“As a CHRO with 20 years of experience across HR and an intense obsession to learn about AI in HR, I’ve witnessed numerous technological shifts in our field. However, none have been as profound or as rapid as the current AI revolution. Today, I want to share my reflections on that AI won’t only be augmenting, but potentially replacing entire HR systems, and what this means for our industry.”
Riina Hellstrom – Expert Opinion
Does Klarna’s attempt to drop Workday offer a glimpse into the future?
Klarna, the Swedish fintech giant, has decided to move away from its long-term partnerships with Salesforce and Workday, and instead will leverage AI to craft a simpler tech stack that is designed uniquely for its business. While this decision is likely to be a shock to many, it’s just another part of Klarna’s aggressive AI initiative, which has already seen the company replace 700 customer service agents with AI systems.
To translate what this means for us normal HR people: Klarnas engineers are literally utilising AI to code their own HR/IS system!Â
While you may argue that moving away from Workday is just another example of aggressive cost-cutting that has been commonplace in HR over the past few years, that’s not what’s occurring here. We can’t really operate HR without a modern HR/IS, and replacing that with tech that you coded yourself sounds super risky. What we’re seeing here is a fundamental shift in how companies are beginning to view their technology infrastructure. Legacy systems like Workday and SuccessFactors, which have been the backbone of HR operations for years, might suddenly look outdated in the face of AI-driven alternatives. If I had a seat at the Workday board, I’d definitely dive in an learn more about this, soon!
The power of unstructured data
How AI systems can transform HR tech
Traditional HR systems rely heavily on structured data – neatly organised information that fits into predefined categories. Our organisations are becoming more complex, not the line-manager led, hierarchical pyramid that the legacy HR systems are founded on.Â
I’ve literally been in a situation where a 500 person organisation moved to a flat tribe model, and we didn’t need line managers to lead work, we had a hierarchy of product owners and agile coaches. But the global HR team required this group to have a “line manager” because Workday (the HR/IS system) was setup so. We ended up hiring an assistant, calling the position a “line manager” in Workday, and her task was literally to approve the HR workflows in the system. Didn’t make any sense whatsover.Â
The AI revolution in tech builds on a totally different logic. You don’t need a hierarchy or linear thinking. You can build it on the complex reality, because the AI can deal with unstructured data. AI-leveraged employee information systems can deal with a both-and world; connecting traditional hierarchies, tribes, project organisations, and external workforce such as freelancers and contractors. There’s a wealth of other, external unstructured data, like employee feedback, performance reviews, and even social media posts. This data is still valuable, but leveraging it has largely been unrealistic on these legacy systems – while AI thrives on unstructured data.Â
Andreessen Horowitz, the Silicon Valley venture capital firm, recently highlighted how AI is transforming how we handle this unstructured data, particularly in sales. The same principles also apply to HR. AI can now sift through vast amounts of unstructured data to extract meaningful insights about employee performance, engagement, and potential.
The a16z article on AI transforming sales provides some crucial insights that we can apply to HR tech development:
- Automated Data Entry: AI can automate the tedious task of data entry, freeing up HR professionals to focus on more strategic tasks.
- Predictive Analytics: AI systems can analyze patterns in employee data to predict turnover, identify high-potential employees, and even suggest personalized development plans.
- Natural Language Processing: This allows for more natural interactions with HR systems, making them more accessible to all employees.
- Real-time Insights: Unlike traditional systems that rely on periodic reports, AI can provide real-time insights into workforce trends and issues.
- Personalized Employee Experience: AI can tailor the employee experience, from onboarding to career development, based on individual preferences and behaviors.
What are the ethical considerations and challenges associated with AI in HR?
While the potential of AI in HR is exciting, it also raises important ethical considerations:
Decision Replicability and Explainability: As AI systems become more complex, ensuring that decisions are replicable and explainable becomes crucial. In HR, we can’t afford to have “black box” Al systems making critical decisions about people’s careers and livelihoods. A “black box” Al refers to systems where the decision-making process is opaque – we can see the input and output, but not how the Al arrived at its conclusion. This lack of transparency is unacceptable in HR.
- Privacy Concerns: With AI systems processing vast amounts of personal data, protecting employee privacy becomes more challenging and more important than ever. You have to be clear on what data sets are to be used by AI and what is not. Setting guidelines and expectations for AI use can give employees confidence that you won’t, for example, start crawling their social media profiles, or feed their search history into the AI model. Giving this confidence will help with the adoption of AI tools, and ensure that no employee feels they are under the watchful eye of ‘Big Brother’.Â
- Bias and Fairness: We must ensure that AI systems do not perpetuate or amplify existing biases in hiring, promotion, and other HR processes
- Human Touch and judgement: While AI can handle many tasks more efficiently, we must not lose sight of the importance of human judgment and empathy in HR. The AI-powered tech will give recommendations and suggestions that are quite accurate, but there will always be outliers. AI should be an assistance to human intelligence and EQ, not the other way around.Â
It’s time to embrace the AI revolution in HR
As HR leaders, we stand at a crossroads. The AI revolution offers unprecedented opportunities to transform our field, making it more data-driven, efficient, and strategic. However, it also challenges us to rethink our roles and the ethical implications of our technologies.
The sunset of legacy systems like Workday and SuccessFactors may be approaching faster than we thought. Just imagine what your CFO will tell you, if they hear Klarna is saving those millions every year, not paying massive licenses due to their own AI-HR-IS system? What if Klarna open sources it? We’re looking at serious disruption and innovation in the field! At least I’ll be following this space closely.
The future of HR is AI-driven, but it’s our responsibility to ensure that this future is also ethical, fair, and truly beneficial for all employees. The time to start preparing for this future is now.
We at Agile HR Community deliver “AI in HR” workshops and upskilling. We’re not working on the techie part, but translating this world so you can make more educated decisions for your organisation and work.
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