Full article with thanks to: hbr.org/2023/08/how-to-reskill-your-workforce-in-the-age-of-ai
How will AI affect businesses and employees? It’s the million-dollar question, and according to Harvard Business School’s Raffaella Sadun, the answer will depend on how well an organisation connects the new technologies to both a broad corporate vision and individual employee growth. One without the other is a recipe for job elimination and fewer new opportunities for all.
Luckily, she points out, we are early in our AI journey, and nothing is predetermined. Smart leaders don’t need to understand every technicality of AI. But they do need to identify the best use cases for their specific business and communicate a clear strategy for reskilling their teams.
For this episode of our video series “The New World of Work”, HBR editor in chief Adi Ignatius sat down with Sadun, who wrote the HBR article, “Reskilling in the Age of AI”, to discuss:
· How leaders should use GenAI to augment their own decision making, without entrusting it to make the actual decisions.
· Even in the age of AI, the top management skills will be a mixture of technical (“hard”) and social (“soft”) skills. Those who excel will comprehend their organisation’s complexity while communicating a clear vision to all employees.
· Handling change management when everyone is uncertain about the future and regular employees are especially fearful.
“The New World of Work” explores how top-tier executives see the future and how their companies are trying to set themselves up for success. Each week, Ignatius talks to a top leader on LinkedIn Live — previous interviews included Microsoft CEO Satya Nadella and former PepsiCo CEO Indra Nooyi. He also shares an inside look at these conversations —and solicits questions for future discussions — in a newsletter just for HBR subscribers. If you’re a subscriber, you can sign up here.
ADI IGNATIUS:
Raffaella, welcome.
RAFFAELLA SADUN:
Thank you so much. It’s a pleasure being here.
ADI IGNATIUS:
I want to talk about your HBR article on re-skilling in the age of AI. Let’s start at a high altitude. How dramatically do you think workplaces will be transformed as AI technologies take hold?
RAFFAELLA SADUN:
It’s important to distinguish between the potential impact of this technology and what the reality will be. The potential is very high. As we’ve learned from past technological transformation, the possibility is that these technologies will change occupations radically. In fact, there are several estimates that tell us that maybe a huge percentage of the US population will be affected, for example, as occupations will be affected by these technologies.
What’s very interesting about AI in particular is that it has the potential of having an impact on white-collar jobs and high-skilled jobs, which typically have been insulated from past technological revolutions. The part where we come back to reality is that at the end of the day, what happens will be a function of the adoption process. And the adoption process is typically very messy, as we’ve seen in other technological revolutions. It depends on figuring out how to integrate these technologies in the workflow. And it also depends on the incentives to adopt, whether people will accept these technologies as their everyday companions in their work.
From what we know from past technological revolutions, it can take a while and it’s going to be a bumpy ride before we can really think about the revolutionary impact often mentioned in the press.
ADI IGNATIUS:
I know you can’t possibly know the answer to this, but I’m interested in your thoughts. Even the technology industry is split as to whether the widespread adoption of AI, generative AI, you name it, will eliminate jobs or will somehow create new jobs as we collaborate with machines. Do you have a view on that as you’re starting to see this play out in companies? Is it a net creator of jobs, subtractor of jobs, what’s your guess?
RAFFAELLA SADUN:
That is the million-dollar question. What’s going to happen at the end of the day depends on what firms’ strategies and organisational responses are. Let’s first say that not every firm will be actually adopting these technologies. Again, we’ve seen it in the past. There will be a lot of heterogeneity.
And those that do have basically two ways of reacting to the technology, shaping the technology adoption. One will be the lazy way. And this is people, like Daron Acemoglu who have talked about this in other outlets, where essentially they’re going to substitute whatever workforce they can with new technologies without really changing their production processes, their organisational processes. That would be potentially complicated. There would be elimination of jobs without the creation of new opportunities.
Then there is a second pathway that I find very exciting. Not everybody will get there, but I am pretty certain that some firms already are rethinking their workflows, and they’re rethinking their organisational processes in such a way that these technologies create new tasks, new opportunities, and potentially new jobs.
I’m sorry to give you an answer that is not definitive, but it depends. The critical point is that it depends on what firms do. There is nothing that is predetermined at this point.
ADI IGNATIUS:
Let’s get back to the re-skilling question from the perspective of managers. How should we think about our workforces? Are we essentially now competing for external tech talent that is skilled in these new technologies? Or can we plausibly think about retraining an existing workforce to handle this challenge?
RAFFAELLA SADUN:
Look, in practice, firms are constantly doing both things at the same time. They’re sourcing talent from external labor markets, and I think to various degrees of commitment and resources, they’re also investing in training.
What’s interesting is that the external workforce option becomes a little bit tricky these days for a couple of reasons. Some are related to the tightness of labor markets, which make sourcing external talent more costly. But also specific to AI and these new technologies is the fact that these technologies are effective only to the extent that they’re well-integrated with the specific use case. It’s not clear that somebody who is hired from the external labor market who doesn’t really know the production process would be best placed to adopt these technologies in this specific workflow of the organisation.
Two things: one, the cost, and the second the benefits of having external talent are somewhat changing. That’s what we’ve seen and what we document in the article, a newer attention towards solutions that are much more focused on internal talent, and not just upskilling internal talent but also re-skilling, which means giving them training that allows the workforce to jump from one occupation to the other.
ADI IGNATIUS:
Generative AI is a piece of this puzzle. It’s got us thinking, as a media company, as a learning company, how it creates opportunities, how it disrupts us. I figure that’s playing out through most companies now. Do you think we even know what the use cases are, let alone how to adapt our workforce to what those may be?
RAFFAELLA SADUN:
I think it’s very early-stage, to be honest. There are the estimates that I was mentioning before of this potential transformational effect of AI on occupations and jobs, typically based on taxonomies of occupations where you can break down an occupation in multiple tasks, and then there is an inference that says, well, these tasks seem to be amenable to AI and this doesn’t and that’s how we come up with these very large estimates of the potential impact of the technologies.
When it comes to the reality, of course, even if an occupation is the same in principle, it can be very different across different firms. One of my favorite examples: I have a student here in my executive program that told me how he adopted AI in this shoe manufacturing company. I won’t get into the details of what he did, but he really thought for two years about the specifics of the production process in his firm and then modeled the AI adoption based on what he was doing and what was needed.
This is a case where we are not talking about just getting a computer out of the box and plugging it. There will be a lot of adaptation and this is what makes every prediction extremely unreliable at this point.
ADI IGNATIUS:
Let’s talk about internal re-skilling. How does a leader create a re-skilling program that works? Are there takeaways from companies that you’ve seen who seem to be doing this effectively?
RAFFAELLA SADUN:
There is a lot of enthusiasm, I think at a high level, about re-skilling, and we’ve heard of companies that truly believe in the opportunity of providing their workforce with training that really allows them to thrive in this era of technological changes.
The reality, however, is a little different from the hype, and this is something that we are currently studying. The problem is that even a well-designed training program, we heard from companies, sometimes has really low take-up rates. There seems to be resistance from the perspective of the employees in putting themselves, if you like, in the mix and going through these training programs to change occupations.
Also, there is resistance at middle-managerial levels. We’ve heard, for example, of middle managers that were very concerned about sending their own workers to get trained and especially trained to change occupation, very naturally because that’s how you lose your talent. If you send your workers to a training program, effectively, you’re not only losing the person while this person studies or gets trained, but you’re also potentially losing talent in the long run.
This is just to say what we hear at the high level, what the very ambitious estimates of what re-skilling can do, from our interviews, appear to face a reality that is often quite different.
ADI IGNATIUS:
Sending your team, your high potentials, to learn new skills, to go off and do an executive education program, you always run that risk that you may be training them for the next job. I don’t know if AI is just another example of that or somehow a more dramatic problem. But it might be useful for people to hear. What kind of incentives or programs can you set up where you do the training, but you’re not simply preparing your employee to go work somewhere else where there’ll be in demand?
RAFFAELLA SADUN:
That is a risk that always exists, and the organisations we spoke with embraced that risk. If you live in fear that training is going to immediately make you lose your talent, that is probably not the best attitude to invest in these training programs.
What we’ve heard that seems to work better are training programs that are first of all embedded in a company strategy. If you are able to articulate why going through a re-skilling or up-skilling program matters for the organisation and what the rewards are that people are going to get out of these training programs within the firm, that already changes the salience of the training program and how people see themselves within the organisation. This is one.
Second is making sure for people that go through these training programs, they can see the benefits of training on their own skill. Sometimes we have the super well-designed programs, wonderful technology, but people don’t know what’s going to happen to their own career. Here we’re talking really at the personal level. What happens to me if I get trained and maybe I change occupation down the line? What is my career pathway? That clarity is often absent, and [clarity] is something that increases the chances of take-up and makes the training program more successful, not just in general, but within the firm.
ADI IGNATIUS:
I want to go to an audience question. This is definitional to provide context. This is from Olivier in Switzerland. What kind of AI are we talking about here? There’s AI and there’s GenAI. What do you have in mind when we’re talking broadly about AI?
RAFFAELLA SADUN:
When people talk about AI, there is this very broad definition. In the specific examples that I was mentioning before, I’m thinking about decision support systems. One concrete example would be AI used in the context of buying decisions for supply chain managers, for example. Another case could be decision support systems for clinicians, for physicians.
These are types of technologies that can help in decision making, but then of course the type of applications that are out there right now are much wider than that, much broader than that.
ADI IGNATIUS:
On generative AI, ChatGPT and Bard and Bing, are you finding a use for that in your world, in your profession or even for your hobbies? Are you finding a use case for yourself for GenAI?
RAFFAELLA SADUN:
Absolutely. I’m an economist by training and machine learning has gradually permeated even what we do at an academic level. The type of information that we can now distill from unstructured data is just incredible with large language models. In fact, Adi, with colleagues, we actually digitised the Harvard Business Review archives, and thanks to this algorithm we were able to extract the type of topics and problems that HBR worked with throughout the course of its history. This is just one example the structuring of unstructured information that is a very immediate application of AI within my specific field of research.
ADI IGNATIUS:
Back to re-skilling, let’s talk about the employee perspective. We all know that people learn at different rates. You just have to expect that and figure out how to bring more people along. Not everyone will get there, but for employees who want to get there and feel like, “OK, I’m late out at the gate. I don’t really understand AI, I don’t understand Generative AI,” how do they prepare themselves for this transforming world?
RAFFAELLA SADUN:
Let’s first clarify that learning a new skill is scary. I don’t know the last time you learned a new software, for example, or a new way of doing things, [but] I can tell you that, especially as an adult, it’s not the easiest thing to do. Even harder is learning a new skill to get to a new occupation. I am an applied economist. If you ask me to become a macroeconomist tomorrow, I’d be scared. It’s hard.
The first thing is choosing training programs that are high quality. There is so much noise right now in the training market. That’s actually a challenge. A little bit of due diligence clearly on what you do, but I think that most of the work is actually on the mindset that you have as you approach learning new skills.
And in particular, I think what matters is understanding, trying to put yourself in a condition in which you know that you’re going to face moments of fear or moments of “I just cannot do this, it’s too much”.
How about thinking about cohort models where you’re not alone in this learning process, learning in the flow of work. That’s what we heard also from the companies, to lower the frictions and the inevitable bumps in the road that you will find when you start learning a new skill as an adult.
ADI IGNATIUS:
A few questions have come in that build on this question of fear. This is a question from Donna, from Alabama in the US. What else can businesses do to communicate that, yes, there’s uncertainty, yes, there’s fear, but how can they help employees move along the path despite all of that?
RAFFAELLA SADUN:
We go back here to the importance of having clear strategic vision on how this training program fits within the company’s future and the future of the employees. That can go a long way towards alleviating some of the concerns and some of the uncertainty that employees face. Why are we learning it and what is the strategic imperative that is driving the investments in training?
The second is, are you structuring the incentives and the responsibilities in the organisation in a way that makes training not just an HR initiative that lives in its own silo, but it’s really embedded in the organisational fabric of the firm?
For example, some of the companies that we speak with make training part of the managerial responsibilities. There are KPIs around not only how much you train yourself, but also how much your subordinates get trained. And these are all things that help with the alignment.
It’s important to acknowledge that there is risk on the employee side and making sure that training is as frictionless as possible. For example, making sure that people are paid or they’re not just expected to get trained on Sundays or Saturdays, making sure that they have a clear career pathway, making sure that the incentives are aligned for today and the long run.
ADI IGNATIUS:
I have a question from Richard in Cape Town, South Africa, and it’s about company culture. As we bring in AI, how do we think about maintaining, strengthening, and evolving a healthy corporate culture, as we’re relying on machines to do more and more of what humans used to do?
RAFFAELLA SADUN:
This is a great question. To some extent, my expectation is that companies with a great culture are going to be the companies that are going to be able to make the most of new technologies. It’s not just AI. These are the companies where change is easier because you have a culture, you know what to stand for. Going back to employees’ perspectives, these are probably the companies where it’s easier to experiment and change.
The other point that you’re making on the extent to which a company’s culture influences how the technology is used, I think that’s a really interesting one. Some of my economist colleagues are very concerned that companies’ cultures are not focused enough on making sure that technologies contribute to the growth of employees rather than just substitution.
There is a vast heterogeneity out there. If you are a culture that invests in its employees, it’s important to think carefully about the ways in which you are presenting technologies, and you’re presenting opportunities for your employees to grow with the introduction of these new technologies.
ADI IGNATIUS:
You’ve written in the past about the evolving needs for skills in the C-suite. This is a question from Shadia in Massachusetts in the US. What kind of leadership skills do executives need in the age of AI? Not necessarily to master AI technology, but it is transforming and will transform the workplace. What are the leadership skills that CEOs and the C-suite need most in this transformative era?
RAFFAELLA SADUN:
This is a question that I think pertains not just to the use of technologies, but the emergence of knowledge based and complex organisations. Since many organisations are going this direction, the type of skills that matter are not just cognitive or strategic skills, like knowing what to do, or knowing in-depth a specific technology.
It’s having the skill that is necessary to combine all the knowledge that exists in your company. If you have, for example, more technically savvy people, it’s your responsibility as a leader to find a way for these technically savvy people speak to each other and communicate with the other parts of the organisation that may not be as technologically savvy. These are social skills that allow for this trading of expertise.
The second piece is related to the soft skills, persuading, and helping people cope with change. What is difficult is to find this unique mix of both cognitive skills and social skills. These are the type of leaders that I expect to really thrive going forward. We see this already. We see that the demand for these skills has increased a lot over the past 20 years, this combination of social and technical skills.
ADI IGNATIUS:
As the editor of a magazine that writes about management issues, I’ve been heartened over the years to see you do research and write pieces that say good management actually matters. It actually contributes to higher productivity. Sometimes, oddly, we seem to undervalue the role of management. In the research you’ve done, in the writing you’ve done, what can managers learn from your findings to improve what they do?
RAFFAELLA SADUN:
It’s almost a definition of who I am, believing that management matters and that managers should have this clear in their mind. They are critical for a company’s performance, a company’s success.
Now, the piece that my research has explored in the past is that sometimes even the best managers underestimate the importance of basic management practices. You want to think about complexity, you want to think about strategy. Of course, that’s all really, really relevant, but please also make sure that the basics of management are implemented in your firm.
In the research that you were mentioning before, we find that actually there is quite a bit of heterogeneity in the adoption of basic management practices across firms and across a variety of countries and industries, and this heterogeneity really matters for firm performance. I think we offer different explanations of why that could be the case, but maybe starting to understand where you are and not underestimating the basics would be my advice.
ADI IGNATIUS:
We’ve talked about AI in mostly positive terms, in terms of how it can contribute to a company and to its productivity. There are also potential or actual downsides we’re seeing. This is a question from Debra from Ontario in Canada, but I think there’s several areas of potential concern. Thinking about deep fakes, hallucinations, the things AI can do that are inaccurate, that could set us astray, how do we safeguard against some of these downsides that we’re already seeing?
RAFFAELLA SADUN:
These are relevant questions. On the one hand, the cost of using these technologies has really decreased enormously, even over the past year. The wide adoption is not even a year old. As the cost of these technologies has decreased, my concern is that we would use these technologies blindly, without truly understanding that they are not oracles, and they’re not able to make complex judgements or complex reasoning. They are effectively a support system for, but not really a [replacement for] decision making.
My advice is to think about the use case, and never trust something that just comes out of the box. Most of the cost in the adoption of these technologies will be in adapting them, and truly understanding these technologies for your own specific use case.
On the one hand, the cost of accessing the basic elements of the technologies have been lowered quite a bit, but on the other hand, where I think people should really focus their attention is making sure that the adaptation is done carefully and is done in an iterative way, making sure that there are no hallucinations, but also making sure that you’re adding value to your production process rather than just adding a new fancy toy just for the sake of it.
ADI IGNATIUS:
That’s good advice. I want to talk to you about the transformation in the workforce that’s happened really because of the pandemic that caused us all to adapt. Many of us are still in a hybrid work environment. To what extent do you think that period, and what we learned from that period, has permanently transformed both the workplace and how we think about work, how we interact? What are the lasting takeaways from that moment?
RAFFAELLA SADUN:
There has definitely been a shift. We see it, for example, in job adverts that now include remote work options. I’ve done some work on this and you can see that there has been a big jump, especially during the pandemic months, in the extent to which companies that were not offering remote options or hybrid options now do that.
Now, however, and again this is looking at the data, you also observe that there is tremendous heterogeneity across firms in the extent to which hybrid and remote jobs are being accepted in a post-pandemic world.
What we are seeing is that what matters is not so much the location, but the extent to which the design of the job is complemented by other organisational choices. Just to give you a few examples, the documentation of work, ways of communication, ways of promoting people, even if they’re not in the office.
ADI IGNATIUS:
Having looked at technology and its effect on the workforce, I’m curious whether you are a techno-optimist or a techno-pessimist or absolutely neutral. We all make a choice as to who we are on that and maybe it amplifies who we are inside. But I’m curious, as you’ve looked into some of these technologies in the workforce, are you basically optimistic, pessimistic, neutral?
RAFFAELLA SADUN:
I’m an organisational economist, Adi, so the answer that I’m going to tell you is: everything will be different. What’s important for your listeners is that as these new technologies emerge, what we might see, what we’ve seen in the past, is a polarisation of outcomes across firms. My expectation is that maybe on average we won’t see much or we would see something but not as dramatic, but we will see vast differences in the extent to which some firms are really able to click and figure out how to use these technologies for their own benefit.
In the past, these firms have typically been the larger ones because there are economies of scale in technology, and then we will see other firms that just don’t get it. I would just be alert, not just on the average effects, but I would be very, very careful about this opening up between those that are at the frontier and those that remain behind.
ADI IGNATIUS:
Raffaella, we’re almost out of time, but I really want to thank you. Thank you for being on the show. Thank you for your thoughts.
RAFFAELLA SADUN:
Thank you so much for having me.
Full article with thanks to: hbr.org/2023/08/how-to-reskill-your-workforce-in-the-age-of-ai
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