The AI Challenge: Measurement and Org Redesign are not enough. AI and the hard part.
AI - Org, Talent, Behavior, Culture
Yes, 100%, you have to redesign your organization for the already here, rapidly growing/changing AI future. But it is downstream from some essential things, and so much harder than you think. There are four astronomically hard parts.
Past industrial revolutions did not sneak up on the incumbents. They were just not capable of leading through that change. Sure, a part of that was just hubris, but a bigger part was a mismatch of talent to task. Fantastic roller-skating athletes do poorly when the game changes to alpine climbing... sounds bonkers, but that scale of a shift is coming.
AI will literally change every part of commerce and every part of your company. You have about three years to manage that change.
The Four Hard Parts
I. Strategy Refresh
The broad impact and opportunities of AI are by now pretty obvious. The not-so-obvious bit that feels hard to think through is that this is the thin edge of the wedge, the beginning of AI ecosystem impact. It is getting bigger and faster.
The chance that your existing strategy is perfect for the next three years is zero.
The hard part: Smart strategy process is a dark art on a good day. Most 'strategists' convince you that their strategy-building structure is genius and will reveal the right path forward. The structured thinking and process help, but they may not get you a winning strategy this time. There are two giant issues with this.
Do the board, CEO, and key C-suite members have deep enough context in the current change wave to have meaningful discussions about the land of what is possible?
Are there incentive barriers and self-preservation obstacles to consider cannibalization and euthanasia alternatives?
I once had several great chats with a big, smart firm CEO about coming on board, ramping up innovation, and taking the firm to a new level. In the end, he decided not to, in part, because he only had 4 years left to retire and a lot of his board wouldn’t get it!
II. Building the Smart Chain - Strategy-Mission-Task-Talent
A new modified strategy generates a new mission and macro tasks to achieve that mission. The new tasks require talent.
The hard part: If you get this far, most companies shy away from switching out leadership and talent aligned with the old task map, not the new one. The picture above is what happens when the market/mission changes and your highly skilled roller skaters find out the new game is alpine climbing. Sure, that's a bit of an exaggeration, but this is decidedly the biggest commercial, technological, and structural shift in a hundred years. It is just beginning.
Exiting poor performers doesn't usually happen well and C+ talent pervades many companies. Exiting top talent with great track records who are now talent mismatches is rarely done. In times like these, if winning is the goal rather than merely surviving for some time, it is essential.
III. The Structural Part
With a modified strategy, mission, task, and talent map, you must now ensure your structure supports all of it.
The structure of a company is really the skeleton, the superstructure, and the key elements around it that make the whole thing work.
Maybe the most important element is to be clear about which behaviors are wanted and rewarded, and which are punished. Over communicate and over execute that.
Org Redesign - the org chart is not as important as you think. Org charts don't have magic, but they can have drag. Just have one that fits the mission and doesn't get in the way.
The hard part: Clear communication, rewards, and punishments, managed vigorously, will drive the new behaviors you want. At a company, the sum of your behaviors is your culture. Most companies are not great at truly authentic rewards. They are usually awful at punishments/disincentives, especially the higher up you go.
The really hard part: Think about innovation and how important that is across every function at your firm going forward. When was the last time you rewarding risk taking that failed? Most companies focus on action versus plan. This kills a root of innovation and trains people that they get rewarded for hitting a plan. No reward for just missing a far superior stretch goal.
IV. The End of HR. The one you know, not the next one.
Most of what HR does today, just like paralegals, coders, and marketing analysts, will be managed away by smart process-centric, context-aware, personalized agentic layers. Most of those will require human overwatch, but that's 90%+ of the HR folks gone.
There are three things we know for certain:
Competition is accelerating, not just because of AI
Almost all jobs, teams, and process networks will be improved massively by AI
New entrants to compete against you arrive and scale in astounding ways (look at Harvey, or the Ukraine drone industry).
The Really Hard Parts
So 'HR' becomes so very critical to drive these outcomes:
The employee base must continually keep pace with tool/tech/process development. That will not happen by accident or by reusing anything you have now.
Decision rights and structures have to be flat, fast, and focused. If you do not have an agile organization, you will fall behind. Most organizations have no view, measurement, or understanding of how agile they are, or are not.
The organization must be great at change management. They must be clear about which model they use and the elasticity of the speed-versus-quality curve.
Collective Generative Intelligence and cumulative IQ/knowledge will be potent weapons. That needs to be set up, cared for, and fed.
Innovation and continuous improvement have to be baked into the entire structure and extend into your entire ecosystem, not just your employees.
Talent and where you apply it must be leveraged, lego-ized, precise, and migratory.
That makes HR more of an asset-optimization, speed-oriented world than a resource-management and paperwork/regs department.
Every employee will also have digital ‘employees’.
Not a chance your existing HR team is fit for purpose...future purpose.
All of that changes how costs, humans, spend, and P&Ls are structured and managed. That makes you wonder about giant market-cap firms like Workday, which are not prepared to serve this era (which has already started). They are down roughly $70B in market cap in just over two years. That, as much as anything, is an early warning flare for all of the above.
(No AI was used or harmed in the production of this article - typically I would have two bots argue over improving this and then incorporating the winning bits, but it's Saturday and I am busy with regular human stuff)
