The gap is widening between what is needed from an efficient, effective HR function and what most organizations currently offer. Enhancing employee experience is widely seen as a cornerstone duty of HR, but about 36 percent of employees across Europe and the United States are not satisfied with their current employer. And most HR departments are still far from making full use of the tools and practices available to them, including gen AI, which has been applied at scale to only a small number of HR departments.
This report highlights five trends that HR leaders in Europe must recognize and act on to close the gaps among business expectations, employee needs, and HR delivery.
1. Workforce planning is not approached strategically enough. As organizations try to keep up with rapid changes driven by gen AI and shifting skill needs, workforce planning must move beyond short-term staffing forecasts to include a longer-term view and future-scenario planning. While 73 percent of surveyed organizations conduct full operational workforce planning, only a small share link their strategies to future skill needs. For example, in the United States, only 12 percent of HR leaders say they do strategic workforce planning with at least a three-year focus.
2. Talent acquisition is becoming more complex. The increase in layoffs across sectors and rising unemployment rates suggest that the labor market is easing in many regions, but hiring remains a challenge. The results of McKinsey’s 2025 HR Monitor Survey show that offer acceptance rates are low (56 percent in the countries studied), 18 percent of new hires leave during their probationary period, and overall hiring success stands at just 46 percent in Europe. These difficulties call for a more strategic and coordinated approach to attracting and hiring talent.
3. Employee development continues to be highly fragmented. Employee development is imperative for organizational success, but many organizations still segment it into silos. Surveyed HR professionals and employees report clear areas for improvement: 26 percent of employees say they received no feedback in the past year, some employees spent as few as six days on training, and only about one-third of critical roles are backed by succession plans. To prepare the workforce for future challenges, organizations must connect performance management, learning and development, and talent development in one cohesive strategy.
4. Employee experience is essential—and underdeveloped. Nearly 20 percent of surveyed employees report dissatisfaction with their employer, yet only 7 percent have clear plans to leave their jobs. This gap suggests a growing risk of quiet quitting. For employees, job security has become the top reason for staying in a job (39 percent), followed by work–life balance (34 percent), and relationships with colleagues (33 percent). Despite this, many HR departments continue to focus primarily on optimizing compensation and working hours, only partially addressing what matters most to employees. A more tailored, data-driven approach to the employee experience is needed to build motivation and long-term commitment to employers.
5. Gen AI and shared-services centers could boost efficiency and effectiveness. Amid rising cost pressures, 13 percent of surveyed organizations plan to reduce HR head count by an average of 22 percent. Shared-services centers (SSCs) can help HR departments run more efficiently with fewer people, but only 18 percent of surveyed organizations with more than 1,000 employees currently use specialized SSCs in HR. While many organizations are exploring gen AI, only 19 percent of core HR processes in Europe are enhanced with gen AI, and for 32 percent of HR processes, HR departments are still in pilot phases. This signals that most organizations are far from realizing gen AI’s full potential. To meet future business needs, HR departments must modernize their operating models by expanding SSC adoption and using automation and gen AI to increase speed, scalability, and strategic impact.
Only by addressing these five areas in an integrated way can HR teams evolve into strategic partners for their organizations—proactively shaping workforce strategy, employee engagement, and, ultimately, long-term organizational performance. This report discusses each of these five areas in detail and offers recommendations on how HR leaders can improve their efforts in each.
