In 2025, Human Resources Management (HRM) is increasingly more recognised as a potential engine for business value, resilience, and responsible growth. Yet, the reality is that most organisations are still on the journey toward this vision. While some companies are making significant progress, many are still developing the capabilities, systems, and cultures needed to realise these ambitions. This article explores critical areas where HR can—and increasingly does—create value in companies, while honestly reflecting on uneven progress, persistent challenges, and lessons learned.

Strategic Alignment of HR With Business Performance and Pay Transparency

The strategic alignment of HR with business goals is more often an aspiration than a reality. It is often what I encounter as an HR Advisor. I actually find it a bit unusual to write that, but that is genuinely how it feels. As part of preparing for new legislation requiring the documentation and justification of pay disparities, this is something I frequently come across. Few of the people I meet have a complete overview of this information.
The EU’s Pay Transparency Directive, implemented in 2023, has prompted a wave of change, requiring employers to make pay structures more transparent and to link salary increases to objective performance metrics. In leading companies, this has led to the overhaul of performance management systems, with annual reviews and regular check-ins structured around clear, measurable objectives—often tied to key business outcomes such as revenue growth, customer satisfaction, or innovation targets. But still, not all is “up front” yet.
For many organisations, this transition is still in progress. Defining and measuring performance in a way that is both fair and meaningful remains a challenge, particularly in complex or creative roles where outcomes are not easily quantified.
The link between pay and performance is not always clear to employees, and some managers struggle to conduct unbiased appraisals or communicate pay policies openly. There is also a risk of over-reliance on systems or metrics that do not fully capture the complexities of individual contributions. As a result, while some employees feel motivated by transparent, performance-linked pay, others remain sceptical or disengaged. It is truly a balance.

Moreover, the cultural shift required to make pay transparency effective is significant. In many companies, conversations about salary have traditionally been private or even taboo. Moving to a model where pay bands are published and salary decisions are justified in writing can create discomfort and resistance, particularly among long-serving staff or in hierarchical environments. HR teams are learning that successful implementation requires not just new systems, but also extensive training for managers, clear communication with employees, and a willingness to address difficult questions about fairness and equity.

The process of aligning HR with business strategy is iterative, requiring ongoing dialogue, adjustment, and a willingness to learn from both successes and setbacks. As more companies share their experiences and best practices, the hope is that transparent, performance-linked pay will become the norm rather than the exception across Europe.

Responsible and Compliant Use of Artificial Intelligence in HR

Artificial Intelligence is transforming HR, but the adoption process is marked by both enthusiasm and caution. The EU AI Act, expected to take full effect in 2026, sets high standards for transparency, fairness, and accountability in HR technology. Some pioneering companies have embraced AI-powered recruitment, chatbots, and predictive analytics, using these tools to automate routine tasks, personalise employee experiences, and provide data-driven insights.

Yet, the reality is that many organisations are still in the early stages of adoption. Concerns about bias, privacy, and the reliability of AI systems are widespread. There have been well-publicised cases of chatbots that frustrate users or algorithms that inadvertently discriminate against certain groups. Too often, new systems are rolled out before they are truly ready, resulting in employee and client dissatisfaction. As a result, HR leaders are investing in rigorous testing, user feedback, and human oversight. In most companies, AI augments rather than replaces human judgement, and employees are given clear explanations and the right to challenge automated decisions.

The process of integrating AI into HR is also shaped by the need for compliance with GDPR and other data protection laws. HR teams must ensure that personal data is collected, stored, and processed in accordance with strict legal requirements, and that employees are informed about how their data is used. This adds an additional layer of complexity to the adoption of AI, particularly for multinational organisations operating across different legal jurisdictions.

Furthermore, the value of AI in HR is realised only when technology enhances, rather than undermines, the human experience.
I see HR leaders are increasingly aware that the success of AI initiatives depends on employee trust and acceptance. This means involving employees in the design and rollout of new systems, providing clear information about how AI will be used, and creating channels for feedback and redress. The path forward involves continuous learning, collaboration with legal and data protection experts, and a commitment to ensuring that technology genuinely adds value for both employees and the business.

Competence-Based Workforce Planning: Skills, Knowledge, Experience

Competence-based workforce planning is gaining momentum, but implementation remains uneven. The most advanced organisations use sophisticated talent mapping platforms to inventory competences, knowledge, skills, and experience across the workforce. These systems help identify gaps, forecast future needs, and design targeted upskilling programmes.

However, many companies are still transitioning away from rigid job descriptions and traditional career paths. Cultural barriers, lack of digital infrastructure, and limited resources can slow progress. In some sectors, especially SMEs or industries with strong legacy practices, workforce planning is still largely reactive. Policy initiatives, such as the Skills Agenda and national upskilling programmes, are helping to drive change, but the journey toward a fully competence-based model is ongoing.

The process of moving to a competence-based approach also requires a shift in mindset. HR teams must work closely with business leaders to define the competences required for strategic priorities—such as digital transformation, sustainability, or international expansion—and then map the existing workforce against these needs. This often involves difficult conversations about talent gaps, succession planning, and the need for reskilling or redeployment.

Success depends on leadership commitment, employee engagement, and the willingness to rethink long-standing assumptions about talent and careers. It also requires investment in technology, data analytics, and change management. As more organisations share their experiences and build communities of practice, the hope is that competence-based workforce planning will become more widespread and effective across.
One thing many companies forget is that time and working hours must be dedicated to creating and implementing this. It’s very important to get it right from the beginning. Constant changes create insecurity, mistrust, and doubt towards management. So whatever is initiated must be carried through – and then given time to work, so that it can be evaluated after 6, 9, or 12 months and adjusted accordingly.

Employee Experience as a Value Driver: Well-Being and Organisational Culture

Employee experience (EX) is increasingly recognised as a strategic priority, but few companies can claim to have fully embedded it into every aspect of their operations. The best examples come from organisations that have defined their culture in clear terms, communicate it frequently, and hold management accountable for modelling values in daily behaviour. These companies invest in well-being initiatives, mental health support, and flexible work arrangements, and they use regular surveys and feedback tools to listen to employees.

Yet, for many organisations, EX is still a work in progress. Some struggle to move beyond surface-level perks to address deeper issues of trust, inclusion, and psychological safety. Others face challenges in maintaining a consistent culture across remote or hybrid teams, or in translating values into everyday practice. It is also clear that when management does not actively live and communicate the company culture, employees quickly notice the disconnect, which can undermine trust and engagement.

The process of building a strong employee experience also involves addressing the practical realities of work. This includes designing physical and digital workspaces that support collaboration, creativity, and well-being; providing opportunities for learning and growth; and recognising and rewarding contributions in meaningful ways. HR teams must balance the needs of different employee groups, from frontline workers to remote professionals, and adapt their strategies as the workforce evolves.

The journey toward a truly employee-centric culture requires sustained effort, investment, and a willingness to learn from both successes and setbacks. It also requires leadership at all levels, with managers playing a critical role in shaping the day-to-day experience of their teams. As more organisations share their stories and learn from each other, the hope is that employee experience will become a core driver of value and differentiation across Europe.

Agile and Everyday Change Management, Including Manager and Employee Training

Change management is becoming a core HR competency, but it remains a challenging area for many organisations. Leading companies have embedded change management into daily operations, providing ongoing training for managers and supporting employees in adopting new ways of working. Communication is clear and consistent, with every change initiative accompanied by a detailed roadmap and a vision of the new normal. Changes are given time to stabilise before further adjustments are made, reducing fatigue and confusion.

However, many organisations are still learning how to manage change effectively. Some struggle with unclear communication, lack of manager training, or resistance from employees who feel overwhelmed by constant transformation. Others find it difficult to balance the need for agility with the importance of stability.

A key lesson from recent years is the importance of preparing both managers and employees for change. This means investing in training on change leadership, resilience, and adaptability; providing clear information about the reasons for change and the expected outcomes; and creating opportunities for feedback and dialogue. It also means recognising that change is not a one-off event, but an ongoing process that requires patience, persistence, and a willingness to adjust course as needed.

The best results come from organisations that invest in building change capability at all levels, use feedback to refine their approach, and recognise that successful change is as much about people as it is about processes. It is also vital that organisations avoid constantly shifting course—once a change is launched, it should be given time to become part of the everyday routine, with adjustments only after a period of stability, such as six, nine, or twelve months. This approach helps to build trust, reduce anxiety, and ensure that changes are sustainable over the long term.

Continuous Upskilling, Lifelong Learning, and Internal Mobility

The imperative for continuous upskilling and lifelong learning is widely acknowledged, but realising this vision remains a challenge for many European employers. The most progressive companies have created internal talent marketplaces, offer personalised learning pathways, and partner with educational providers to deliver accredited training. Employees are encouraged to take charge of their own development, and success is measured by both business outcomes and employee growth.

Some organisations lack the resources or digital infrastructure to support large-scale upskilling. Others struggle to motivate employees to engage with learning, or to align training with strategic priorities. National and EU-level initiatives, such as the Pact for Skills, are helping to close gaps, but progress is uneven.

The process of building a culture of lifelong learning also requires a shift in mindset. HR teams must work with business leaders to identify future skills needs, design relevant training programmes, and create incentives for learning and development. This often involves rethinking traditional approaches to training, moving away from classroom-based courses toward more flexible, on-demand, and experiential learning opportunities.

Success depends on leadership commitment, employee engagement, and the willingness to experiment with new approaches. It also requires investment in technology, data analytics, and change management. As more organisations share their experiences and build communities of practice, the hope is that continuous upskilling and internal mobility will become more widespread and effective across Europe.

Diversity, Equity, Inclusion, and Belonging (DEIB) as a Strategic Priority

DEIB is a strategic imperative in policy and rhetoric, but practice often lags behind. Leading organisations collect and analyse diversity data, audit recruitment and promotion processes for bias, and provide training on inclusion and allyship. Employee resource groups, mentoring, and leadership accountability are standard features. These companies report higher innovation, better decision-making, and stronger financial results.

However, many organisations are still at the beginning of their DEIB journey. Challenges include collecting reliable data, addressing unconscious bias, and ensuring that diversity is felt as well as measured. Legal requirements, such as the EU’s Gender Equality Strategy and national quotas, are driving change, but cultural and structural barriers remain.

The process of embedding DEIB into organisational culture is complex and ongoing. HR teams must work with leaders to set clear goals, measure progress, and hold themselves accountable for results. This often involves difficult conversations about privilege, power, and systemic barriers, as well as a willingness to challenge established norms and practices.

Progress is being made, but there is still a long way to go before DEIB is fully embedded in every aspect of people management. The journey requires leadership, persistence, and a commitment to continuous learning and improvement.

Compliance With Evolving European Labour Laws and Regulations

Compliance with labour laws and regulations is a major focus for European HR, but the landscape is complex and constantly evolving. Leading organisations invest in compliance training, robust policies, and digital tools to monitor changes. They work closely with legal teams, engage with works councils, and maintain positive industrial relations. Proactive compliance not only avoids penalties but also builds trust with employees and stakeholders.

For many companies, however, compliance is a source of ongoing challenge. Navigating the requirements of the EU Work-Life Balance Directive, Whistleblower Protection Directive, GDPR, and national reforms can be daunting, especially for SMEs or multinational organisations. The process of harmonising practices across borders, adapting to new rules, and managing risk is continuous.

The process of ensuring compliance also involves ongoing education and communication. HR teams must keep up to date with legal developments, train managers and employees on their rights and responsibilities, and create channels for feedback and reporting. Support from industry associations, legal experts, and peer networks is invaluable, but there is no one-size-fits-all solution.

Data-Driven HR Decision-Making and People Analytics

Data-driven HR is an aspiration for many European organisations, but maturity levels vary widely. The most advanced companies use people analytics to inform decisions on recruitment, retention, performance, and engagement. GDPR compliance is paramount, and employees are informed about how their data is used and protected. Analytics platforms provide real-time insights, support strategic workforce planning, and enable evidence-based action.

Yet, many organisations are still developing the skills and systems needed to leverage people data effectively. Challenges include data quality, integration of disparate systems, and building a culture of data literacy. Some HR teams are cautious about the ethical implications of analytics, while others struggle to translate insights into action.

The process of building a data-driven HR function also requires investment in technology, training, and change management. HR teams must work with IT, legal, and business leaders to define data governance policies, ensure data privacy, and create a culture of evidence-based decision-making. Success depends on leadership commitment, employee engagement, and the willingness to experiment with new approaches.

Ethical Leadership, ESG, and Corporate Social Responsibility in HR

Ethical leadership and ESG are rising priorities for European HR, but translating these values into everyday practice is an ongoing journey. Leading companies embed ESG into recruitment, reward, and performance management, conduct ethical audits, and report transparently on sustainability outcomes. Leadership development focuses on responsible management, and executives are held accountable for ESG targets.

Many organisations are still building the systems and cultures needed to support ethical HR. Challenges include aligning ESG with business strategy, measuring impact, and engaging employees in sustainability initiatives. Regulatory pressure, investor expectations, and societal demands are driving change, but the pace varies.

The process of embedding ESG into HR also involves ongoing education and communication. HR teams must work with leaders to set clear goals, measure progress, and hold themselves accountable for results. This often involves difficult conversations about trade-offs, priorities, and the long-term impact of business decisions.

The journey toward ethical, responsible HR is marked by experimentation, learning, and a willingness to challenge established practices. As more organisations share their experiences and build communities of practice, the hope is that ESG will become a core driver of value and differentiation across Europe.

HR as the Engine of Sustainable Value and Social Impact

Human Resources Management in 2025 is a field in transition. The vision of HR as a strategic, data-driven, and ethically grounded function is increasingly recognised, but most organisations are still on the path toward realising its full potential. Progress is uneven, challenges persist, and the journey requires ongoing learning, adaptation, and collaboration. By sharing experiences, embracing innovation, and committing to continuous improvement, HR professionals can help ensure that HR becomes not just an administrative function, but a genuine engine of sustainable value and social impact for European companies.