When AI Makes Final Decisions: The Effects of HR Decision Authority Within AI ‐Enabled HRM on Organizational Reputation

ABSTRACT As organizations increasingly embed artificial intelligence (AI) into human resource management (HRM), research has largely examined whether and when AI is used in HRM and how such use affects internal stakeholders. Much less is known about how the allocation of final HR decision authority between AI and human shapes external stakeholders' evaluations of the focal organization. Drawing on signaling theory, this research proposes that when information about AI‐enabled HR decision authority becomes available or knowable to external stakeholders, it can function as an organizational signal that shapes organizational reputation. Across three studies, we show that when AI rather than human HR specialists holds final decision authority over consequential HR decisions, external stakeholders infer greater employee objectification, which, in turn, damages organizational reputation. This process further depends on receiver‐side heterogeneity: the effect is attenuated when perceived AI humanlikeness is higher and amplified when HR issue relevance is higher. These findings contribute to the literature on AI‐enabled HRM, organizational reputation, and signaling theory, and provide implications for how organizations integrate, govern, and communicate AI use in HRM practices.