How to Lead and Develop Skills in the Age of AI

0:00Hey Chicago, class it up with Crocs. You know back to school is coming in fast. So why wait to find your new fave footwear? Step into a local Crocs store and step into your new look. Try it. Style it. Make it yours. Because the right pair doesn't just show up. It shows off. First day fits, handled. Walk out ready for whatever's next. Visit your nearest Crocs store today. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes.

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1:13Raffaella Sadun:Welcome to Harvard Business Review's The New World of Work. I am Adi Ignatius, Editor-in-Chief of Harvard Business Review. Each week on this show, I interview a CEO, a thought leader, or someone who can inspire and educate us on the changing dynamics of the workplace. Our viewers come from all over the world. They work at everything from Fortune 500 corporations to fledgling startups, from family businesses to nonprofits. The aim of this show is to provide insights for everyone as they navigate this transitional moment in how we organize ourselves in the business world. So in today's episode, we have another great guest, Rafaela Sardon, a professor at Harvard Business School.

1:49Raffaella Sadun:I'll come back with a proper introduction for her in just a moment. But first, let's hear from our good friends at KPMG, who are our sponsors for this season of The New World at Work. At KPMG, it's our people who make the difference for our clients. Talented teams leveraging the right technology to uncover insights that illuminate opportunity. Ready to make the difference together?

2:18Raffaella Sadun:Okay, now before we begin, if you are an HBR subscriber watching this, you can head to hbr.org slash newsletters to sign up for the New World of Work newsletter, where I offer an inside look each week at these interviews and talk about some of the most interesting takeaways. Also, if you like content like this, please consider subscribing to our magazine and website. The address is hbr.org slash subscriptions. And if you like hearing smart people talk about some of the same issues we discuss in this show, be sure to check out our flagship podcast, IdeaCast, available wherever you get your podcasts.

2:51Raffaella Sadun:And remember, you can watch previous episodes of this show on YouTube or right here on LinkedIn and Facebook. So my guest this week is Rafaela Sadon, a professor at Harvard Business School who specializes in questions of strategy. Her research focuses on the managerial and organizational drivers of productivity and growth. She's the co-author of an upcoming article in Harvard Business Review entitled Reskilling in the Age of AI, and we'll be talking about that and other topics today. Rafaela, welcome. Thank you so much. It's a pleasure being here. All right, well, let's get right into it. So I do want to talk about this article that you have coming up in HBR on reskilling in the Age of AI.

3:35Raffaella Sadun:let's start at a high altitude you know how dramatically do you think workplaces will be transformed as ai technologies take hold i think it's important to distinguish between what's the potential impact of this technology and what the reality will be the potential is the answer to your question is very high uh there will be as as we've learned from past technological transformation the possibility is that these technologies will change occupations radically And in fact, there are several estimates that tell us that maybe a huge percentage of the U.S. population will be affected, for example, by occupations will be affected by these technologies.

4:15What's very interesting about AI in particular is that they have the potential of having an impact on white collar jobs and high skilled jobs, which typically have been sort of insulated from past technological revolutions. I think the part where we come back to the reality is that at the end of the day, what happens will be will be a function of the adoption process. And the adoption process is, as we know, 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 depends also on the incentives to adopt, whether people will accept these technologies as their.

5:01Hey, Chicago. Class it up with Crocs. You know back to school is coming in fast. So why wait to find your new fave footwear? Step into a local Crocs store and step into your new look. Try it. Style it. Make it yours. Because the right pair doesn't just show up. It shows off. First day fits, handled. Walk out ready for whatever's next. Visit your nearest Crocs store today. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes.

5:47Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. Companions every day 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, I think, before we can really think about the revolutionary impact that is often mentioned in the press.

6:14Raffaella Sadun:So I know you can't possibly know the answer to this, but I'm interested in your thoughts. you know, 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, whether this is a net creator of jobs, subtractor of jobs? What's your guess? you know i think that that is the million dollar question what's going to happen at the end of the day depends on what firm strategies and firm organizational responses to these technologies are so let's first say that not every firm will be actually adopting these technologies we've seen it 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, to the adoption, shaping the technology adoption.

7:18One will be the lazy way. And this is people like Daron Asimoglu 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 organizational processes. That would be potentially complicated. there would be elimination of jobs without really the creation of new opportunities. And 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 organizational processes in such a way that these technologies create new tasks and new opportunities and potentially also new jobs.

8:05So coming back to the answer, I'm sorry to give you an answer that is not definitive, it depends. But the critical point is that it depends on what firms do. There is nothing that is predetermined at this point.

8:17Raffaella Sadun:Okay, so let's get back to the reskilling question. So, and let's talk first from the perspective of managers. You know, 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, you know, plausibly think about retraining an existing workforce to handle this challenge? Look, in practice, firms are constantly doing both things at the same time. They are 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.

9:08Some are related to the tightness of labor markets, which make sourcing external talent more costly. But I think also specifically to AI and these new technologies is the fact that these technologies are effective only to the extent that they are very integrated and well integrated with the specific use case. And 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 organization. So these two things, one, the cost, and the second, also the benefits of having external talent are somewhat changing.

9:52That creates, and that's what we've seen and what we document in the article, a newer attention towards the technology. Hey Chicago, class it up with Crocs. You know back to school is coming in fast. So why wait to find your new fave footwear? Step into a local Crocs store and step into your new look. Try it, style it, make it yours. Because the right pair doesn't just show up, it shows off. First day fits, handled. Walk out ready for whatever's next. Visit your nearest Crocs store today. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more.

10:41Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. We have solutions that are much more focused on internal talent, and in particular, not just upskilling internal talent, but also reskilling, which means giving them training that allows the workforce to jump from one occupation to the other.

11:14Raffaella Sadun:My guest today is Rafaela Sadan. If you have questions for her, put them into the chat. I'll try to get to as many audience questions as possible later. You know, generative AI is a piece of this puzzle. It's, you know, 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, I don't know, 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? I mean, do you think we, like, what percentage are we in terms of understanding this new technology and the potential it has to contribute to productivity or any other positive aspect of business?

12:01I think it's very early stage, to be honest. There is, you know, the estimates that I was mentioning before of this potential transformational effect of AI on occupations and jobs are 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. Now, 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.

12:41And, you know, one of my favorite examples, I have a student here in my executive programs that told me how he adopted AI in this shoe manufacturing company. and you can, you know, he, 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 adoption based on what he was doing and what he was needed. I think that this is a case where we're not talking about, you know, 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, I think, extremely reliable at this point.

13:22Raffaella Sadun:So I think you said before that on the one hand, managers are going to be looking for talent that's out there and on the other are going to need to reskill their own workforces. So let's talk about internal reskilling. You know, how does a leader create a reskilling program that works? And, you know, are there takeaways from companies that you've seen who seem to be doing this effectively? Right. So that's really the motivating question for the article that you just published. There is a lot of enthusiasm, I think, at a high level about reskilling. And we've heard with 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.

14:09the reality however is a little bit different from the hype and this is something that we are currently studying the problem is that even a well-designed training program what we heard for companies sometimes has really low take-up rates so there seems to be resistance from the perspective of the employees in putting themselves if you like in the mix and trying to going through these training programs to change occupations. And also what I found really interesting is there is also resistance at middle managerial levels. And so we've heard, for example, of middle managers that were very concerned of sending their own workers to get trained and especially trained to change occupation very naturally.

15:00Hey, Chicago, class it up with Crocs. You know back to school is coming in fast. So why wait to find your new fave footwear? Step into a local croc store and step into your new look. Try it. Style it. Make it yours. Because the right pair doesn't just show up. It shows off. First day fits, handled. Walk out ready for whatever's next. Visit your nearest croc store today. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes.

15:46Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs. Because that's how you lose your talent. If you send your workers to a training program, effectively, you are not only losing the person while this person studies or gets trained, but you're also potentially losing talent in the long run. And so this is just to say what we hear at the high level, what we, you know, the very ambitious estimates of what reskilling can do from our interviews appear to face a reality that is often quite different.

16:29And these are the challenges that we discuss in the article.

16:35Raffaella Sadun:So I want to stick with that because, you know, sending your team, your high potentials, whatever, 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, you know, a more dramatic problem. But I think it might be useful for people to hear. So how do you, you know, what kind of incentives or what kind of programs can you set up where you do the training, but you're not simply preparing your employee to go work somewhere else where they'll be in demand?

17:11Look, that is a risk that always exists. And the organization that we spoke with embraced that risk. And so I want to say, if you live in fear that training is going to immediately, you know, make you lose your talent, that is probably not the best attitude to invest in these training programs. I think what we've seen and what seems to, at least what we heard, seems to work better are training programs that are, first of all, embedded in a company strategy. And so if you are able to articulate why going through a reskilling or even an upskilling program matters for the organization and what are the rewards 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 organization.

18:07So I think this is one. The second one is making sure that for people that go through these training programs, they can see the benefits of training on their own skin. So I think it's interesting. Sometimes we have these super well designed programs, wonderful technology, but you don't 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 if I get trained and maybe I change occupation down the line? what is my career pathway? That clarity is often absent. And I think that that is something that makes, first of all, increases the chances of take up and makes the training program more successful, not just in general, but within the firm.

18:58Raffaella Sadun:So I want to go to an audience question now. And this is sort of definitional to provide some context as we have this discussion. This is from Olivier in Switzerland, who's really asking, can you be more clear, like what kind of AI are we talking about here? You know, there's AI and there's AI and there's gen AI. And, you know, what do you have in mind when we're talking broadly about AI? Yeah. So in the case, you know, I think that this is actually the question. When people talk about AI, there is this very broad definition. In my specific, in the specific examples that I was mentioning before, I'm thinking about, for example, decision support systems.

19:36And 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. Hey, Chicago, class it up with Crocs. You know back to school is coming in fast. So why wait to find your new Fave footwear? Step into a local croc store and step into your new look. Try it. Style it. Make it yours. Because the right pair doesn't just show up. It shows off. First day fits, handled. Walk out ready for whatever's next. Visit your nearest croc store today.

20:29When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs. Can help in decision making. But then, of course, the type of applications that are there right now are much, much wider than that and much broader than that.

21:10Raffaella Sadun:On generative AI, you know, the chat GPTs and BART and Bing and things like that. You know, I'm curious, are you finding a use for that in your world, in your profession or even in your, you know, for your hobbies? Are you finding a use case for yourself for Gen AI? Absolutely. Absolutely. And in fact, you know, 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. And in fact, Adi, I with colleagues, we actually digitized the Harvard Business Review archives.

21:54And thanks to these algorithms, we were able to extract the type of topics and problems that HBR worked with throughout the course of its history. And, you know, this is just one example of things that, again, the structuring of unstructured information, I think, is a very immediate application of AI within my specific field of research.

22:20Raffaella Sadun:Yeah, great. Okay, so back to reskilling. And now let's talk about the employee perspective. So, you know, we all know that new technologies come, 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 sort of want to get there and feel like, OK, I'm laid out of the gate. I don't really understand AI. I don't understand generative AI. How do you know, how do they prepare themselves for this transforming world? OK, so let's first clarify that learning a new skill is scary. I don't know. I know the last time that you learn a new software, for example, or a new way of doing things.

23:04I can tell you that it's especially as an adult, it's not the easiest thing to do. Even harder if learning this 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 kind of scared, to be honest. I mean, it's hard. So I think that the first thing is getting into besides the obvious, which is choosing training programs that are high quality. there is such a so much noise right now in the training in the training market that's actually a challenge so 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 this new as you approach learning new 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 some sort of maybe moments of fear or moments of I just cannot do this, it's too much.

24:08How about thinking about cohort models where you're not alone in this learning process, learning in the flow of work. These are all things that are able, and 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?

24:31Raffaella Sadun:So a few questions have come in that sort of build on this question of fear. And, you know, you started to talk about just now about the broad cohorts, but this is a question from Donna from Alabama in the US. And it's really, you know, what else then beyond that can businesses do communicate, you know, just to appreciate, yes, there's uncertainty, yes, there's fear, but to sort of help employees move along the path despite all of that? You know, I think we go back here to the importance of having clear strategic vision on how this training program fit within the company's future and the future of the employees.

25:12That, to me, can really 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 a strategic imperative that is driving these investments in training? I think this really matters. The second one is, are you structuring the incentives and the responsibilities in the organization in a way that makes training not just an HR initiative that lives in its own silo, but it's really embedded in the fabric and organizational fabric of the firm. And for example, some of the companies that we speak with make training part of the managerial responsibilities.

25:51There 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. And then, as I said before, I think it's really, really important to acknowledge that there is risk on the employee side and making sure that training is as frictionless as possible. That comes to, for example, making sure that people are paid or, you know, 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 in the long run.

26:32Raffaella Sadun:So I have a question from Richard in Cape Town, South Africa, and it's about company culture. So, you know, as we bring in AI, as we integrate AI, you know, how do we think about maintaining, strengthening, evolving a healthy corporate culture as we're relying on machines to do more and more of what humans used to do? I think this is a great question, actually. And, you know, 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, not just AI. And this is because these are the companies where change is easier.