A New Role for HR?

Recently, I came across an insightful article in the Harvard Business Review titled “HR’s New Role.” It posits that in today’s tight labour market, cost-cutting is out, and championing employee concerns is in. The article suggests that HR must shift its focus from cost-cutting and productivity back to prioritising employee well-being.

Cappelli and Nehmah offer insightful reflections on the evolving function of HR, and I find myself in agreement with a number of their recommendations. However, the article's wider narrative does not adequately address the macroeconomic hurdles and the transformative potential of generative AI. The issue at hand is not the sheer number of jobs but the quality of those jobs. The once dynamic urban escalator for social advancement has largely ground to a halt.

The industrialised nations are replete with employment prospects, with employment levels at or near to record levels. Yet there has been a noticeable slump in productivity growth over the past decade, a situation exacerbated by the COVID-19 pandemic. The impact of remote work on productivity has yielded mixed results, and we are faced with considerable demographic shifts, including falling birth rates and a contracting workforce. In light of the wider societal challenges posed by climate change and an ageing populace, it is imperative to confront the issues of productivity and well-being head-on. Technology must play a central role. HR has a critical part to play in safeguarding the commercial viability of our enterprises, championing the interests of employees, and ensuring responsible business conduct, particularly in the application of technology.

Technological advancements understandably concern people as they disrupt industries and create winners and losers. No technology benefits everyone equally. For instance, the Luddites opposed mechanised weaving during the industrial era, because they could rightfully see it spelt the end of the careers of artisans. Whilst industrialisation ultimately raised living standards and birthed the middle class it initially depressed wages and it took 70 years for the benefits to be shared with the workforce. It is often said the industrial revolution started with the construction of the first factory and ended with the publication of the communist manifesto.

History shows transitions can be painful. The computer revolution from the 1980s increased productivity but was polarising, automating many middle-skilled jobs. Computers traditionally excelled at following rules and procedures, displacing jobs requiring high school literacy, numeracy, and training. But the computer revolution did not destroy jobs - its actually helped to create them - but it is the quality of those jobs that matter. The rise of low-paid service jobs has accompanied the hollowing out of middle-skilled jobs. This has contributed to the widening income gap and the rise of popularism.

Maintaining the value of labour is crucial. Technologies that enhance human expertise and skills are favourable for income distribution, unlike those that merely automate tasks. The focus should be on the quality, not the quantity, of jobs. High employment rates mask the problem of job quality. This is not merely about HR leading the charge in convincing senior management to improve employee treatment or to alter company policies regarding compensation, training, layoffs, vacancies, outsourcing, and restructuring. At the heart of the matter is a more profound question - how we generate quality jobs and empower a broader segment of society to engage in higher-skilled, more fulfilling work.

Traditional computing automated formal procedures but couldn't handle tacit knowledge. However, AI, especially deep learning and generative AI, can infer patterns from large data sets, making educated guesses and supplementing human decision-making. It can enhance professional judgement by providing guidance based on extensive data, making it a valuable tool for improving decision-making across various fields, if used wisely and with thought.

Generative AI represents a potential paradigm shift for productivity, promising to reshape the workforce and drive substantial gains. It may help combat skill-biased change that has contributed to wage polarisation and the prevalence of low-quality service jobs. Several empirical studies show the Generative AI can enable individuals with lower abilities to perform tasks previously requiring higher skills, offering the possibility that Generative AI can reverse the skill-biased technological changes since the 1980s. The most compelling aspect of these studies is that they demonstrate a correlation where the successful and well thought through implementation of generative AI is linked to a reduction in turnover, particularly among new hires. Additionally, employees reported higher job satisfaction, and customers expressed greater contentment, reflected in superior ratings for support staff.

To be clear: I am not jumping on the Generative AI zeitgeist bandwagon. I firmly believe we must be cautious about how and where we apply generative AI. While it can drive productivity by up to 14%, its limitations, such as hallucinations, difficulty following rules, and poor numerical accuracy, require expert oversight in many areas. Understanding the jagged technical frontier of AI is essential to navigate its implementation effectively.

In this context, HR's role is crucial in enabling commercial success by fostering an engaged, diverse, and talented workforce, ensuring responsible business practices, and maintaining compliance and the license to operate. In a tight labour market, productivity and well-being are both critical and not mutually exclusive. Balancing these priorities is essential, especially in the current macroeconomic context, where we face sluggish growth, climate change, and an ageing population. We have an opportunity to increase productivity and support social mobility, but we must also guard against burnout and focus on creating quality jobs that address meaningful problems. By focusing on both productivity and employee well-being, HR can help navigate this transition effectively, ensuring organisations thrive while maintaining a supportive and healthy work environment. I agree with Dave Ulrich that HR has a role to play in driving stakeholder value.

Implications for HR Strategy

Knowledge Management

Generative AI can significantly enhance productivity, cost optimisation, and innovation by making knowledge more accessible and contextual. By promoting self-service and streamlining workflows, AI can help employees find information quickly and learn on-demand. HR should identify roles that will benefit from this type of information “in the flow of work” where the ROI is high and ensure ethical support for decision-making with appropriate guidance and guardrails.

Skills Development

As AI reshapes jobs, understanding and developing skills that create competitive advantage is critical. Talent intelligence platforms combined with LXPs can help identify these skills, offering personalised career and learning pathways. AI-enabled skills assessments will likely be key to business agility, allowing organisations to dynamically understand and adapt to the skills related to jobs and individuals both within the organisation and in the broader market. HR can adopt a robust skills taxonomy and use labour market intelligence and a better understanding of internal supply/demand to enhance workforce planning and adaptation. This is also positive for employees: we are in a period of tremendous change - helping them to navigate through this period, adapt to changes to jobs and business models and remain employable (both internally and externally) by leveraging personalised, labour market insights and giving them the tools to upskill/reskill.

Job Quality

Cappelli and Nehmah rightly emphasise the importance of job quality, including fair wages, employment stability, and work-life balance. However, they underestimate the role of AI in enhancing these aspects. Generative AI can help low-skilled workers perform high-skilled tasks, promoting social mobility and improving job satisfaction. HR must ensure AI-driven productivity gains do not come at the expense of employee well-being, focusing on creating supportive work environments that prioritise mental health and work-life balance. Let's remember AI doesn't design jobs: we do.

Employee/Industrial Relations (ER/IR)

Strengthening ER/IR capabilities is crucial as AI transforms the labour market. With growing unrest and unionisation efforts post-COVID, HR must proactively manage these changes. This involves open communication and negotiating the impact of AI on the workforce, ensuring fair transitions and addressing ethical concerns. Reinforcing ER/IR capabilities will help manage both short-term cost-of-living challenges and the long-term impacts of AI and the energy transition.

Performance Management

Generative AI presents unique challenges in performance management, as it can blur the lines between top performers and the rest of the workforce. AI can learn from the best individuals and disseminate this knowledge across the organisation, making it harder to distinguish individual contributions. HR should implement objective performance evaluations and reward systems that recognise the broader impact of top performers. This approach promotes equity and continuous improvement, balancing AI benefits with human contributions.

Recruitment Strategies

As generative AI matures, it can support individuals with lower skill levels, broadening the candidate pool and relaxing qualification prerequisites. HR must revisit recruitment strategies to leverage AI's capabilities, focusing on essential human qualities like creativity and problem-solving. Where can we open up jobs to individuals without university degrees/of lower skill, vs those which still require expert oversight? Clear job expectations and distinctive skill sets will be paramount as the technological landscape evolves. There is an opportunity to do this in a sustainable way with a clear link to ESG strategies if done well.

HR's New Role?

It is crucial to maintain the value of labour, as it underpins the industrialised world's ability to provide a decent standard of living for many based on their skills. Tools and technologies that enhance human expertise and extend its reach are beneficial for income distribution, which in turn helps to drive social mobility and productivity.

Navigating the future with AI requires a strategic and ethical approach to people management. HR must adapt to leverage AI's potential while addressing its challenges, driving both organisational success and employee well-being. By focusing on knowledge management, skills development, job quality, ER/IR, performance management, and recruitment strategies, HR can effectively navigate the transformative impact of generative AI and ensure a balanced approach to organisational and employee needs. This balance is crucial to ensuring the transition to a more AI-driven workplace is both productive and humane, addressing potential wage deflation and supporting social mobility.

?