Keeping HR Human in the Age of AI: A Guide for SMEs

AI, automation and hybrid working, have transformed HR in ways we never expected a few years ago. Small and medium-sized enterprises (SMEs) can benefit greatly from these advancements. They provide chances to work smarter and improve efficiency. But there's also a real risk. HR functions could become too focused on processes and numbers. In turn, losing sight of the people at the heart of every business.

For SMEs, keeping HR human isn’t just a ‘nice to have’, it’s essential. Building trust, engagement and resilience keeps teams together through challenging times. Here are some strategies to make the most of technology in HR, without losing the human touch.

The risk of transactional HR

AI and automation are powerful tools. They reduce admin and give leaders more data to inform decisions. But if we’re not careful, it’s all too easy to reduce employees to data points. When HR becomes transactional, decision-making feels impersonal. In turn, this can dilute workplace culture and reduce employee motivation.

Short-term gains from applying metrics and algorithms might look great on the surface. However, over time, this can erode trust and belonging. Two things every SME needs for long-term success. A recent Gartner survey found that 60% of organisations use AI for HR tasks. However, another survey showed that 70% of UK workers prefer human interaction over AI. In fact, 36% want to deal only with humans. AI can make admin tasks easier. However, the human touch builds culture, lifts morale and supports wellbeing. These factors are key for keeping employees engaged and retained.

How to maintain meaningful employee connections

Blending tech expertise with emotional intelligence will reshape the role of SME leaders. This paves the way for a more innovative and inclusive future.

With hybrid working, it’s even more important to build strong work relationships. Relationships that will help employees feel valued and connected to their workplace. Here’s how SMEs can keep their people engaged:

Set up regular check-ins: Don’t just talk about work. Leaders should also check-in with employees about their wellbeing, career and personal goals.
Build team spirit online: Try virtual coffee breaks or digital games. These can help to keep the social side of work active.
Celebrate wins: Acknowledge both big and small wins in team meetings or shout them out in a group message. Recognition boosts morale and belonging.

Should SMEs be using AI to help with HR?

First, it’s important to debunk some of the myths about AI. One myth is that AI will make HR impersonal. While AI can lack emotional intelligence, it can enhance personalisation when used well. For example, it can help to tailor candidate experiences.

On the flip side, some believe AI is flawless or entirely objective. However, AI is only as reliable as the data it’s trained on. If biases exist in the data, they’ll influence the outcomes. To remain effective and unbiased, AI tools need ongoing oversight and regular adjustments. These changes need human input.

To make the most of AI, the first step is clarity. Business leaders need to first understand how AI can support HR functions. They then need to develop a relevant strategy. Transparent communication with employees about AI’s role in HR is equally important to build trust. This means that ethical AI use is also critical. SME leaders should be able to confidently audit AI tools, ensuring they’re fair, inclusive and free from bias. But above all, maintaining a human touch is essential. While AI can analyse data and give insights, final decisions should rest with people. Those who can add empathy and context.

AI may be able to analyse employee sentiment and recommend areas for improvement. However, it’s the expertise of leaders who can determine the relevance of these suggestions and how best to implement them. Humans are complex, and no technology can fully address every challenge.

By combining AI’s efficiency with human judgment, SME leaders can create a balanced approach to HR. When used thoughtfully, AI isn’t a threat; it’s a powerful assistant that helps leaders to work smarter, not harder.

Using AI for human decision-making

AI can automate repetitive tasks, speed up recruitment and give insights into staff performance. But it should enhance, not replace, human judgment.

There are some key areas where AI can be implemented to help with processes:

Recruitment and talent

AI is great for sorting through CVs quickly and spotting trends, but don’t let it decide everything. Some talented people might not match every automated filter.

Use AI for first-round screening. Then, conduct human interviews. Look for traits such as creativity and emotional intelligence. These are things an algorithm often can’t spot.

AI can use engagement and performance data to predict which employees might leave, need upskilling or are ready for a promotion. However, such situations, again, are nuanced. For instance, changes in personal life or leadership potential might be overlooked. This highlights the need for a genuine connection with employees.

Performance management

AI can model different scenarios. It can forecast headcount, assess remote work viability, or analyse restructuring impacts. This is done using historical data. It can also track targets and progress, but numbers will never tell the full story. Pair AI data with regular manager check-ins and feedback sessions. Use the data to spark conversation, not shut it down.

Keeping people at the centre of these decisions helps avoid bias and supports a fair, well-rounded view of every employee.

Learning and development

AI can also assist with recommending training paths based on employee roles, goals and skill gaps within the business. But leaders will need to ensure learning aligns with the business strategy. This should be balanced with employees' motivations, career aspirations and preferred learning styles.

Creating authentic communication

The general theme here is that a genuine connection between SME leaders and employees is needed. If businesses are mostly remote, or a lot of communication happens online, it’s easy to misread signals or feel out of the loop. Here’s how to keep teams talking and listening:

Be transparent and share updates and goals openly, using platforms like Slack or Teams. The more a team knows, the more trusting they’ll be.
Train managers, as great communication is a skill. Invest in training so managers know how to listen and empathise, even on video calls.
Encourage feedback from everyone. Make it normal to share thoughts. Use regular surveys, quick check-ins or anonymous suggestion boxes.

Open and clear communication is what makes any workplace feel real and human.

Wellbeing first

The pressure of uncertain times can hit employees hard. SMEs must put wellbeing and mental health at the top of their HR agenda, now more than ever.

This means building a culture of wellbeing. There are a few common ways to do this:

Flexible work: Let employees balance their jobs with family, health and whatever else matters to them. Hybrid and flexible hours do make a difference.
Support mental health: Offer access to counselling, online wellbeing resources and regular workshops. According to a CIPD report, businesses that invest in mental health see stronger engagement and lower absence rates.
Lead by example: Managers should show it’s okay to talk about wellbeing and take care of themselves. This sets the tone for everyone else.

If the company faces tough choices, leaders must be as open as they can be about what’s happening and why. Honest communication builds trust and helps teams navigate changes together.

SMEs thrive when HR stays human

Technology will keep changing HR, but real success comes from putting people first. In a digital age, building human connections and fostering open conversations is key. That's what builds resilient, agile teams that'll thrive, no matter what the future brings.

By working with HR tech, instead of letting it take over, business leaders can create a workplace that’s innovative and inclusive. One where people want to work, grow and succeed.

About the author

Dr Aaron Taylor is the Head of School for HRM at Arden University. Arden University is a leading UK provider of flexible, online and blended learning, supporting thousands of students globally. As an established pioneer in online learning, it offers learners personalised academic and digital-skills support from enrolment to graduation.