A new report by Henley Business School and Oxford Strategic Consulting (OSC) examined global human capital challenges facing today’s leading organisations and how business leaders can deliver the differentiating strategic capabilities (DiSCs) needed to achieve outstanding strategic success. Utilising in-depth interviews with CEOs, C-Suite leaders, Boards and HR professionals, the innovative “HR with Purpose: Future Models of HR” report identified three key trends in the nature of work:

1. A rapid and continuing shift from a permanent full-time workforce to a combination of full-time, part-time, permanent and temporary, employed and self-employed staff. Key people will be far less tied to one organisation so their enthusiasm and motivation will need to be earned daily.

2. A trend towards more flexible, project-based teams, contrasted with traditional steady state business-as-usual operation. Organisations that help team members to maximise their own happiness and enthusiasm will benefit from significant increases in individual resilience and flexibility with significant impacts on business results.

3. Increasing use of AI and the potential near-term displacement of human capital with AI capital – a development most business leaders are ill-equipped to manage. With differentiating strategic capabilities no longer deriving mainly from human capabilities, organisations will need to balance and manage increasingly interchangeable human and technological capabilities.

The HR function should, in theory, be well-positioned to address these challenges. In practice, the function is not yet expert in delivering the strategic capabilities (DiSCs) needed to achieve outstanding strategic success. Instead, HR services are increasingly delivered by technology and external providers, while business leaders often rely on subject-matter experts for advice. An inability to deliver strategic contributions in today’s fast-changing business environment will leave internal HR functions to simply oversee relationships in a quasi-procurement role.

Until recently, the key capabilities needed within organisations have been primarily human capabilities, yet those capabilities are becoming increasingly interchangeable between human and technology. Robot receptionists serve as just one example. This capability shift presents an opportunity for business leaders to empower their HR functions to become expert in all capabilities – both human and technological – so they can start to deliver the capabilities needed to achieve outstanding strategic success. The function would have to be expert in the trade-offs between human and technological capabilities as well as expert in the capabilities themselves, such as artificial intelligence (AI).

Future business leaders have the choice of simply re-skilling HR to provide better tactical value through people-processes and expert advice on people issues or transforming the function to exploit the full potential of its strategic contribution by defining and delivering DiSCs. If HR cannot rise to this challenge, then it will be eclipsed by another function, be it IT or Strategy. This would confine the HR function to an increasingly marginalised and unfocused mixture of welfare, legal and service delivery roles. The future of HR is not doomed, but it must adapt to prosper and to deliver true value for organisations.