CHRO confidence eases as AI reshapes workforce planning

The Conference Board's CHRO Confidence Index fell to 56 in the third quarter, remaining above the 50 mark that signals more positive than negative responses.

The survey of US chief human resource officers showed confidence continued to ease from the record high reached earlier this year. The index stood at 58 in the second quarter, as hiring expectations improved slightly while retention and engagement weakened.

Hiring plans remained positive for the next six months. The hiring component of the index rose to 61 from 59, with 53% of respondents expecting hiring to increase and 17% expecting it to decrease.

That stability in recruitment plans contrasted with a cooler outlook for overall workforce growth. Some 49% of CHROs expected total workforce size to increase, down from 55% in the previous quarter, while 28% expected no change and 23% expected a decrease.

"CHROs are still planning to hire, but the broader workforce picture is becoming more cautious," said Diana Scott, US Human Capital Centre leader at The Conference Board.

"Organisations are balancing the need for talent with slower workforce growth and mounting concerns about engagement and retention. At the same time, AI is forcing leaders to rethink what skills they will need in the future and how they plan their workforces," Scott said.

Retention and engagement

Retention expectations softened in the quarter. The retention component slipped to 54 from 55, with 33% of respondents expecting employee retention to improve and 22% expecting it to worsen.

The gap between those expecting retention to improve and those expecting it to deteriorate narrowed to 11 percentage points from 17 in the previous quarter, pointing to a more mixed view among HR leaders about their ability to keep staff over the next six months.

Employee engagement showed the sharpest deterioration of the three index components. The engagement reading fell to 55 from 59, with 44% reporting increased engagement and 24% reporting a decrease.

The increase in respondents reporting weaker engagement was notable. In the second quarter, 16% reported decreased engagement, compared with 24% in the latest survey.

AI planning

The survey also found that AI is already changing how organisations approach workforce planning, although most respondents said those changes remain limited. More than eight in 10 CHROs (82%) said their organisation has changed its workforce-planning process because of AI.

Half of respondents described the change as slight, while 25% said it was moderate and 7% said it was significant, suggesting many employers are still at an early stage of adjusting planning processes to account for AI.

Among organisations that had altered workforce planning, 67% said they had analysed AI's potential impact on jobs, tasks or workforce demand. The same share said they had brought AI technologies or AI leaders into workforce-planning discussions.

Fewer had changed planning cycles or data inputs. Some 45% said they had incorporated new AI-related workforce, skills or labour-market data, while 21% had changed workforce-planning schedules and 20% had increased the frequency of planning.

Integration across the wider business remained limited. Just 19% said anticipated AI effects had been incorporated into workforce and financial planning across the enterprise, with the figure the same for global and non-global organisations.

Among global organisations, 32% said they had incorporated anticipated AI effects into workforce and financial planning for selected functions, roles, business units or geographies. Among non-global organisations, 30% said the same.

Preparedness gaps

Many CHROs said their organisations were not yet fully ready to manage AI-related workforce changes. While 55% described their organisation as prepared to manage AI-driven workforce change over the next two years, only 4% said they were very prepared.

More than a quarter, or 27%, said their organisation was unprepared, pointing to a wide gap between early adoption of AI in workforce planning and confidence in managing its longer-term effects.

The main barriers cited were difficulty predicting AI's impact on the workforce, named by 41%, limited AI skills in the current workforce at 39%, and an unclear AI strategy at 31%. Financial resources, executive alignment and workforce data were mentioned less often.

"AI is clearly becoming part of workforce planning, but most organizations are still working through what it means in practice," said Robin Erickson, PhD, head of human capital research at The Conference Board.

"The biggest obstacles aren't simply budget or data. Organisations are uncertain about how AI will change work, the potential gaps in workforce skills and, thus, the lack of a clear AI strategy. CHROs will need to connect the HR technology strategy much more closely with workforce and skills planning," Erickson said.