As AI disruption and economic uncertainty persist, HR leaders are realigning their priorities. They are placing internal talent development at the center of workforce strategy. This is according to a new report from DDI, a global leadership development firm.

In a survey involving 2,185 HR professionals, 86% said they expect their organizations will need new leadership skills and capabilities. This shift is expected within the next five years. Fully half of all CHROs named internal talent development as their number-one business priority. This ranked even higher than hiring and culture-building. Only 33% of leaders placed external hiring as a current priority. This indicates a shift in how organizations build resilient teams.

Even with this emphasis, succession readiness is not yet adequate. Only 20% of HR leaders said they have candidates ready to assume crucial leadership roles immediately. On average, just 49% of critical positions were filled internally. Many HR leaders noted a clear talent gap.

Tacy Byham, CEO of DDI, stated, “Leadership is getting tougher daily, and CHROs have a unique opportunity to prepare the next generation.” She added that trusted people analytics can help build resilient leadership pipelines.

The report also highlights a growing ROI challenge in leadership development. Two-thirds of HR organizations use online learning libraries. However, these had the lowest return on investment. In contrast, organizations using assessments to gauge leadership potential saw better results. CHROs using cohort-based development, regular coaching, and formal succession planning saw internal promotions succeed 3.7 times more often.

Stephanie Neal, Director of DDI’s Center for Analytics and Behavioral Research, stated, “HR is under pressure to show measurable ROI.” She added that teams must also manage talent transformation and AI-related changes. Developing internal capabilities is now essential.

The challenge is growing, as training continues to lose priority. According to HR Dive’s Identity of HR survey, training as a top priority dropped from 12% in 2024 to 5% in 2025. As training budgets shrink, HR leaders are trapped. They must upskill teams but lack the necessary resources.

To meet this challenge, organizations are turning to skill-based approaches. A Mercer report found increased adoption of skills libraries, role-specific skill mapping, and capability-based reward programs. These tools help HR teams close talent gaps. They also link leadership development with future business priorities.

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News Source: Businesswire.com