Owning a business today isn’t what it used to be. According to isolved’s Second-Annual Business Owners Report, 76% of business owners say running a business has become more complicated in the past year, compared to just 52% the year before.
Between rising costs, shifting employee expectations, and ongoing economic uncertainty, many leaders are feeling the pressure from every direction.
To stay competitive, more business owners are turning to two areas for support: artificial intelligence (AI) and human resources (HR). Both can play a major role in improving efficiency and creating stronger teams. Yet many organizations aren’t using them to their full potential.
The isolved report, which surveyed more than 2,000 U.S. business owners and executives, reveals some interesting patterns about how leaders are adapting and where they may be missing opportunities.
AI Is Reshaping the Way Businesses Operate
An impressive 81% of business owners view AI as a business opportunity, and 84% say it’s already had a substantial impact on their operations. Common uses include employee-facing chatbots and automating payroll, benefits, and learning functions. However, most leaders believe the biggest benefits of AI are still ahead, as adoption continues to evolve.
Cost Pressures Are Leading to Hard Choices
More than half of the business owners surveyed (56%) expect to reduce headcount in the coming year. Despite this, many are trying to balance financial realities with employee well-being. Eighty-one percent are open to offering flexible pay options like earned-wage access to support financial wellness and boost retention.
The HR Disconnect: Strategic vs. Operational
Here’s where things get interesting. While 94% of HR leaders describe their departments as strategic, only 41% of business owners agree. That’s a big gap. The data shows that while most owners (95%) are deeply involved in HR, recruitment, payroll, and benefits, they don’t necessarily view HR as a driver of business strategy. Closing this perception gap is critical if you want to unlock your team’s full potential.
Burnout and Skills Gaps Are Being Overlooked
Only 40% of business owners believe their workforce is experiencing burnout, compared to 79% of employees who say they are. That disconnect can lead to missed warning signs and declining productivity. On top of that, 48% of HR leaders report a growing skills gap, but many owners aren’t investing fast enough to address it.
A Shift in Power Dynamics
Interestingly, 82% of business owners believe the balance of power is shifting back toward employers. As a result, some are reducing flexibility and job seeker incentives, instead emphasizing efficiency. While this may provide short-term control, it’s important to remember that engagement and retention thrive in environments where employees feel valued and supported.
A Continued Focus on DEI&B
Despite challenges, the commitment to diversity, equity, inclusion, and belonging remains strong. Eighty-three percent of business owners plan to increase investment in these initiatives, while only 4% plan to eliminate them.
What Business Owners Want from HR Moving Forward
Owners are increasingly looking for strategic insights from HR data, not just reports. They want to understand how employee experience impacts business outcomes, how to measure ROI on HR initiatives, and how to use this information to make better decisions. Unfortunately, few believe they’re getting that level of insight right now.
Yutaka Takagi, Principal Product Evangelist at isolved, summarized it well: business owners are facing greater complexity, and success depends on aligning with HR, leveraging technology thoughtfully, and keeping the employee experience at the center.
For any business owner, this means taking a closer look at how you’re using your tools and your team. Is HR a strategic partner in your business? Are you using AI to free up your people’s time for higher-value work? The more intentional you are in these areas, the more likely you’ll turn today’s challenges into tomorrow’s competitive advantage.
If you’d like to explore the full findings of isolved’s Second-Annual Business Owners Report, you can click here to dive deeper into the data and insights shaping the future of small business leadership.
