Addressing the Capacity Crisis: A Three-Pronged Strategy for HR Leaders

Authors: Jeff Garrand Meghan Hopkins

HR teams face growing pressure to balance everyday operations with more strategic responsibilities. The demands on HR leaders to support employee retention, wellbeing and organizational growth are also increasing.

This situation has led to a capacity crisis, and companies are now wondering how to manage team workloads. Do HR leaders need to focus on specific tasks or strategies? Or are we going to see AI doing more of HR's work?

Let's find out how companies can navigate this shift and explore solutions and insights from two of our specialists.

Combating the overwhelm

Traditionally, HR teams handle administrative tasks like payroll, hiring paperwork, employee policies and benefits. However, additional expectations now focus on employee experience and engagement.

The "capacity crisis" results from a shortage of staff or resources needed to accomplish all these tasks effectively. Constrained budgets and inconsistent workforce demands are adding to the strain. Seasonal impacts can prove even more challenging, as recruiting surges mean less time to dedicate to compensation planning and open enrollment preparation.

According to the 2026 Society for Human Resource Management (SHRM) State of the Workplace report, HR teams are overextended and understaffed. Moreover, burnout and stress remain top workplace concerns. Compared to the previous year's data, a clear pattern emerges: HR teams are struggling.¹

Beat the burnout: Three areas to focus on

Expanding HR headcount might seem like the most direct solution in times of need.

However, it's more complex than that. Hiring alone does not fully address the operational challenges many organizations face. Given that permanent hiring can be difficult due to budgetary and headcount constraints, HR leaders need to allocate resources wisely.

This is where a three-pronged approach comes into play, one that considers HR technology, the use of artificial intelligence and the need for fractional resources or external assistance. Effective change management will be the pillar supporting the adoption of this approach.

Let's examine each component in turn.

Step 1: Leverage HR technology

The global HR technology market is projected to grow significantly, rising from $44.32 billion in 2026 to $99.08 billion by 2035.²

Modern HR systems can automate repetitive administrative tasks such as payroll, onboarding, benefits administration and employee documentation. This automation significantly improves efficiency and expands capacity, allowing HR professionals to focus more on strategic priorities and the employee experience.

With more investments in HR technology, today's platforms offer advanced analytics and reporting tools that support workforce planning, performance benchmarking and data-driven decision-making.

Step 2: Explore the benefits of AI

A 2026 Chief Human Resource Officers (CHRO) Association survey report revealed that AI and workplace digitization are the most immediate concerns for CHROs, with 91% citing them as top priorities.³

HR teams can benefit from AI in several ways, including streamlining processes, reducing administrative strain, and improving efficiency. Repetitive tasks can be handled swiftly with AI-powered tools, helping HR teams operate more effectively.

However, organizations should approach AI strategically rather than merely adopting new tools. Leaders must carefully evaluate whether a solution aligns with their business needs and existing processes. AI should be seen as a tool that enhances human work rather than replaces it. Thoughtful implementation is key.

Reflecting on her first job in HR many years ago, Hopkins recalls a memorable interaction with an employee of her company who had been admitted to the hospital and faced issues with insurance coverage for a procedure. "That's the real opportunity: Technology and AI can free up capacity so HR can focus on human interactions, not just processes," Hopkins explains.

"Although I was buried in benefits administration paperwork, the situation highlighted the importance of HR in making a difference during those crisis moments. Engaging in meaningful interpersonal interactions with employees is where the real value lies," she adds.

Step 3: Consider fractional support strategically

Many organizations are also expanding HR capacity by leveraging fractional or temporary resources to provide external support for certain specialized functions.

Outsourcing areas such as payroll, benefits administration and compliance support allows HR professionals to focus more on strategic priorities like hiring and workforce planning.

This approach is especially helpful during seasonal workload spikes. "Using flexible, on-demand support will help organizations stay agile, meet peak needs and focus on the work that drives the most impact," concludes Hopkins.

Change management: The binding element

While technology, AI and fractional support can help address the main capacity crisis, sustainable adoption is the key to success.

Employees and managers need access to the right resources from the beginning, including guidance during onboarding and ongoing support throughout their time at the organization.

Prioritizing clear communication and providing continuous training throughout the implementation process is essential. "Employees want to feel comfortable with the technology, and leaders play a vital role in modeling this behavior. Keeping everyone informed about why changes are occurring and the value they bring is also important," says Garrand.

Facing capacity constraints?

If you'd like to know more about how Gallagher can help you tackle your HR capacity challenges, please get in touch with our specialists today.

You can also learn about Gallagher Drive, our people data and analytics platform.