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Artificial Intelligence and Organizational Development: Psychological

Perspectives on the Restructuring of Organizational Structures, Processes,
and Functions

Conference Paper · May 2024

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 Artificial Intelligence and Organizational Development: Psychological Perspectives on
the Restructuring of Organizational Structures, Processes, and Functions
Sayyed Meysam Dibaji
Assistant Professor, Department of Psychology, Faculty of Education and Psychology,
University of Isfahan, Isfahan, Iran
[Link]@[Link]
Hajar Massah
Assistant Professor, Department of Psychology, Faculty of Humanities, Khomeinishahr
Branch, Islamic Azad University, Khomeinishahr, Isfahan, Iran
massah@[Link]
Abstract
This study investigates the potential impact of Artificial Intelligence (AI) on Human Resource
(HR) practices and how businesses perceive these changes. The widespread adoption of AI is
transforming organizational structures, processes, and performance. Opinions regarding AI's
impact diverge, with some viewing it as a threat that could replace human activities, while
others see it as an opportunity to improve efficiency and decision-making. This research
examines how AI will impact core HR processes like recruitment, training, and performance
management. Employing a descriptive research approach, this study analyzed peer-reviewed
scientific papers and conducted a survey of organizational development professionals. The
analysis reveals several areas where AI can influence HR practices, including decision-making,
talent development, and performance management. The results of this research present these
areas, detailing how AI impacts them and outlining the perceptions of these changes among
businesses. The research warrants further investigation into the ethical considerations
surrounding AI in HR, potential biases in algorithms, and job displacement. It also suggests
future research avenues like thematic analysis of survey data and case studies of successful AI
implementation in HR. This study sheds light on the potential transformation of HR practices
by AI and provides valuable insights for organizations navigating the AI-driven era.
Keywords: Artificial Intelligence (AI), Organizational Development (OD), Digital
transformation, Digital human resource management
Introduction
Digital technologies have profoundly transformed the way companies operate (Saarikko,
Westergren, & Blomquist, 2020). The extent of this transformation has led some to label it as a
new industrial revolution (e.g., Soh & Connolly, 2021; Popkova & Gooletskaya, 2022).
Artificial intelligence (AI) has been at the forefront of this change, owing to the increased
availability of big data and the feasibility of implementing complex algorithms (Davenport &
Ronanki, 2018).
Relying on future-oriented research and well-supported hypotheses that suggest potential
impacts is likely the most effective way for organizations to avoid disruptive shocks from
widespread AI adoption in business. The full extent of AI’s impact on organizational structures,
processes, and performance, as well as the specific mechanisms through which these changes
will be realized, remain subjects of ongoing research. Nevertheless, based on the capabilities
and functionalities of AI and its associated AI-powered HR technologies, organizations can
proactively prepare for the impending transformations. Despite the ambiguity surrounding the
impact of AI on organizational development, leading organizations across various industries
are actively adopting and adapting AI systems to their organizational change initiatives
(Wamba-Taguimdje, Fosso Wamba, Kala Kamdjoug, & Tchatchouang Wanko, 2020).
Bughin, J., Hazan, E., Ramaswamy, S., DC, & Chu (2017) stated that Large Companies Spend
300% More on AI Than Small Companies. The talent acquisition system of Unilever and
Netflix's decision-making regarding movie story, director, and actors (Mar, 2019) are just a few
examples of AI utilization. This supports the claim made by some researchers that AI can
replace human activities and organizational processes (Agrawal, Gans, & Goldfarb, 2019;
Bughin, Hazan, Sreekanth, & Chui, 2017); however, this claim is not without its vehement
critics (e.g., Khatri, Pandey, Penkar, & Ramani, 2020). The increasing availability of big data,
the decreasing cost of high-performance graphics processing units (GPUs), and the growing
sophistication of computational models are all key factors driving the growth of AI in
businesses (PWC, 2019).
Building on the assertion by Heinlein and Kaplan (2019) that AI has the potential to replicate
human behavior while retaining its cognitive, emotional, and social aspects, the impact of AI
on organizational development warrants further investigation. A substantial body of research
examines the impact of AI on specific aspects of organizational transformation. However, a
growing body of literature investigates the multifaceted influence of AI on organizational
change across various dimensions. For instance, a recent study by Deloitte (2020) found that
AI adoption in organizations prioritizes operational efficiency (28%), product/service
improvement (25% each), followed by decision-making (21%), cost reduction (20%), and
headcount reduction (11%). These findings highlight the potentially transformative nature of
AI, suggesting that its impact extends far beyond the aforementioned cases.
Given the significant role of AI in reshaping the landscape of work within organizations
undergoing digital transformation, this research aims to identify how AI will transform HR
practices and the potential perception of this impact as a threat or opportunity by businesses.
The research focuses on the following key questions:
1- How will AI transform core HR functions such as recruitment, training, or performance
management?
2- How will these transformations manifest in the practical application of HR practices?
3- Will businesses perceive these AI-driven changes in HR as threats or opportunities?
By exploring these questions, this study seeks to shed light on the potential impact of AI on HR
practices and provide valuable insights for organizations seeking to adapt and thrive in the AI-
driven era.

Method
This study adopts a descriptive research approach, employing a library-based method for data
collection. Papers relevant to the research topic were identified and reviewed through a
comprehensive search of databases such as Web of Science (WoS), Scopus, ProQuest One
Business, Business Source Complete (Ebsco), Science Direct, and Wiley. Only peer-reviewed,
English-language papers from scientific journals were included in this review to ensure the
highest quality and most recent research. This excluded book chapters, reports, and conference
proceedings. Following an analysis of the selected papers, codes were identified and assigned
based on their thematic content. Codes appearing with the highest frequency were then
considered to represent the most dominant probable changes in the structures, processes, and
functions of organizations due to the widespread adoption of AI in businesses.

Results

Table 1 summarizes the key areas where AI has a substantial influence on reskilling needs based
on a review of the research literature. The table further details how AI impacts each area and
provides a selection of the reviewed papers for reference. To validate these findings, a survey
of several organizational development professionals was conducted, gauging the percentage of
companies that perceive each item as a threat or an opportunity. To delve deeper into the survey
findings, a separate paper will be dedicated to their analysis and discussion.
Table 1. Areas of Artificial Intelligence Impact on Organizational Development
Examples of Opportunity
Area of Impact AI Mechanism
Supporting Papers or Threat?
Opportunity:
Decision-Making Mikalef, Framnes,
Combining Human and Artificial 85 percent
and Execution in Danielsen, Krogstie, &
Intelligence Threat: 15
Business Olsen (2017)
percent
Aligning the Shafiabady, Opportunity:
Increasing agility in organizational
organization with Hadjinicolaou, Din, 87.5 percent
restructuring and operations and
external changes Bhandari, Wu, & Threat: 12.5
processes
Vakilian (2023) percent
Shifting from traditional learning
Opportunity:
organizations (linear, pattern-based,
loop learning 83 percent
inflexible) to network learning Betancourt (2024)
process Threat: 17
organizations (circular, event-based,
percent
flexible)
Opportunity:
Organizational Problem formulation specially for ill- 70 percent
Von Krogh (2018)
problem solving defined problem Threat: 30
percent
Duggan, J., Sherman, Opportunity:
U., Carbery, R., & 80 percent
control mechanisms algorithmic management
McDonnell, A. (2022) Threat: 20
Galière (2020) percent
Opportunity:
Consumer to
Facilitate customer relationship and De Boeck, Meyers, & 85 percent
consumer
word of mouth promotion Dries (2018) Threat:
relationship
15percent
Opportunity:
Allal-Chérif, Simón-
redefine the 75 percent
Intelligent purchasing Moya, & Ballester
purchasing function Threat: 25
(2021)
percent
Opportunity:
Rudko, I., Bashirpour
Organizational 60 percent
Job variety and richness Bonab, A., & Bellini, F.
structure Threat: 40
(2021)
percent
Opportunity:
Job losses Computerization and automation Frey & Osborne (2017)
40 percent
 Threat: 60
percent
Opportunity:
Jarrahi, 2018; Spencer, 90 percent
productivity business process reengineering
2018 Threat: 10
percent
Opportunity:
job characteristics and perceived 65 percent
innovative behavior Verma & Singh, 2022
substitution crisis Threat: 35
percent

Discussion
This study investigated the potential impact of Artificial Intelligence (AI) on HR practices and
business perceptions of these changes. The findings, summarized in Table 1, reveal a complex
landscape with AI influencing various aspects of HR, including decision-making, training, and
performance management. Notably, the perception of these changes as threats or opportunities
remains divided.
Opportunities and Challenges: A Balancing Act
The research highlights both the potential benefits and challenges associated with AI-driven
HR. On the one hand, AI offers significant opportunities for increased efficiency, agility, and
data-driven decision-making. For instance, AI can streamline recruitment by filtering
candidates and identifying the best matches based on pre-defined criteria (Mikalef et al., 2017).
Similarly, AI-powered training programs can personalize learning experiences and adapt to
individual needs (Betancourt, 2024). However, these advancements raise concerns about
potential job losses and deskilling due to automation. Concerns regarding algorithmic bias in
decision-making processes also emerge (Frey & Osborne, 2017; Duggan et al., 2022). As the
survey results in Table 1 indicate, a significant portion of organizations perceive both
opportunities and threats associated with AI adoption in HR.
Moving Forward: Embracing a Human-Machine Partnership
The findings underscore the importance of adopting a strategic approach to AI implementation
in HR. Organizations must prioritize the development of a human-machine partnership, where
AI complements and enhances human capabilities. This necessitates investment in training HR
professionals on leveraging AI tools effectively and fostering a culture of continuous learning
within the organization. Furthermore, addressing ethical considerations surrounding AI use in
HR is critical. Organizations should establish transparent selection criteria and actively mitigate
potential biases in algorithms. Additionally, open communication with employees regarding AI
adoption and its impact on roles can alleviate anxieties and promote trust.
Limitations and Future Directions
This study acknowledges limitations, such as the reliance on a literature review and the need
for further empirical research. Future studies could benefit from employing a thematic analysis
of survey data to gain a deeper understanding of perceived threats and opportunities.
Additionally, conducting case studies of successful AI implementations in HR could provide
valuable insights into best practices and lessons learned. Ultimately, a comprehensive
exploration of the ethical considerations surrounding AI adoption in HR remains crucial.
Conclusion
The arrival of AI in HR represents a transformative era. By acknowledging both the
opportunities and challenges associated with AI, organizations can develop a strategic approach
for integrating these technologies while ensuring ethical and responsible implementation. By
 embracing human-machine collaboration and fostering a culture of continuous learning,
organizations can leverage AI to enhance HR practices, empower employees, and achieve a
competitive advantage in the AI-driven future of work.

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