Why HR Gets Sidelined and How Top Teams Are Making It Strategic

Why HR Is Still Overlooked and What High-Performing Teams Are Doing About It

New research from isolved and Sapient Insights Group sheds light on why HR continues to struggle for strategic influence despite its critical role in business success. Drawing on data from nearly 3,500 small and midsized businesses representing over 25 million employees, the study highlights outdated perceptions, underused AI tools, and gender disparities as major barriers holding HR back.

In times marked by disruption and AI-driven change, HR must shift from a compliance focus to the center of business decision-making. The findings offer clear evidence and practical steps for HR professionals to increase their impact.

Strategic Credibility Gaps Limit HR's Impact

There is a notable credibility gap between HR and other business functions. While 62% of business owners and 55% of CEOs consider HR a strategic partner, only 23% of finance leaders and 35% of IT leaders agree. Even within HR, just 52% of teams are seen as strategic across their organizations.

This disconnect persists despite research showing that strategic HR drives 34% stronger business results over five years, including improvements in profitability, innovation, and market share. Closing this gap is essential for HR to influence core business decisions effectively.

AI as a Strategic Differentiator

Organizations leveraging artificial intelligence in HR report an average 8% improvement in HR, talent, and business outcomes. Depending on the company's size, this can translate to substantial financial gains.

Yet, 25% of SMBs and 20% of mid-market companies are unaware that their existing HR technology already includes AI and machine learning features. This underutilization limits HR’s potential to streamline operations and elevate its strategic role.

When HR leaders engage AI thoughtfully and ethically, they can enhance efficiency and gain stronger influence within their organizations. For HR professionals interested in AI tools and training, platforms such as Complete AI Training offer valuable resources to build these skills.

HR Missing Its Moment in Change Leadership

Companies undergo an average of four and a half major business changes annually. Despite this, many HR teams remain reactive and focused primarily on compliance.

The report finds that HR functions embracing cross-functional collaboration, data fluency, and workforce-centric scheduling are more likely to be recognized as strategic partners. Taking proactive roles in change management strengthens HR’s position.

Gender Equity Gaps Undermine Strategic Roles

Women make up over 70% of HR leadership overall, but men hold 86% of strategic HR roles in publicly traded companies. Additionally, female HR leaders often report to finance or payroll departments — areas less likely to view HR as strategic.

This structure reinforces the perception of HR as transactional and limits female leaders’ ability to gain executive influence. Addressing these imbalances is key to unlocking HR’s full strategic potential.

Outcome-Focused HR Creates Business Value

HR teams that emphasize measurable outcomes—such as skills development, internal mobility, and workforce planning—drive stronger long-term business success. Their work directly contributes to profitability, innovation, and workforce agility.

Aligning HR efforts with both business goals and employee needs positions HR as a critical partner in growth.

Attend Live Keynotes with Stacey Harris at Connect for People Heroes

HR professionals can explore the full research findings at isolved’s Connect for People Heroes events in November 2025. Stacey Harris, Chief Research Officer at Sapient Insights Group, will present the study results during keynote sessions.

• November 4–5 – Philadelphia, PA
• November 13–14 – Scottsdale, AZ

These events offer opportunities to engage with peers and develop actionable strategies for advancing HR’s strategic role.

About isolved®

isolved provides human capital management (HCM) solutions that help organizations recruit, retain, and develop their workforce. More than 195,000 employers and 8 million employees use isolved's platform to streamline HR operations and enhance employee experiences.

The isolved People Cloud™ is a unified HCM platform with built-in AI and analytics, connecting HR, payroll, benefits, and talent management into a single solution that supports better business outcomes. Through the Sidekick Advantage™, isolved offers expert guidance and community support empowering HR professionals to grow their impact.

About Sapient Insights Group

Sapient Insights Group is a women-owned, independent research and advisory firm known for its data-driven insights that help organizations improve workforce outcomes. Their Annual HR Systems Survey is the largest independent study of HR systems adoption and outcomes, now in its 28th year.