While content and training personalization has traditionally been done on a smaller scale, AI enables organizations to accomplish it at a much larger scale and reach more individuals.

Looking ahead, the group agreed digital labor, chatbots and virtual assistants will continue to be common use cases for AI. Technology will continue to accelerate and mature. In the case of chatbots and virtual assistants, there is a future opportunity to marry structured and unstructured data. As Justice said, “The art of the possible here is to be able to bring together that structured and unstructured data into these models” and give them access to answer sophisticated, complex questions about topics such as benefits details.

Common Challenges to Consider

Many companies find it challenging to align strategic objectives. AI implementation is “happening at a very quick pace, but it needs to be in lockstep with the overall strategy of the organization,” said Kurtz.  

Readiness is another challenge. “One of the biggest things that we're seeing clients struggle with now is jumping right away into an AI solution, but not yet having a solid foundation from a data standpoint. And those two are critical,” Kurtz shared. Governance is another common challenge among organizations implementing AI. Having a solid governance structure to help guild the ongoing maintenance of AI models and ensuring its alignment with an overall business strategy is complex, but essential for success.

Dr. de Montjoye emphasized the importance of a flexible approach to all these efforts, stating “It's really about this agile, iterative approach working with experts and really trying to identify opportunities where AI as it exists today is going to be very good and will bring value… it's a question of really aligning what AI can do today with the opportunities.”

Connect with Baird’s Global Human Capital Management Team

Bret Schoch

Sebastian Daumueller

Andy Livadariu

Simon Pearson

Don McCunniff

Helen Jones