Beyond Hiring: Solving HR’s Leadership Crisis

AI for HR Leaders: How to Find the Future Leaders Already Inside Your Organization

The first rung of the career ladder is getting harder to find. Revelio Labs reports that U.S. entry-level job postings have fallen about 35% since early 2023. Revelio is careful to note that the decline alone doesn’t prove AI is the cause, but the effect on talent pipelines is the same either way: fewer starter roles means fewer places where future leaders learn the job.

The middle is thinning too. Gartner predicted that through 2026, 20% of organizations would use AI to flatten their structures, eliminating more than half of current middle management positions. Gartner also warned that mentoring and learning pathways may break, leaving junior workers short on development opportunities.

So here’s the tension every people leader is facing. The pipeline that used to produce leaders is shrinking at both ends, and at the same time, leadership matters more than ever. This is where AI for HR leaders gets interesting. Used well, it doesn’t replace judgment. It helps you see the talent you already have, earlier and more fairly.

The leadership bench was already fragile

None of this is landing on a strong foundation. DDI reports that 80% of organizations lack confidence in their leadership bench, after a decade-plus decline in readiness with only a slight rebound in 2025.

The definition of a good leader is shifting at the same time. In the World Economic Forum’s Future of Jobs Report 2025, employers expect 39% of workers’ core skills to change by 2030, and leadership and social influence saw the largest jump in importance of any core skill, rising 22 percentage points.

In a recent Achieve webcast, Lauren Starkand, Sr. Talent Partner at Mercer, named the paradox underneath it all: AI is making critical thinking and judgment more important while removing many of the entry-level experiences that used to build them. That puts real pressure on how organizations spot potential, and on how intentionally they develop it.

Why traditional succession planning rewards visibility over capability

Most talent processes lean heavily on one person’s view: the manager’s. Managers rate performance, then potential, often once a year and often with little training on the difference. Lauren described the predictable result. Without better tools, potential assessments drift toward “they’re smart and I like them,” and neither trait alone predicts leadership success.

That’s a structural blind spot, not a character flaw. A manager isn’t in every meeting. They don’t see the colleague who quietly unblocked a cross-functional project or coached a peer through a hard client call. And the employees most likely to be missed are the ones who collaborate to influence rather than raise their hand first.

The gap shows up in how employees feel, too. Research shared in the session, developed by Mercer in collaboration with Workhuman, found that nearly a third of employees believe their company doesn’t even know whether they have the potential to move into more complex or senior roles. Organizations are collecting more people data than ever. They just aren’t always reading the right signals.

“Being smart and being likable to the manager, while both important things, do not alone predict success.” Lauren Starkand, Mercer

Recognition data: an organic signal of emerging leadership

If the manager’s view is too narrow, where else should HR look? KeyAnna Schmiedl, Chief Human Experience Officer at Workhuman, made the case for recognition. A performance review is a formal exercise someone is asked to complete. A peer recognition message is unprompted. It’s a colleague saying, in the moment, that you did something that mattered and why.

That makes peer-to-peer and cross-functional recognition a democratized data set. It captures moments a manager never saw, and it can surface people a manager never would have nominated. The business case for a strong employee recognition program goes beyond pipeline insight, too. Longitudinal research from Gallup and Workhuman found that well-recognized employees are 45% less likely to have turned over after two years. Yet only 22% of employees say they get the right amount of recognition for their work.

This is where AI in HR earns its place. Turning thousands of recognition moments into readable patterns (who keeps getting thanked for connecting teams, who keeps getting credited for clarity under pressure) is exactly the kind of signal-from-noise work AI does well. Workhuman has built a Future Leaders tool for this purpose. The panel was clear, though: data rounds out the story, and human judgment still decides what to do with it.

What potential actually looks like now

Lauren defined potential simply: the ability to take on more complex roles over time. Past performance matters, but it’s backward-looking. The forward-looking markers she watches for are learning agility, relationship building across the organization, comfort with ambiguity and change, sound judgment when AI is generating more information than anyone can read, and the genuine motivation to take on more.

She added one more that recognition data captures especially well: organizational citizenship. That’s the help, context, and connections people give others when they don’t have to. KeyAnna pushed the idea further. People who can spot strengths in others, and say so out loud, are exactly the leaders organizations need. Giving recognition is itself a leadership signal.

Build versus buy: the economics of growing leaders from within

When the internal bench is thin, the reflex is to hire from outside. The evidence says to slow down. Research by Wharton’s Matthew Bidwell, summarized by Knowledge at Wharton, found that external hires received significantly lower performance evaluations in their first two years than internal workers promoted into similar jobs, had higher exit rates, and were paid roughly 18% to 20% more.

The cost of leaving future leaders undeveloped is steep in the other direction as well. Gallup estimates that replacing a leader or manager costs around 200% of their salary.

Lauren framed it for executives this way: you’re going to pay for leadership either way. You can spend it on an external salary premium, or invest it in people who already know your culture. The internal path also builds something no recruiter can sell you: the commitment and discretionary effort that come when people feel invested in. That makes leadership development one of the most underrated employee retention strategies on the table.

Turning talent signals into a dynamic pipeline

Identifying potential is only half the work. Tara Cooper, Global HR Tech Analyst and Advisor at Mercer, argued it may be the easier half. The harder part is development, and the panel agreed it has to be personal. A few practices stood out.

Favor experiences, then measure them

Stretch assignments, cross-functional exposure, and new networks tend to outperform training alone. KeyAnna described a virtuous cycle: place an emerging leader in a stretch role with support, then watch the recognition that follows to see whether it was too much or not enough.

Tell people how they’re seen

Not everyone sees themselves as a future leader, especially quieter contributors. Sharing how colleagues experience them opens a better development conversation.

Make it continuous

Treat behavioral data as an ongoing source of talent insight, not an annual snapshot, so readiness is built before a crisis rather than scrambled for during one.

Reward managers who export talent

Broaden manager goals so developing people and moving them into the wider business counts as success. It’s a practical lever for middle manager development, and it reduces talent hoarding.

If you’re tackling these questions inside your own organization, you don’t have to work through them alone. The Achieve Leadership Network brings people leaders together to compare what’s actually working, from succession models to recognition strategy.

What this looked like in the room

These ideas came from Beyond Hiring: Solving HR’s Leadership Crisis, an Achieve webcast moderated by Tara Cooper of Mercer with KeyAnna Schmiedl of Workhuman and Lauren Starkand of Mercer. Tara shared new research developed with Workhuman on how leadership pipelines are changing, and both panelists brought the practitioner view: how Mercer uses an AI career assistant to help employees shape development plans, and how Workhuman is turning recognition into a forward-looking picture of leadership.

The conversation closed with a simple audit any HR team can run this quarter. Pick one role or talent population and ask three questions. Who are you seeing, and who might you be missing? What evidence are you using beyond backward-looking data? And what are you doing with that insight once potential shows up? Attendees also dug into how to start on a tight budget and how to build the business case with executives. Those answers are worth hearing in full.

Build the next generation of leaders with peers who are doing it

The organizations that win the next decade won’t be the ones that hire their way out of a leadership gap. They’ll be the ones that learn to see, grow, and keep the leaders already in the building. That’s culture, performance, and retention working together.

The Achieve Leadership Network is where people leaders build that capability alongside peers: member masterclasses, masterminds, tools, and research grounded in what’s happening in organizations right now. Builders of a better world of work don’t figure it out alone.

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