# Top HR Challenges SMBs Must Tackle for Success in 2026 | Capterra > Discover the three key HR challenges SMBs will face in 2026 and learn actionable strategies to drive growth, engagement, and successful AI adoption. Source: https://www.capterra.com/resources/key-hr-challenges-smbs --- # 3 Big HR Challenges Ahead for SMBs Written by: Bruno Peláez Bruno PeláezAuthor Senior Content Analyst Experience I’ve been writing for Capterra since 2019, establishing myself as a thought leader in the B2B software market. My current f... [See bio & all articles](https://www.capterra.com/resources/author/bruno-pelaez/) and edited by: Mehar Luthra Mehar LuthraEditor Experience I’ve been a team lead at Capterra for nearly three years, helping shape educational articles, thought leadership research reports, and content des... [See bio & all articles](https://www.capterra.com/resources/author/mehar-luthra/) Published December 2, 2025 6 min read Table of Contents - [Preparing SMBs for upcoming HR disruptions](#preparing-smbs-for-upcoming-hr-disruptions) - [1\. The growth-cost tension challenge](#1-the-growth-cost-tension-challenge) - [2\. The AI integration challenge](#2-the-ai-integration-challenge) - [3\. Keeping employees engaged in a shifting work environment](#3-keeping-employees-engaged-in-a-shifting-work-environment) - [The HR road ahead for small and midsize businesses](#the-hr-road-ahead-for-small-and-midsize-businesses) ## Preparing SMBs for upcoming HR disruptions **Small and midsize businesses (SMBs) must combat growth-cost tension, AI integration hurdles, and employee engagement challenges in 2026 to stay competitive and resilient.** Knowing how to tackle the biggest HR obstacles will help businesses build agile teams with [the right HR tools](https://www.capterra.com/human-resource-software/) and position themselves for long-term success. **Why you should read on:** Our report draws on vetted data from Capterra’s 2025 HR Software Trends Survey\*, which gathered insights from more than 3,000 HR leaders in 11 countries, alongside Gartner research on HR challenges and trends. ## 1\. The growth-cost tension challenge **What does it mean?** The growth-cost tension challenge is the struggle to cut costs while still funding growth and innovation. This challenge has become increasingly critical for SMBs as they navigate a volatile economic environment marked by rising costs, inflation, and shifting market dynamics. For instance, Gartner’s Market Risks CHROs Should Watch — October 2025 report reveals that 69% of HR leaders identify this tension as one of the most significant disruptions impacting their talent strategy goals.[\[1\]](#sources) ### What global HR leaders tell us - 70% of HR leaders expect the HR technology cost to increase in 2026 - 30% point out that managing organizational or strategic changes to business is a challenge to face in 2026 -  63% expect their workforce to increase in the next 12 months  - 36% say retaining employees is one of their main challenges ### Why the growth-cost tension matters - **Rising costs squeeze profits:** Increasing costs can shrink profit margins, making it harder for SMBs to grow - **Uncontrolled spending hurts competitiveness:** Poorly managed spending may cause businesses to fall behind competitors and struggle to adapt to market changes - **Short-term savings risk long-term growth:** Focusing solely on short-term savings can limit a company’s ability to invest in long-term opportunities, putting future growth and competitiveness at risk. ### How AI in HR software can help organizations face the growth-cost challenge - 68% of HR leaders who use AI features in their HR software report that they help improve efficiency or productivity. - 50% of HR leaders who use AI features in their HR software say they help extract more or better insights from their data. How SMBs can manage growth-cost tension - **Scenario planning:** Utilize scenario planning to prepare for various economic scenarios and remain adaptable. This approach helps SMBs balance growth goals with cost controls by mapping out staffing, production, and investment plans for various outcomes. You can leverage [financial management software](https://www.capterra.com/financial-management-software/) for this. - **Smart resource allocation:** Invest in what makes the business unique, rather than cutting costs across the board. Enterprise resource planning ([ERP](https://www.capterra.com/enterprise-resource-planning-software/)) and [workforce management software](https://www.capterra.com/workforce-management-software/) help companies in this aspect. In fact, 49% of HR leaders who use AI in their HR software say that it helps improve organizational agility. - **Cost-conscious culture:** Build a culture where everyone understands and takes responsibility for spending decisions. For instance, instead of leaving cost control to finance or leadership alone, every team member understands how their choices impact the bottom line. - **Collaborative leadership:** Work closely with leaders and stakeholders to balance cost management with growth plans. [Collaboration tools](https://www.capterra.com/collaboration-software/) and [project management software](https://www.capterra.com/project-management-software/) can support SMBS in this purpose. - **Clear governance:** Clarify decision-making roles and processes to accelerate the progress of key business and growth projects, such as employee well-being initiatives or process improvements. [Workflow management solutions](https://www.capterra.com/workflow-management-software/) can help companies establish clear governance. ## 2\. The AI integration challenge **What does it mean?** SMBs struggle to integrate AI with existing systems, manage data security, and align projects with long-term goals while facing skill gaps and employee resistance. It highlights the obstacles SMBs encounter when incorporating AI into current systems and workflows. Often, AI tools are implemented without a unified strategy, resulting in confusion, delays, and unmet objectives. Businesses must overcome issues such as integrating AI with existing technology, protecting data, and connecting projects to strategic priorities—all while managing limited resources and ensuring effective oversight. According to Gartner, 40% of HR leaders report that a blended AI-human workforce poses a challenge to employee experience management.[\[1\]](#sources) ### HR leaders using AI features share AI adoption challenges - 57% say their organization is using AI features in HR software - 45% of HR leaders already using AI say having sufficient AI skills on staff is a significant challenge in 2026 - 36% of those who already use AI say overcoming employee resistance to AI is a significant challenge in 2026 ### Why the AI integration challenge matters - **Competitive pressure:** Companies that fail to integrate AI effectively risk falling behind their competitors, who might already be using AI to enhance services and improve efficiency. - **Operational efficiency:** AI can help boost productivity, cut costs, and deliver better customer experiences, but only if it’s implemented well. - **Data governance and security:** Poor AI integration can lead to data breaches, regulatory issues, and a loss of customer trust, ultimately threatening business stability. ### Employee AI adoption: Five key actions for success **Step 1: Set clear AI goals** Define specific outcomes for AI in your business. Involve employees in shaping these goals to ease concerns and focus on simple, practical integrations that fit naturally into everyday work routines. **Step 2: Build a change manager network** Appoint AI change managers to support communication and employee engagement. Use surveys and focus groups to gather feedback and address concerns, building trust in the process. **Step 3: Launch and pilot AI initiatives** Announce the start of AI adoption with clear, empathetic communication. Co-create small pilot projects with employees and celebrate quick wins to boost motivation. **Step 4: Enable ongoing feedback** Set up channels for employees to share feedback on AI adoption. Encourage open conversations to spot challenges early and adjust your approach as needed. **Step 5: Keep the momentum going** Regularly track progress and tweak your AI strategy. Demonstrate to employees how AI enhances productivity to maintain enthusiasm and encourage ongoing engagement. How SMBs can manage the AI integration challenge - **Structured implementation:** Start with simple, high-impact AI projects before moving to more complex ones. [Project Management software](https://www.capterra.com/project-management-software/) can help set up this type of project. - **AI tools portals:** Build or utilize internal portals to enable staff to easily find and utilize AI tools. Document specific use cases and map them with AI tools and features to enable optimized usage. - **Data management:** Set up effective data practices, combine existing data sources, digitize records, and automate data collection. Use [data management software](https://www.capterra.com/data-management-software/) for this process. - **Cross-functional collaboration:** Form teams with reps from IT, HR, and operations departments to ensure AI projects meet both technical and business needs. [Workflow management](https://www.capterra.com/workflow-management-software/) and [collaboration software](https://www.capterra.com/collaboration-software/) provide the tools for this collaboration dynamic. - **Responsible AI practices:** Implement clear guidelines for the ethical use, security, and transparency of AI. [Compliance solutions](https://www.capterra.com/compliance-software/) can help companies with this. ## 3\. Keeping employees engaged in a shifting work environment **What does it mean?** Shifting business conditions caused by economic pressures and organizational changes lead to employee engagement challenges. The result: Increased uncertainty, heavier workloads, and reduced flexibility for employees.  These factors can make it more difficult for employees to stay engaged and may lower overall morale. According to Gartner, 52% of HR leaders identified rising employee uncertainty, while 51% reported heavier workloads as key factors weakening talent attraction and retention.[\[1\]](#sources) ### What global HR leaders tell us - 39% of HR leaders say supporting employee well-being and mental health is a challenge in 2026 - 38% say improving employee engagement is one of the top concerns for 2026 - 57% of HR leaders report currently using employee engagement software ### Why does keeping employees engaged matter - **Engaged employees drive performance:** They are crucial for achieving strong performance and productivity, particularly during periods of change. - **Process friction erodes team motivation:** High work friction, such as inefficient processes or unclear changes, can lower engagement. - **Low morale undermines growth and retention:** Disengaged teams are more likely to miss growth opportunities, experience higher turnover rates, and see a decline in overall performance. - **Resource gaps trigger dissatisfaction and turnover:** When employees feel they lack fair access to resources, dissatisfaction and disengagement can increase, further impacting morale and retention. ### How HR software and AI features can help improve employee engagement - 43% of HR leaders using AI features say HR software helps boost employee satisfaction and engagement. - 39% of HR leaders using AI features say HR software helps improve retention. How SMBs can improve employee engagement - **Transparent communication:** Share clear principles and reasons for changes. Give employees a chance to voice concerns and build trust. [Employee engagement solutions](https://www.capterra.com/employee-engagement-software/) and [employee communication tools](https://www.capterra.com/employee-communication-tools-software/) can support companies in these actions. - **Reduce work friction:** Identify and resolve process bottlenecks, empower staff to manage their workloads effectively, and align workflows with business objectives. [Employee scheduling software](https://www.capterra.com/employee-scheduling-software/) and [workflow management software](https://www.capterra.com/workflow-management-software/) can help businesses in this field. - **Custom training programs:** Offer training that fits individual needs, especially during periods of change, to support skill growth for all employees. [Learning management systems](https://www.capterra.com/learning-management-system-software/) provide the tools to develop training programs for employees. For upskilling strategies, read our report on [Closing the skill gap: Upskilling strategies and trends that actually work](https://www.capterra.com/human-resource-software/upskilling-employees-strategies-and-trends/). - **Continuous feedback:** Set up two-way channels for employees to share experiences and feedback. Use this input to shape policies and respond to changing needs. [360 degree feedback software](https://www.capterra.com/360-degree-feedback-software/) and [survey platforms](https://www.capterra.com/survey-software/) help organizations collect employee sentiments and concerns. ## The HR road ahead for small and midsize businesses SMBs that tackle growth-cost tension, AI integration, and employee engagement with proactive approaches will be better equipped for the future. By adopting practical solutions, effective employee engagement strategies, and the right technology, businesses can turn HR challenges into opportunities for growth, creating workplaces where people and organizations succeed together. Visit Capterra’s [HR software directory](https://www.capterra.com/human-resource-software/) to find the best solutions for your business. ## Capterra's 2026 Software Buying Trends Report ### Download our 2026 Software Buying Trends Report to see how successful software adopters avoid disappointment and how your business can, too. * * * Sources 1. [Market Risks CHROs Should Watch — October 2025](https://www.gartner.com/document-reader/document/7010798), Gartner * * * ### Was this article helpful? * * * ## About the Authors [### Bruno Peláez](https://www.capterra.com/resources/author/bruno-pelaez/) Bruno Peláez is a senior content analyst at Capterra, covering the B2B software industry, with a current focus on the human resources and finance and accounting industries. His Capterra research has been featured in various Spanish-speaking publications, including El Economista (Mexico), Forbes México (Mexico), El Universal (Mexico), El Financiero (Mexico), and El Periódico (Spain), among others. [### Mehar Luthra](https://www.capterra.com/resources/author/mehar-luthra/) Mehar has been a team lead at Capterra for nearly three years, helping shape educational articles, thought leadership research reports, and content designed to help businesses compare software to find the best fit. She's spent nearly a decade in the editorial space, having served as a content writer, editor, editorial head, and now as a team lead. ### RELATED READING - [How AI Onboarding Tools are Reshaping HR Operations](https://www.capterra.com/resources/ai-onboarding-tools-for-hr/) - [What is a Job Requisition? 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The goal of the study was to understand the HR software that companies are buying, their benefits and challenges, and the impact of AI on HR. Respondents were screened for employment at companies with more than one employee, working in management-level roles or above. Respondents were also confirmed to be at least partially responsible for HR software purchase decisions within their organization.