Managing AI-Induced Job Displacement: HRM Theories and Strategies for a Changing Workforce

(Donna M, 2023)

AI-induced job displacement is a significant issue in Human Resource Management (HRM). As AI technologies become increasingly integrated into the workplace, HRM practices must adapt to ensure a balance between technological advancements and employee well-being. This post explores the relationship between AI and job displacement through the lens of emerging HRM theories, such as Best Fit HRM, Best Practice HRM, Strategic HRM, and Human Capital Theory, and provides practical examples for addressing this challenge (Pfeffer, 1994; Wright & McMahan, 1992).

1. Best Fit HRM

Best Fit HRM aligns HR strategies with the specific needs of the organization and its external environment. In the context of AI-induced job displacement, this requires HRM strategies to adapt to technological changes (Becker & Huselid, 2006). For example, when introducing AI in recruitment, HR practices must focus on roles that AI can't replace, such as customer service or leadership positions, while also considering reskilling efforts.

Example: A hotel adopting AI chatbots for recruitment might need to shift its hiring practices to account for technological changes, focusing more on human-centric roles like leadership or problem-solving that AI cannot easily replace.

2. Best Practice HRM

Best Practice HRM posits that certain HR practices can universally improve performance and engagement (Pfeffer, 1994). In response to AI-induced job displacement, HR must adopt universal practices that promote employee engagement and resilience, such as reskilling programs, employee well-being initiatives, and transparent communication.

Example: Implementing reskilling programs and well-being initiatives, such as providing mental health support during AI transitions, can reduce the negative impact of job displacement.

3. Strategic HRM

Strategic HRM integrates HR practices with the long-term goals of the organization (Wright & McMahan, 1992). In the face of AI-induced job displacement, HR professionals must plan proactively, ensuring that the workforce remains adaptable and competitive.

Example: By strategically using AI to automate routine tasks, HR can focus on enhancing employee productivity and offering development programs that allow employees to transition into more complex roles.

4. Human Capital Theory

Human Capital Theory emphasizes the value of employees as a resource that contributes to organizational success (Becker, 1964). In the context of AI, this theory focuses on continuous learning and development to address job displacement.

Example: HRM can invest in upskilling and reskilling employees, thereby increasing their employability even as AI technologies replace certain routine tasks.

Practical Steps to Address AI-Induced Job Displacement in HRM

1. Reskilling and Upskilling: 

Develop training programs that help employees gain new skills to ensure adaptability to AI-driven changes. For example, a hotel might train staff in digital marketing or customer experience management, areas that AI cannot easily replace.

2. AI Integration in Recruitment: 

While AI can streamline recruitment, HR should ensure that displaced workers are offered alternative career paths and transition programs.

3. Employee Engagement Strategies: 

HR should maintain transparent communication with employees about the impacts of AI and provide mentorship or coaching programs to support transitions.

References

• Becker, B. E., & Huselid, M. A. (2006). Strategic Human Resources Management: Where Do We Go from Here? Journal of Management, 32(6), 898-925.
• Pfeffer, J. (1994). Competitive Advantage through People: Unleashing the Power of the Workforce. Harvard Business Press.
• Wright, P. M., & McMahan, G. C. (1992). Theoretical Perspectives for Strategic Human Resource Management. Journal of Management, 18(2), 295-320.
• Becker, G. S. (1964). Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education. University of Chicago Press.
• Chui, M., Manyika, J., & Miremadi, M. (2016). Where machines could replace humans—and where they can’t (yet). McKinsey Quarterly.
• Donna, M. (2023) The Great AI Job Displacement is Here - The Legal Implications. Available at: https://www.linkedin.com/pulse/great-ai-job-displacement-here-legal-implications-massimo-donna (Accessed 30 March 2025).