Indore (Madhya Pradesh): A study by the Indian Institute of Management Indore has shed new light on how Artificial Intelligence (AI) is reshaping the Human Resource Management (HRM) scenario.
The study, authored by Prof Shrihari S Sohani and Prof Jatin Pandey and published in ‘Acta Psychologica’, introduces a novel framework that evaluates AI’s practical utility in key HR functions challenging conventional wisdom about its universal benefits.
The research seeks to bridge the gap between AI’s perceived promise and its real world performance in the workplace.
Using a dual-lens approach based on the Transaction Cost View (TCV) and Resource-Based View (RBV), the study assesses AI’s role in four core HRM functions: recruitment and selection, performance management, training and development and compensation and benefits.
“While AI is widely touted as a game-changer in HR, our research finds that its value varies considerably across different HR domains,” said Sohani. “This framework helps organizations strategically decide where AI adds real value and where caution is required,” he added.
Where AI works and where it doesn’t
Recruitment and selection emerged as the most AI-friendly function. The study found that AI tools like chatbots and machine learning algorithms significantly streamlined candidate screening, reduced hiring biases and accelerated talent acquisition—all while handling large volumes of data with ease.
However, in performance management, AI’s capabilities are more limited. Although AI can crunch performance metrics, it falls short in evaluating qualitative factors such as collaboration, creativity and adaptability. “Performance management still requires the human touch,” noted Prof. Pandey.
In training and development, the researchers highlighted AI’s ability to deliver personalized learning experiences and adaptive training programmes, helping employees upskill efficiently. Similarly, in compensation and benefits, AI showed promise in automating payroll, ensuring regulatory compliance, and offering strategic insights into market trends, found the researchers.
Challenges: Ethical and operational hurdles
Despite these benefits, the study flagged several challenges, including data privacy concerns, algorithmic bias and the need for continuous human oversight. The researchers urged organizations to implement AI ethically, ensuring transparency and fairness in AI-driven decisions.
“Our framework isn’t just about technological efficiency—it’s about strategic alignment,” said Prof Sohani. “Organizations must balance innovation with responsibility, he added”.
Road ahead
The study calls for ongoing research into AI’s long-term impact on workforce engagement, productivity and satisfaction. It also encourages exploration of AI’s applicability across different cultural and organizational contexts.
By aligning AI adoption with both economic efficiency and strategic goals, companies can build more agile, inclusive and future-ready workplaces.
