HR teams and organisations will grapple with emerging challenges in AI integration, diversity initiatives, and employee engagement over the next year, according to Lattice’s 2025 State of People Strategy Report.
The report, based on a survey of over 1,250 HR leaders and managers globally, looked at the most persistent pressures HR teams face, from hiring uncertainties to AI’s transformative influence.
“This year’s State of People Strategy Report reveals that HR is at an inflection point and demonstrates why, in the age of AI, this is HR’s moment to lead,” said Lattice CEO Sarah Franklin. “Employee engagement is down, skill gaps are growing, and people teams are being asked to do more with less – while innovation in AI technology, which has massive potential to help HR address these challenges, is often raising new questions instead of solving real problems.
“To build a future where AI serves the success of people, we must continue to empower HR to do what they do best: unlock potential, drive performance, and elevate every employee.”
Core Priorities Remain Unchanged
Despite an environment marked by frequent change, Lattice’s report shows that high-performing organisations have remained focussed on four main areas: employee engagement, performance management, learning and development (L&D), and manager enablement.
High-performing HR teams that actively support their managers see significant positive outcomes, including higher manager engagement, stronger company loyalty, and improved employee connections. In these teams, 91 percent report meeting most or all of their managers’ needs, in contrast with only 41 percent among low-performing teams.
This highlights a critical opportunity for HR teams to improve manager alignment and engagement by providing targeted tools, resources, and training to help managers foster trust and cohesion within teams.
Slow AI Adoption: a Missed Opportunity
As AI continues to revolutionise workplace operations, the report notes that HR has yet to fully capitalise on its potential. Only 15 percent of HR teams have moved beyond evaluating AI to implementing it. While AI was found to hold promise for various HR processes, a lack of user-friendly tools tailored for HR needs and concerns about the technology’s broader impact have hindered its adoption.
Despite AI’s slow uptake, HR teams willing to experiment with the technology report satisfaction, particularly in areas such as pay and promotion analysis. However, successful integration will depend on intuitive, data-driven solutions that empower HR professionals to manage critical responsibilities without the need for extensive technical expertise. The report suggests that, with the right approach, AI can alleviate administrative burdens and enable HR to refocus on core people-centric initiatives.
DEIB Efforts Take a Back Seat Due to Resource Constraints
Diversity, equity, inclusion, and belonging (DEIB) initiatives, historically key areas of HR strategy, have seen a marked decline in prioritisation this year, with only 15 percent of HR teams identifying DEIB as a focus for 2025. The report attributes this drop to resource limitations and difficulties in demonstrating return on investment, particularly among U.S.-based organisations, where DEIB prioritisation lags behind that of their European counterparts.
European HR leaders were found to be 2.8 times more likely than their U.S. counterparts to list DEIB as a priority.
Engagement Efforts Hampered by Limited Resources
Although employee engagement remains a top priority for the fourth consecutive year, the report notes a wide gap between HR teams’ ambitions and the resources available to realise them. While 92 percent of HR professionals acknowledge the importance of engagement, only 39 percent of HR teams report having the necessary resources and support to enact engagement initiatives – leaving a concerning 61 percent unable to fully implement their plans.
“HR teams have faced significant challenges in recent years, yet our State of People Strategy Report demonstrates their resilience – and offers a path forward,” said Gianna Driver, Chief People Officer at Lattice. “By partnering with managers, prioritising engagement alongside performance, and leveraging technology to solve real problems, we can build resilient, future-ready teams.”