Dear Colleagues! This is Asrar Qureshi’s Blog Post #1141 for Pharma Veterans. Pharma Veterans Blogs are published by Asrar Qureshi on its dedicated site https://pharmaveterans.com. Please email to pharmaveterans2017@gmail.com for publishing your contributions here.
Continued from Part 2…
Preamble
McKinsey report HR Monitor 2025 highlights the following trends that HR managers/leaders should recognize, understand, and work on. We took the first two in the last blog post; the others we shall take up in this and following post(s) and then conclude the topic.
Five Trends That HR Leaders Must Recognize
- Workforce planning is not approached strategically enough
- Talent acquisition is becoming more complex
- Employee development continues to be highly fragmented
- Employee experience is essential
- Gen AI and shared-services centers should boost efficiency and effectiveness
HR function can evolve as a strategic partner for the organization if they address these five areas in an integrated fashion.
- Employee Experience is Essential
Employee development remains fundamental to organizational success, and companies are increasingly recognizing the importance of the employee experience (EX). A positive EX can drive engagement, reduce absenteeism, and enhance productivity across the workforce. This is particularly critical given that visible signs of dissatisfaction and disengagement are on the rise.
According to recent findings, nearly 20% of employees are unhappy with their employers, with France (30%) and Italy (27%) reporting the highest dissatisfaction rates. In Europe, employees miss about 15% of their scheduled work time, equal to roughly 37 workdays each year. Most of this absenteeism, especially in France (62%) and Italy (57%), is due to health-related issues, both physical and mental, rather than logistical challenges or difficulties balancing work and personal life.
Despite these high rates of absenteeism and dissatisfaction, unwanted attrition in Europe remains relatively low at 5.6%. This discrepancy suggests a risk of “quiet quitting,” where disengaged employees remain in their roles without being motivated or productive. The risk of quiet quitting is highest in France, Italy, and Spain, where dissatisfaction rates are more than twice the attrition rates, followed by Germany, where a significant portion of unsatisfied employees still stay with their employer.
Investing in a positive employee experience can make a significant difference: McKinsey’s research indicates that employees with a positive EX are 16 times more engaged and eight times more likely to remain with their organization compared to those with a negative experience.
To boost employee engagement and motivation, HR teams should closely examine the employee experience, identify what truly matters to their people, and shape their strategies to address these priorities.
Employee experience is highly individual. While factors like job security, positive relationships, and flexibility are foundational, other drivers can be more specific—such as providing quality workspaces in open-plan offices or implementing fair bonus structures for sales teams. These elements differ between organizations and even among departments.
To address these varied needs, HR should revamp policies, processes, and support systems across the entire employee journey, offering proactive and tailored engagement. Approaches like a cafeteria benefits model—where employees select perks best suited to their life stage and preferences, such as mobility support, childcare, or wellness programs—can be highly effective. Additionally, ensuring equal access to resources, tools, and development opportunities for all employees, regardless of location, is vital to fostering a strong and supportive work environment.
HR departments can use tech-driven EX strategies, like HR analytics and AI, to monitor employee experience, personalize development, and identify early signs of disengagement or burnout. Aligning EX with employee values increases engagement and retention, even during uncertain times.
- Gen AI and Shared-services Centers Should Boost Efficiency and Effectiveness
The delivery of HR services is rapidly evolving, driven by increasing cost pressures and the transformative power of generative AI. These factors are shifting HR’s focus from purely reducing costs to emphasizing speed, automation, and strategic value—with cost savings emerging as a natural benefit of embracing AI.
Generative AI is poised to revolutionize HR, delivering significant productivity gains and enabling a higher level of personalized service for employees. Organizations that fail to integrate AI into their HR operations risk lagging behind in both efficiency and the quality of employee experiences, which now demand seamless, customized, and human-centric interactions.
High-performing companies are already leveraging automation and AI to enhance efficiency, reducing the ratio of HR staff from one per 70 employees to one per 200. Many organizations are expanding shared-services centers or adopting technology-first models that incorporate AI and automation into HR functions—sometimes bypassing traditional structures altogether. At the same time, AI is empowering HR to play a more strategic role by providing data-driven insights that inform transformation and improve business decisions.
To meet growing demands for efficiency and fully unlock the benefits of generative AI, HR needs to rethink how its services are organized and delivered. Companies that modernize HR by combining shared-services centers, self-service options, and generative AI will be best placed to achieve operational excellence and deliver meaningful value to their employees at scale.
Many organizations have yet to fully digitalize their HR services, with many still relying on fragmented or even paper-based processes. Shared-services centers (SSCs) and self-service tools could greatly improve efficiency but are not widely adopted; for instance, only 18% of surveyed large European companies use specialized HR shared services. The UK leads in adoption at 40%, while other countries like Spain, Germany, and Italy lag behind at around 14-16%.
To benefit from generative AI in HR, companies must first standardize and digitalize their services. Once this foundation is set, integrating gen AI into SSC operations can help automate tasks, reduce manual work, and boost scalability. Modernizing HR means moving from rigid role-based structures to gen AI–enhanced workflows, carefully balancing centralized delivery with automation. SSCs will continue to play a crucial role in managing complex HR issues and providing strong employee support, even as automation expands.
Organizations are increasingly automating HR tasks with generative AI, aiming to improve both efficiency and service quality. Experts estimate that about one-third of HR activities could be automated, and companies are encouraged to start with high-impact use cases while developing comprehensive gen AI strategies. In Europe, gen AI is mostly used for routine processes like time tracking, absence management, and administrative tasks, with pilot projects focused on more complex areas such as workforce planning and recruitment.
Successful adoption requires a strong business case, targeting applications with clear value and measurable ROI. A growing number of organizations—60% overall, 55% in Europe, and 70% in the United States—have implemented or plan to introduce gen AI governance structures like centers of excellence. Building dedicated gen AI teams and upskilling in data analytics and digital services are key, alongside ensuring ethical and effective use, particularly in sensitive areas like résumé screening.
Sum Up
Many HR departments in Europe and the US are still early in adopting best practices and integrating generative AI, with many lacking standardized processes and digital infrastructure. Despite easing labor markets, the need for a resilient and modern HR function remains strong. Over the next 12 to 24 months, organizations have a crucial opportunity to modernize HR by aligning strategy with business goals, updating operating models, and building digital skills to fully leverage gen AI and improve both employee experience and organizational performance.
Concluded.
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