Solving the productivity crisis with a blended workforce

The productivity paradox

Productivity has flatlined across advanced economies. In the UK output per hour remains below pre-pandemic levels. In Europe and the US CEOs warn that skills shortages are stifling growth. Meanwhile, boardrooms are demanding more with less: more efficiency, more resilience, more results – all on shrinking budgets.

As organisations wrestle with the productivity puzzle many are pinning their hopes on changing the work model – bringing people back to the office or doubling down on hybrid. But evidence suggests that location alone won’t move the needle.

At Gartner’s 2025 HR Symposium research director Shannon Wiest told delegates that merely changing the work model, whether bringing employees back on site or adopting hybrid, does not change productivity. “It doesn't deliver a clear productivity boost– no spike, no dip, just a flat line,” she said. 

Her point wasn’t that workforce models don’t matter but that most organisations are changing the wrong thing. Productivity won’t be solved by where people work but by how work is designed and led. 

And right now most HR functions are still designing work through the narrowest possible lens – permanent headcount.

HR leaders are caught in the crossfire. They’re told to accelerate transformation, cut costs, improve employee experience and deliver talent pipelines that simply don’t exist. The instinctive response is to double down on permanent hiring. But this model is buckling under the strain.

According to Manpower 74% of employers say they are struggling to find the skilled talent they need. Time-to-hire is too slow, costs are too high and the very capabilities needed for survival – digital fluency, adaptability, AI literacy – remain scarce. 

Meanwhile research by The Upwork Research Institute in 2024 found 71% of employees are experiencing burnout and nearly half are unsure of how to achieve the productivity gains employers expect from them. Yet 81% of global c-suite leaders acknowledged they had increased demands on workers. 

And according to Microsoft’s Work Trend Index survey of 31,000 full-time employed or self-employed knowledge workers across 31 markets, 53% of leaders say productivity must increase but 80% of the global workforce – employees and leaders – say they’re lacking enough time or energy to do their work.

Meanwhile demographic trends are “propelling major economies toward population collapse in this century,” to quote McKinsey. Two-thirds of humanity lives in countries with fertility below the replacement rate of 2.1 children per family.

The European Union is projected to enter a period of population decline after 2026 while, by 2050, working-age populations are projected to decline in 22 out of 27 EU countries with the share of those aged 85+ in the EU as whole more than doubling.

The number of older people is growing and the number of younger people shrinking. The first wave of this demographic shift is hitting advanced economies and China, where the share of people of working age will fall to 59% in 2050, from 67%. Later waves will engulf younger regions within one or two generations. Sub-Saharan Africa is the only exception.

Yet there is some reason to be optimistic. Academic forecasts point to just how transformational AI could be. Economic modelling from the Penn Wharton Budget Model, building on MIT professor Daron Acemoglu’s research, projects that AI could lift productivity and GDP by 1.5% by 2035 and nearly 3% by 2055. In around 40% of jobs studied, at least half of all tasks could be automated. 

Early signs of that shift are already visible inside organisations. Josh Bersin’s latest Supermanager research highlights what happens when leadership and technology evolve together. “We see the rise of superworkers – people who dramatically amplify their productivity and performance with AI,” he notes. The leaders who enable this shift don’t manage people and deploy technology, Instead they enable people and manage technology. These “supermanagers” weave AI seamlessly into daily workflows, elevating decision-making and giving employees time back to collaborate and innovate. Rather than using AI to squeeze more from people, they use it to reduce burnout, improve wellbeing and unlock sustained productivity, a model that could ultimately make shorter working weeks viable.

The challenge, and opportunity, for HR is therefore clear: productivity growth will depend on how effectively organisations redesign work to blend human and AI contribution. 

That redesign begins with the workforce itself. The blended workforce – a strategic mix of permanent employees, contingent workers, freelancers, gig talent and AI – offers a more flexible, resilient model. Done well, it can unlock agility, scale skills quickly and free core employees for the work only humans can do.

But here’s the rub: few HR functions are ready. “CPOs and their functions have a strong role to play in helping organisations navigate to a more data-led and agile approach to talent, such as using AI for recruitment and planning while ensuring it is done in a fair way that is free from bias,” says Katie Obi, chief people officer at OneAdvanced. “Doing so will help to unlock strategic competitive advantage. To drive this transformation, people functions may need to critically assess their own skill sets and experiences. As a result, the very function tasked with shaping the future of work is still operating with a 20th-century mindset.”

Why HR hasn’t cracked workforce design

Blended workforce strategies aren’t new. For decades organisations have relied on outsourcing, agency staff, consultants and contractors to supplement their core workforce. But these moves were reactive, driven more by cost or crisis than proactive design.

HR has traditionally been sidelined, focusing on transactions rather than architecture. Recruiting, onboarding and payroll processes were optimised for permanent employees, leaving contingent talent managed in silos.

Rudolph Wontumi, VP HR and corporate services at Japanese financial services firm JCB International, asks why HR isn’t looking at what it expects any role to achieve. “The market is telling us that people will stay for 18 months, so rather than wanting someone to be here for five years, why don’t we focus more on short-term outputs?”

The compliance trap: risk or excuse?

Compliance is the most common reason HR leaders give for avoiding large-scale blended workforce strategies. Regulation around umbrella companies, worker classification and tax liability is complex. In multiple geographies, it’s a minefield.

That caution is understandable. But is it also an excuse?

Future-fit organisations need to get great at managing compliance risk while gaining agility. By building clear governance models and partnering with compliance experts they avoid the penalties and reputational damage others fear.

Yet those who master compliance see competitive advantage. They can scale talent pools up and down without fear, while slower rivals remain trapped in rigid models.

Why culture is the missing link in a productive blended workforce

Even when compliance hurdles are solved cultural barriers persist. Many executives – and some HR leaders – still see contingent workers as ‘second-class’. They are paid differently, excluded from benefits and rarely included in engagement surveys or development programmes.

This cultural bias undermines integration. It creates divisions between ‘real employees’ and ‘outsiders’, eroding trust and limiting performance. When contingent, freelance and AI-enabled workers are treated as equal contributors to business outcomes, engagement rises and execution speeds up.

For the blended workforce to succeed HR must change the narrative. All workers – permanent, temporary, freelance or AI-assisted – need to feel part of the same mission. Culture must evolve from hierarchy to contribution; from control to connection.

Is AI the ultimate contingent worker?

The most disruptive new entrant to the workforce isn’t human at all. Artificial intelligence, once a back-office tool, is now performing tasks once reserved for people: drafting content, analysing data, shortlisting candidates, even making recommendations in real time.

Think of AI as the newest category of contingent worker – one that never sleeps, scales infinitely and costs less than any human equivalent.

But AI also raises profound questions. Who ‘manages’ an algorithm? Who is accountable when it fails? How do you balance efficiency with ethics?

What HR must do differently

The whitepaper makes one thing clear: HR cannot deliver productivity and resilience if it remains stuck in administration. To seize the potential of the blended workforce HR must:

• Own workforce design: create models that balance skills, costs, risks and outcomes across multiple talent types.
• Reframe the HRBP role: business partners must evolve into strategic advisors on workforce composition.
• Educate leaders: shift the conversation from headcount to capability.
• Act on evidence: use data from contingent and AI-enabled work as seriously as employee surveys or performance reviews.

This includes helping managers adopt evidence-based practices that sustain productivity through change. Gartner’s Wiest calls this the shift from “mandates to meaningful enablement” – empowering managers to lead with clarity, dialogue and recognition rather than enforcing policy.

HR’s strategic influence is also expanding fast. New research from International Workplace Group shows that 88% of CHROs believe they have more influence now than ever before, with 96% reporting a direct impact on profitability, productivity and talent recruitment. The days of HR being a support function are over. 

Mark Dixon, CEO of International Workplace Group, calls hybrid working a “strategic necessity” for building productive, loyal workforces.  A study by IWG and Arup suggests companies could see productivity increases of as much as 11% by 2030 thanks to flexible working.

In short, the productivity agenda now sits squarely with HR. Today’s CHROs are not just shaping workforce policies but shaping business performance.

The cost of inaction

The stakes are high. Productivity gains will not come from longer hours or harder work. They will come from smarter workforce models.

The alternative? Rising costs, widening skills gaps and a frustrated leadership team that looks elsewhere for answers.

For HR to drive productivity they need to evolve into architects of the blended workforce – one built intentionally with the right mix of human and AI talent enabled by capable, data-driven managers – or risk irrelevance in the boardroom.