The two most important topics for every HR leader's agenda

By Lindsay McGregor and Neel Doshi

Artificial intelligence will trigger a once-in-a-generation reshaping of the workforce. This can lead to an HR team that spends its next decade presiding over one layoff after the other, or an HR team that can focus on transforming the way companies work.?

If, like us, you're aiming for the latter, here are the two most important topics for every HR leader's agenda.

The changing nature of work

HR professionals are right to be cautious and even cynical about artificial intelligence. Many ludicrous statements are being made about what AI can do. Worse still, like an intellectual bully, AIs are quite good at seeming "right" even when they are not.

That said, even in the early days of this technological revolution, there are important, viable use cases for AI. Well constructed AI systems, where context is tightly managed, can automate significant amounts of customer experience, sales, design, technology, and leadership work. These use cases will expand as the technology improves. Productivity will grow as teams experiment and gain new skills. Many functions will downsize while new ones (e.g., AI information management) will grow. ?

Moreover, AI will lead to new value propositions for customers. For example, the awesome perplexity.ai is a radical rethink of a search engine like Google. Factor.ai is a radical rethink of performance management. Companies should expect to face new competition and changing customer preferences.

The combination of these two inevitable trends means that most companies will have to gear themselves for heightened performance while simultaneously dealing with a once-in-a-generation reshaping of their workforces. These are the two critical topics for the HR agenda:

1. How might we reshape our workforce for the future of AI?
2. How might we prepare our organization to compete and perform at a much higher level??

Without proper human capital management, both these challenges will quickly go off the rails. What should have been a methodical re-sculpting of the workforce will instead become reactionary layoffs that lead to a mercenary employee mindset. This mindset will ultimately lead to less effective workforces at the time when companies need to be at their best.?

So then, how can an HR team own these two challenges in ways that are positive for the company, its employees, and its stakeholders?

1. How might we reshape our workforce for the future of AI?

Understand how to embed AI now

To understand how to sculpt your organization, it helps to have a strong mental model for what AI can and cannot do.

For example, as part of our mission to help every organization build a motivating, high-performing culture, we aim to publish our latest insights at least once or twice a week. Our bar for insight is high, so every article is written by a deep subject matter expert.

Our process for doing so is as follows:

1. HUMAN: We continuously collect data, stories, evidence, analogies, and ideas and save them as stacks of cards in the Factor platform.
2. ARTIFICIAL INTELLIGENCE: We then use Factor AI to create a first draft outline using that collected research and ideas. We start with AI for outlining because it is not just good at it, but it serves as a check on our own biases and thinking.
3. HUMAN: We edit and enrich that outline and add research for parts that don't feel right.
4. ARTIFICIAL INTELLIGENCE: We use Factor AI to convert this new outline into a first draft.
5. HUMAN: We extensively edit the first draft. To set expectations, this edit is not minor because AI is generally not good at high-insight personal writing.
6. OTHER HUMANS: We ask our colleagues (other experts in human motivation and performance) to critique and share ideas on the piece.
7. HUMAN: Another round of edits.
8. ARTIFICIAL INTELLIGENCE: We use Factor AI to add links and references to other past articles we created.
9. HUMAN: We review that last edit.
10. ARTIFICIAL INTELLIGENCE: We use Factor AI to do a final proofread for spelling and grammatical errors.

This flow has saved us about 50% of our capacity when writing content, but as you can see, it wasn't as trivial as AI automating Neel and Lindsay. It was AI augmenting Neel and Lindsay, making them simultaneously more productive and more effective. Note: if you need help building flows like this in your organization, contact the Vega team . They are exceptional at embedding AI in ways that improve (not replace) human motivation and potential.

This example clearly shows a few truths about the nature of work in the era of AI. While AI will automate low-skilled work, it can also be an enhancer for high-skilled talent that knows how to wield its power. ?In other words, companies will need to reshape their workforces to attract and retain high-skilled talent.

Painful or purposeful

Imagine three possible paths to reshaping your workforce for this future of AI. ?

• A. Unplanned - we have periodic, large-scale layoffs.
• B. Painful - we make it more painful to work at the company (e.g., eliminate remote work), so people quit.
• C. Purposeful - we increase the bar for motivation, performance, and leadership and help colleagues self-select out if they don't fit.

Today, we see many organizations landing on paths A and B. The problem with those paths is that they are low performer-centric, not high performer-centric. In these paths, organizations get so obsessed with finding the low performers that they implement demotivating, blaming, micromanaging bureaucracies. These systems end up demotivating high performers in equal measure.

Instead, organizations should raise the bar for leadership, motivation, and performance in ways that nurture future high performers while helping everyone else gracefully self-select out. The key to these systems is transparency. Low performers must be able to accurately see the gap between themselves and high performers, and be challenged to ask themselves if they are excited to close that gap.

While this may seem difficult, the good news is that the approach for doing so is exactly the same as the solution to the second problem.

2. How might we prepare our organization to compete and perform at a much higher level??

A "rut" is a groove carved in a road by eons of wheels traveling that path. Often, the rut is a feature, not a bug, in that it helps wagons stay on the path. However, when the path is no longer the right one, this once beneficial rut becomes a curse.

Imagine you're an established company, built and optimized for the era before AI. To help you manage performance at your scale, you created large workforces with deeply established systems of tactical performance. ?These systems are the "ruts" in your organization. To evolve, organizations will need to change transformationally, as incremental change will often not stick as the organization drops back into its rut.

Meanwhile, new competition has no rut. Their processes and workforces will already be AI-optimized. They won't need to lay off. ?Motivation cultures will not be stressed. No cost or energy will need to go into change. This is who companies will be competing with.

To prepare companies for this inevitability while simultaneously leading a talent-friendly reshaping of the organization, HR teams must transform performance management.?

Historically, the performance management system of many organizations was low performer-obsessed. These systems emphasize micromanagement and pressure. These systems typically have three main components:

• Cascading OKRs resulting in constant and fact-free negotiation of your report card.
• Distribution curve annual ratings pitting colleagues against colleagues.
• Lip service leadership development with little accountability to actually leading teams well.

This three legged stool is quite rickety as it is not effective at its primary objective: driving performance.

Future proofing performance management

At a first principles level, performance has three inputs:

1. Skill - people who have the skill to do their work adaptively.?
2. Motivation - people who want to do their work adaptively.
3. Strategy - the direction your people are pointed to when doing their work.

The performance management system of the future should be an AI-powered approach to optimizing all three in ways that nurture skilled (or soon-to-be skilled) talent.

Skill: Talent systems focused on skill management.

Imagine a Michelin-starred restaurant that perhaps Gordon Ramsey is leading. Of course, for each meal, the restaurant has fine-tuned recipes, tools, and stations. So then why do these restaurants need highly skilled chefs? Couldn't anyone just follow the recipe using the tools and stations provided? In many forms of work, the process (i.e., the tactical performance) is only effective when everything goes as planned and nothing needs to change. Often, however, things don't go as planned or work must change. This is where adaptability comes in .

The most common misconception we see when implementing skill-based talent systems is companies thinking that the skill was for executing the task. These companies conflate tasks with skills. Instead, skills are about executing work adaptively. True mastery of skill is being able to achieve a quality outcome even when the task or process isn't actually correct.

In the future of work, it is the tactical performance that is getting automated; meanwhile, the adaptive is still (at least for now) the space for human skill. This is why organizations must evolve to skill-based talent systems.

These skill-based talent systems include:

• Skill-based job descriptions
• Skill-based interviews - where prospective colleagues demonstrate their skill by engaging in work - simulated or real - ?directly related to their target job
• Skill-based apprenticeship - where colleagues choose the skills to work on and leaders help them make and stick to on-the-job plans to learn those skills.
• Skill-based performance management or compensation - where colleagues are evaluated on skill progression and/or paid based on their portfolio of skills.
• De-titling / reduction of hierarchical titles - a skill-based compensation system no longer requires titles, levels, or bands to drive compensation, allowing organizations to use titles more strategically.
• Skill catalog - all of these tactics powered by a catalog of transferrable skills. If you cannot imagine how a "skill" could be transferrable or how it is about adaptive performance, then you're not getting the most out of your skills or your people.

A great skill-based talent system helps employees see, without judgement or blame, the gap between their level of skill and true mastery.

Motivation: Managing motivation as a root input

There's little point in having skilled colleagues if they are demotivated. Demotivated workers are inherently much less adaptive, meaning they aren't putting their skills to use. Yet at the same time, organizations do little to manage motivation.

We've studied performance motivation for decades. To learn more about this interesting and critical topic, we recommend reading Primed to Perform . Many CEOs and founders have made Primed to Perform , their cultural foundation for good reason - it explains exactly how to build a motivating culture. ?

The TLDR is that pressure isn't the motivator that unlocks skilled talent. Play, purpose, and potential are.?

These motives must be managed at the level of the team, not the company. This is why all teams should conduct quarterly Health Checks . Health Checks are a powerful conversation where teams take ownership over their own motivation and performance cultures. ?

These conversations not only result in a motivation measurement, but also, they result in actionable plans for teams to execute. Rather than traditional leadership development, in Health Check organizations, leaders get boosters each quarter specific to the issue prevalent on their teams.

Strategy: Creating alignment without micromanagement.

HR teams have been too absent in the design of most organizations' goal setting process. As a result, this process for many is demotivating and low-performing itself. Instead, HR teams should help implement processes that build strategic alignment without creating negative pressures or a loss of adaptability. ?

To do this well, organizations should focus more on cascading strategy versus cascading metrics (which are a byproduct, but not the main event).

Strategy does not have to be a complex concept. Strategy is simply our vision of our future (usually three years out), and the set of problems we need to solve to get there.

We recommend that organizations have a lean process every quarter where this version of strategy is cascaded. This means that each quarter every team, at the very least, names the problems it is solving to get to its future . For top-down goals, teams are breaking problems down to the level that is appropriate for each team .

Not only is this process more effective at getting alignment, but it is more motivating as well.

Getting started

HR stands at a crossroads. Do they allow their companies to spend the next decade reeling from one layoff after another, or do they create a more motivating glide path to the future?

That glide path requires talent-friendly systems to manage skill, motivation, and strategy.

An amazing HR team should put into place the systems that ensure all three of these levers are excellent and ready for the future. For example:

This approach to performance management is the inevitable future, easy to implement, and sets HR up for an amazing decade ahead.

If you would like getting started, don't hesitate to reach out .