Labor & Employment Law Daily Wrap Up, REPORTS—HR functions face AI, skills, workforce planning challenges as expectations shift, McKinsey report finds, (Aug 11, 2026)

By WK Editorial Staff

Artificial intelligence is reshaping workforce needs, but many employers remain focused on short-term staffing as skill gaps and changing employee expectations create new challenges.

Human resources leaders are entering a period of significant transformation as artificial intelligence, changing workforce expectations and evolving business demands reshape the role of the “people function,” according to McKinsey & Company's “HR Monitor 2026: A Turning Point for the People Function.” The report, based on survey responses from approximately 1,300 HR professionals and 5,500 employees across 10 countries, suggests that many organizations remain unprepared for the scale of workforce changes likely to occur in coming years.

McKinsey's findings indicate that while organizations have made progress in strengthening HR operations and processes, substantial gaps remain between workforce planning and future business needs, employee expectations and organizational responses, and experimentation with artificial intelligence and its successful implementation at scale. According to the report, those disconnects are creating new challenges for HR leaders who are increasingly expected to guide strategic workforce transformation rather than simply manage personnel functions.

The report characterizes 2026 as a pivotal moment for the “people function.” Economic pressures, rapid technological advancement and shifting employee attitudes are forcing organizations to rethink how work is organized, how talent is acquired and developed, and how businesses prepare for future workforce needs. McKinsey concludes that success will depend largely on an organization's ability to move beyond short-term workforce management and embrace a more strategic approach to talent planning.

Workforce planning requires a new approach. One of the report's central findings is that many organizations continue to rely on workforce planning models that focus primarily on short-term staffing needs rather than long-term capability development. According to McKinsey, only 11 percent of organizations surveyed reported taking a long-term perspective on workforce planning.

Researchers argue that such an approach may become increasingly problematic as AI and automation continue to reshape job responsibilities and skill requirements. Organizations that concentrate mainly on filling immediate vacancies risk overlooking broader transformations affecting the nature of work itself. As technology changes how tasks are performed, businesses may need to focus less on traditional headcount planning and more on understanding the capabilities required for future success.

The report suggests that workforce planning should evolve toward a model that emphasizes skills, tasks and organizational capabilities rather than simply staffing levels. Such a shift would require HR leaders to work more closely with business leaders to anticipate future talent needs and identify emerging skill gaps before they become critical.

AI is reshaping skill demands. Artificial intelligence emerged as one of the report's dominant themes. McKinsey found growing demand for AI-related capabilities, technology expertise and data-analysis skills, reflecting the increasing role of automation and digital tools across industries.

However, the report suggests that the most significant changes may not involve technical skills alone. As routine tasks become increasingly automated, organizations expect greater demand for human-centered capabilities such as communication, collaboration, judgment and relationship management. According to McKinsey, the future workforce will require a combination of technological fluency and interpersonal skills.

At the same time, the survey found that many organizations remain in the early stages of AI implementation. While experimentation is widespread, successfully integrating AI into everyday workflows and realizing measurable business value remains a challenge for many employers.

Skills gaps continue to challenge employers. Despite years of discussion about workforce development and reskilling, McKinsey found that skills shortages remain a significant concern. Organizations continue to report difficulties obtaining the capabilities needed to compete in an increasingly complex business environment.

According to the report, demand is shifting away from routine, task-based skills and toward capabilities that support innovation, leadership, adaptability and technology adoption. Yet many employers report that their current workforces are not developing those skills quickly enough to meet emerging needs.

Recruiting becomes more complex. The report found that labor markets have generally stabilized compared with recent years, creating what McKinsey describes as a more employer-driven environment. Offer acceptance rates and overall hiring success rates increased modestly among surveyed organizations.

Yet recruiting challenges have not disappeared. According to the report, employers increasingly face higher application volumes and growing complexity in candidate screening and selection processes. The challenge for many organizations is no longer attracting applicants but efficiently identifying and securing the most qualified candidates.

Employee expectations continue to evolve. Another key finding involves the continued disconnect between employee expectations and employer responses. The report identifies persistent gaps between what employees want from work and the strategies organizations are currently implementing.

Workers increasingly expect opportunities for development, flexibility, meaningful work and support as technology reshapes workplace roles. At the same time, organizations are balancing economic pressures and productivity demands, creating tension between business priorities and employee expectations.

A strategic turning point for HR. Ultimately, McKinsey's report portrays the HR function as undergoing a fundamental transformation. No longer focused solely on hiring, policies and compliance, HR is increasingly expected to serve as a strategic partner in shaping organizational capabilities and future workforce readiness.

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