Business Owners Embrace AI and HR Involvement, but Strategic Gaps Persist

Owning and operating a business is becoming increasingly complex. According to isolved®’s Second-Annual Business Owners Report, 76% of business owners say running a business has become more complicated in the past year, up significantly from 52% in 2024. As business leaders navigate rising costs, shifting employee expectations and economic uncertainty, many are turning to artificial intelligence (AI) and human resources (HR) as strategic levers for support, yet not all are equipped to maximize these investments.

The Business Owners Report, based on a survey of more than 2,000 owners and executives in the U.S., uncovers how today’s business leaders are adapting to challenges, where they are investing for the future and how they view the role of HR. While 94% of HR leaders say their department is viewed as strategic, according to isolved’s fifth-annual HR Leaders Report, only 41% of business owners share that view. This disconnect must be addressed to fully unlock business performance and employee potential.

Click to explore the full findings of isolved’s Second-Annual Business Owners Report

Additional Key Findings from the Business Owners Report

• AI is viewed as a growth opportunity

  • 81% of business owners see AI as a business opportunity

  • 84% say AI has already had a substantial impact on their business, though most still expect the biggest gains to be years away

  • Top AI use cases include employee-facing chatbots and automation for learning, payroll and benefits

• Cost pressures are driving tough workforce decisions

  • 56% of business owners expect to reduce headcount in the next year, with mid-sized companies most likely to make cuts

  • At the same time, 81% are willing to offer flexible pay options, such as earned-wage access, to support employee financial wellness and improve retention

• HR involvement is high but not yet strategic

  • 95% of business owners say they are heavily involved in HR, recruitment, payroll and benefits operations

  • Only 41% consider their HR function to be strategic

  • In contrast, 94% of HR leaders describe their departments as strategic, pointing to a major perception gap

• Burnout and skills gaps are underestimated

  • Only 40% of business owners believe their workforce is burnt out, compared to 79% of employees who say they are

  • 48% of HR leaders report a workforce skills gap, while many business owners are not investing fast enough to close these gaps

• Employers feel the power is shifting back in their favor

  • 82% of business owners believe the balance of power is shifting back toward employers

  • This shift is leading to reduced flexibility and incentives for job seekers, along with a stronger emphasis on efficiency

• Most business owners are still investing in diversity, equity, inclusion and belonging (DEI&B)

  • 83% of business owners plan to increase investment in diversity, equity, inclusion and belonging over the next year

  • Only 4% plan to eliminate DEI&B efforts entirely, signaling continued commitment despite external pressures

• Owners want more from HR data and insights

  • Business owners say they want strategic KPIs from HR, such as ROI on employee experience and impact of each employee on business outcomes

  • However, few believe they are currently receiving this level of insight

“Business owners are navigating a more demanding environment and increasingly looking to HR and AI to help them adapt,” said Yutaka Takagi, Principal Product Evangelist at isolved. “But unless HR is empowered and recognized as a strategic partner and AI is deployed with clear, practical use cases, businesses will miss the opportunity to turn complexity into a competitive advantage. The message from this year’s research is clear: aligning with HR, investing in technology and staying focused on employee experience will be key to thriving through uncertainty.”

About the Second-Annual Business Owners Report

isolved surveyed 2,032 U.S.-based business owners, founders and CEOs across a range of industries and company sizes. The report explores perceptions of AI, top business challenges, investments in HR, diversity, and wellness and the evolving relationship between business leaders and their people teams.

Click to download the full report.

About isolved

isolved is the most trusted HCM technology leader, providing the best combination of software and services to meet the needs of today’s People Heroes – HR, payroll, and benefits professionals. From talent acquisition to workforce management to talent management, our solutions are delivered directly or through our HRO partner network to more than 7.7 million employees and 189,000 employers across all 50 states – who use them every day to increase productivity, accelerate decision-making and ensure performance, while reducing risk. isolved People Cloud™, our intelligently connected platform, automates the entire employee experience by design, so that organizations can engage, empower, and energize their talent while freeing their People Heroes to exceed their goals and grow their careers. Visit https://www.isolvedhcm.com/ to learn more.