Mid-2025 Human Resources Review: Layoff Wave, DEI Shift, and the 'Tricky' AI Future

Halloween is still some time away, but the situation in human resources can already be described as "horrifying" — Zach Nunn, CEO of experience management company Living Corporate, told HR Dive. U.S. companies have asked HR teams to execute record numbers of layoffs, and according to a recent survey by Careerminds, "serial" layoffs involving multiple rounds within 2025 have become the norm. However, while organizations focus on cost-cutting through workforce reduction, investment in existing employees is also being downgraded, Nunn noted.

"The reality is that people initiatives are not being invested in," he said. "What we're seeing is a massive divestment from the daily employee experience, which is troubling because if we don't invest in people, how do we create a healthy experience for customers?"

HR professionals are also feeling the pressure. SHRM's "2025 Workplace State Report" released in March shows that 62% of professionals are overworked, and 57% say their departments are understaffed.

Industry analysts predicted at the start of the year that 2025 would face a series of challenges, including driving AI adoption, restructuring DEI strategies, and adapting talent operations to market volatility. Now that half the year has passed, these predictions have largely come true, but some trends have taken unexpected turns, sources interviewed by HR Dive said.

Nvidia CEO Jensen Huang speaks with Trump administration officials at the "Winning the AI Race" summit at the Andrew W. Mellon Auditorium in Washington, D.C., on July 23, 2025. Sources told HR Dive that cracks have begun to appear in workplace AI adoption.

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AI hype cycle hits roadblocks

After years of hype, AI is becoming increasingly mainstream at work. An Owl Labs report in May found that 67% of companies have integrated AI tools for work-related purposes. But Emily Rose McRae, senior director analyst at Gartner, said cracks are beginning to appear in adoption as employers struggle to find good use cases for the technology.

One common pain point is that employees lack the knowledge to use AI correctly, which requires additional training. But when leadership teams approach HR about improving training or upskilling employees to better leverage AI, "that's unfortunately not very realistic," McRae said, because the learning curve is often too steep.

Generative AI adoption also faces other obstacles, from unclear use cases to minimal productivity gains — some vendors estimate that while the technology can save users a few minutes a day, these tools "don't have a significant impact on productivity," McRae said. As a result, executives expect HR not only to identify good use cases for AI but also to upskill employees to ensure adoption is possible.

"It's really a tough spot," McRae said. "HR has a training responsibility, but also needs to reshape executive expectations and get people to reimagine what the possible outcomes are."

By the numbers

• 95%: Percentage of enterprise generative AI pilots with no measurable P&L impact, according to an MIT report.
• 40%: Percentage of agentic AI projects that could be canceled by the end of 2027 due to cost, unclear business value, or insufficient risk control, according to Gartner.

To underscore these difficulties, MIT recently reported that the vast majority of enterprise generative AI pilots (95%) have "no measurable P&L impact" on organizations. The report's findings don't mean AI has no impactful use cases, McRae said, but they do suggest that identifying the right use cases may not be as easy as vendors have led HR to believe.

In the short term, she added, HR needs to clarify what AI is meant to achieve within the organization, whether it's employee adoption, engagement in training, or other metrics. "Ultimately, you have to figure out what stakeholders want in the short term and compare it against long-term goals, which may mean resetting expectations."

This may also mean HR needs to collaborate across departments, including with IT and team leaders, to determine how AI can best serve employees, or to choose existing resources to better achieve certain goals.

Nunn said companies' expectations for AI also create obstacles. AI can contribute to business strategy and processes like a college intern, he added, but organizations' push to outsource entire departments to the technology may not be realistic given AI's limitations.

"Unfortunately, we're seeing large-scale application of AI in recruiting, background checks, and so on — essentially an entire HR department replaced by a robot," Nunn said. "That's not to say AI has no role in HR processes — much of the HR work we see is very transactional, repetitive, and monotonous — but organizations have the opportunity not to completely replace people, but to upgrade roles rather than necessarily replace them."

There are signs that organizations have begun to recognize this reality. Nunn cited McDonald's withdrawal of its AI drive-thru cashier program in 2024 as an example, while Gartner research released earlier this year showed that about 40% of agentic AI projects could be canceled by the end of 2027 due to cost, unclear business value, or insufficient risk control.

Nunn said it's natural for companies to over-rely on technology trends, but they still need to figure out AI's true value proposition. "The scary thing is that while we fight in real time, we see humans being negatively affected," he added, referencing recent layoffs and an ongoing discrimination lawsuit against HR vendor Workday involving automated hiring systems.

HR departments need to ensure their vendors don't make the mistakes people commonly make when reviewing candidate resumes, conducting background checks, and other practices, Nunn said.

On April 3, 2025, University of Michigan students walk past signage displaying core values, including diversity, equity, and inclusion. Some employers are shifting DEI initiatives to directly address business goals and incorporate employees' broader life experiences.

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Practitioners continue DEI with business goals at the core

The pessimistic outlook for DEI programs at the start of 2025 has largely persisted. According to a Resume.org survey, as many as one in five employers have abandoned their programs since Donald Trump's re-election as president (an outspoken DEI opponent), and more employers are expected to follow in the coming year.

In his first year back in the White House, Trump launched a broad federal crackdown on DEI, targeting public and private sector workplaces that maintain DEI programs. The U.S. Equal Employment Opportunity Commission has also sent letters threatening to investigate employers' diversity hiring practices, certain employee resource group customs, and similar activities.

Despite this, DEI practitioners are continuing their work and, in some cases, adjusting programs to respond to the backlash. Food delivery company Feast & Fettle has taken this approach, according to Kyla Hanaway-Quinlan, the company's COO and head of people.

Specifically, Feast & Fettle's DEI program focuses on building and investing in organizational talent, emphasizing upward mobility and equal opportunity, independent of broader cultural and political temperatures. Hanaway-Quinlan believes this strategy has avoided backlash, which she attributes to programs that were hastily designed or focused more on signaling than business goals.

"My take is that there's a lack of understanding or intentional design around the value of equity in the workforce," Hanaway-Quinlan said. "So it's not surprising that the wheels are starting to come off because DEI programs haven't always been substantive or rooted in business needs."

Hanaway-Quinlan said her organization's program is tied to Feast & Fettle's desire for upward economic mobility for employees and the external barriers that hinder that mobility. This perspective stems from Feast & Fettle's experience hiring workers from diverse backgrounds, including partnerships with community groups supporting formerly incarcerated individuals, those with developmental disabilities, or those experiencing homelessness.

"Your systems have to work toward the goals you're trying to achieve."

Kyla Hanaway-Quinlan, COO and head of people at Feast & Fettle

In this sense, DEI is less about specific demographics like race or gender and more about the broad life experiences employees bring. "Life experience is more than just which boxes you check when filling out EEOC forms," Hanaway-Quinlan said. "It's broader."

Feast & Fettle hasn't changed how it talks about DEI, largely because "the language has always been oriented toward upward mobility and economic pathways for people who work in the hospitality industry and face barriers to employment," Hanaway-Quinlan continued.

In recruiting, Hanaway-Quinlan said the company maintains a similar community-centered, deliberate approach, meaning showing up at social events where the talent pools it wants to cultivate are present. It also partners with local organizations and leverages referral networks from existing employees.

"It really starts with initial program design built around business goals," Hanaway-Quinlan said, with the most important being delivering value to customers. "Your systems have to work toward the goals you're trying to achieve."

Opposition to DEI is an obstacle, but employers can use it as an opportunity to understand why people feel DEI prevents them from accessing certain things, or why efforts to achieve values like equity make them feel excluded, Hanaway-Quinlan added.

"Engaging with more curiosity often helps resolve conflict," she said, noting that if an employee opposes DEI or one of its elements, "I genuinely want to understand what that means to them and why they don't feel like they're part of the conversation."

Overall, Gartner's McRae said she sees DEI work shifting strongly toward "inclusion," as companies seek to retain a diverse workforce while recognizing pressures from the broader environment. One obstacle to address is the difficulty of measuring inclusion, which isn't as easily quantifiable as other elements of DEI; "that doesn't mean you can't do it, it just takes more work," McRae said.

Employers can reshape programs in other ways, such as abandoning metrics that could be illegal, like quotas or promotion programs reserved only for employees of specific races or genders. For example, when deciding participants for a mentorship program, McRae suggested employers could have interested employees write an essay explaining how a lack of mentorship has harmed their careers.

On April 30, 2025, in Sunrise, Florida, job seekers speak with recruiters at a job fair. Despite layoff waves and other signs, some sources disagree that the current labor market favors employers.

Image credit: Joe Raedle / Staff via Getty Images

Employer-friendly job market may not be what it seems

With layoffs surging, workers sometimes cling to jobs for fear of lacking other opportunities, and one might easily assume the market favors employers. AI also plays a role here; respondents to a Shopify survey released in April acknowledged that technology influenced their layoff decisions.

The push to automate more work and cut payroll points to a broader issue about the state of the employee-employer relationship, Nunn said, and HR needs to pay attention to these dynamics.

"HR is in a tough spot," Nunn said, especially regarding AI, where departments may feel pressure to deploy technology before analyzing the impact of failures or ineffective deployments. Professionals must ask the right questions about AI to become true business partners, he added.

Resistance to AI and other top-down initiatives may feel unnatural for HR, but "the last thing you want to do is go with the flow and then realize you've lost your job too," Nunn said.

However, not all observers agree that layoff waves and similar dynamics necessarily reflect an employer-friendly talent market. McRae said employers continue to struggle with evolving employee needs and the extent to which job seekers believe they will tolerate employers.

"I don't have the impression that employers have fully adapted to this shift," McRae said. This can be seen in areas like employee benefits, where niche offerings are increasingly in demand among top talent. Flexibility remains a wish-list item for candidates, even as RTO debates have stabilized.

Employers, McRae said, may be "dreaming of the days when employees will accept what they're given," while in the post-pandemic era "people have seen they can get by with less and are willing to not look for jobs."

An economic downturn could bring further changes, but McRae said she doesn't believe it will necessarily lead employees to tolerate stricter work arrangements.

On April 5, 2022, employees at Google's Chicago office enjoy breakfast in the cafeteria, welcoming back to the office. Sources told HR Dive that employers restricting flexibility need to ensure the office experience delivers on their RTO rationale.

Image credit: Scott Olson / Staff via Getty Images

Employees see through poorly executed RTO

Organizations are requiring employees to return to the office for various reasons, including attrition. A Resume Templates report in May found that more than half of surveyed companies use strategies, including mandating additional office time, as a means of "quiet firing" workers rather than conducting formal layoffs.

Even so, employers' approach to flexibility has largely been the same as in recent years, McRae said. This is because of the role flexible work options play in attracting talent, even when offering hybrid models rather than fully remote. Employees also easily recognize RTO decisions with weak rationales.

"Employees are very clear when employers have an RTO strategy based on employer convenience or policy agreements," McRae said. "Not many employers invest in making the time employees spend in the office a differentiated experience, with a reason to require you to do it rather than stay home."

The "come to the office for collaboration" narrative is often cited in executive RTO mandates, but if employers are sincere about it, they need to know how to facilitate that, McRae continued; "if you say it's for collaboration or team building, you'd better deliver."

Employees need to advocate for the flexibility they need, Nunn said, but employers must also recognize the constraints they may place on hiring when they remove flexibility options.

"I have four kids, and there are some jobs I just can't do," Nunn said. "If you have employees with various needs and you're not flexible in providing those things, you won't have an effective workforce or customer experience. You won't win in the market the way you want to."

Nunn added that organizations that listen to talent and pay attention to how they support workers can expect to excel in the talent competition, especially as the job market shifts more in favor of workers.

"Things are always changing," he said. "What you don't want is resentful people here. Even if you have the ability, it's better to lead with kindness."