How Job Training Must Change in the AI Age

AI is transforming the world and it starts with the right compute. ARM is the AI compute platform trusted by global leaders, proudly Nasdaq listed, Built for the future. Visit arm.com discover. Welcome to the hbr ideacast from harvard business review. I'm kurt nickish. New technologies drive new business opportunities, but employers don't always have the workers with the exact skills for those. And there are costs to waiting, prolonged hiring vacancies, higher turnover, wage spikes, and companies can't always wait for the labor market or education systems to catch up. That's why many organizations teach and train their workers. And today's guest says they're going to have to do more reskilling and get better at it in the future thanks to artificial intelligence and other accelerating technologies. She and her fellow researchers have found that the average half life of some job skills is now just five years, half that again in certain tech jobs. Rafaela Sadoun is here to share how companies need to adapt and what leaders need to do. She's a professor at Harvard Business School and with researchers at HBS and the Henderson Institute at Boston Consulting Group, she wrote the HBR article Reskilling in the Age of AI. Welcome Rafaela.

Thank you so much for having me.

This is an age old problem. Like this is not new in some respects. What's new is the speed.

Absolutely. I mean the notion that technologies change the demand for skills is actually a well recognized stylized fact in economics and in management too. For example, we know that certain types of computer, you know, computer softwares, even Excel changed the type of skills that were needed. Where you know, we don't need a human computer anymore, you have a spreadsheet and therefore those type of skills become obsolete. Whereas more and perhaps more cognitively intensive type of skills, how do you interpret the numbers and what you do become more relevant. And what we are seeing today is a new version of an old phenomenon.

In some ways, are today's companies already pretty good at reskilling or will this new pace really expose some existing weaknesses?

My impression and my co author's impression is that what we are seeing is a lot of interest. And in part this is an interest sparked by organizations such as the OECD or the World Economic Forum that are doing a lot of great research documenting how important reskilling is. So as a consequence we are seeing organizations that are becoming more and more publicly committed to reskilling and making also investments that are quite significant. According to a BCG report, 1.5% of companies budget going into training and also reskilling. However the problem is the following. We believe reskilling is actually a different animal relative to standard training. It's more complex, it's more costly. It has lots of implications for both middle managers and employees as well as policymakers and governments. And this more complex phenomenon, no, firms are not fully ready to manage it. And we hope that with the article we can give some more insights on how do you get up to the task.

You say firms may not be ready for reskilling, but are they even aware of the need? I mean, you talk about some of those global organizations and it does sound like a sweeping demographic problem that many companies would say is the problem of policymakers is the problem of educators and not necessarily theirs.

You know, I think you're right. And what's interesting here is that there is a lot of heterogeneity differences across firms. In the article, we spoke with what we believe are frontier organizations. So these are companies that are very visibly committed to training and are making all sorts of interesting experiments to reskill effectively their workers. There are many, many, many others that are just slowly recognizing the need and others that perhaps recognize the need but are not really taking any action because they don't think that it's within their responsibility or their competitive advantage.

Those frontier organizations do believe that, though. So what conclusions have they drawn?

You know, the frontier organizations we spoke with, and There are approximately 40 around the world spending, you know, from the U.S. europe and Asia, they've realized first of all that the idea of reskilling your is not something that you do just because it looks good on paper or because it's nothing against CSR initiatives. But, you know, the way they're interpreting it is it's a strategic imperative. What does that mean? Well, it means that it's clearly connected to the ambition of realizing specific business objectives. And so there is a clear connection between strategy objectives and HR and training policies. And there are also visibly committed and communicate very extensively throughout the organization why training and reskilling matter. And you would say this is cheap talk. Well, it turns out that when you think about the demands on the times of C suite executives and CEOs spending time and making sure that there is clarity on why it's important that everybody trains is actually quite a strong symbol of commitment. Some of the organizations that we spoke with are some of the usual suspects in the US Companies such as Amazon, they're very visibly committed to training of their employees. Ericsson in Europe, Tata in India, ICIC bank in India, again, several Japanese organizations. So what's interesting is that they are not focused in just one geography and they're not just focused in one industry. It's something that we saw peppering up in different industries and different geographies.

Does the size of those companies and just the complexity of the problem that you mentioned, does that mean that this is really up to large corporations, multinationals to figure this out and that reskilling efforts like this are not in reach of medium sized or smaller businesses?

Again, great point. I think our sample is very skewed towards very large organizations and multinationals. Does this mean that reskilling is only for very large organizations? Actually, no. And we are doing some work here, survey work, where we ask which companies are reskilling and how they're reskilling. And actually what we are seeing is that following your intuition, we don't see a ton of reskilling in very small organizations, but actually we are finding that there are many mid sized organizations that are actively working and investing in reskilling programs to some extent even more than the very largest. Now, of course, it's not that they only do reskilling. Reskilling is part of a broader set of levers that companies use to match talent with their needs. And so they may at the same time invest in training and hire from the labor market or perhaps even outsource. But definitely we see that reskilling matters across many different types of companies and not just the very largest.

So through these interviews you have a good sense of what some of the latest best practices are. What are they doing, what's working for them.

What we see is, since organizations are, I see organizations as being complex systems, right? They're quite hard, it's quite hard to make sure that everything is consistent. They don't have just one silver bullet, but they do different things that touch different levels of the organization. Let me be specific here. I already spoke to the importance of the top level commitment that I think is absolutely necessary. And another piece of commitment that matters is the commitment that comes outside of the HR function. And the reason for this is the following. Often these programs of training and in particular reskilling are primarily advocated and they fall primarily under the responsibility of the HR function, which is, you know, it makes sense. HR is in part also therefore to take care of these aspects of HR policies. However, what happens is if it's only HR that cares about it and there isn't a recognition that this type of training programs can be helpful to realize business objectives, the other functions tend to be dismissive. And so a second piece is the importance of making sure that these reskilling initiatives are responsibilities of every leader and every manager. And so what that means is that there has to be a sense of shared responsibility for the development of people. It cannot just be something that is dumped by HR on the rest of the organization. I can tell you with 99% certainty that something that is rolled out just as an HR initiative has a very high likelihood of being rejected by all the other functions.

Is one of the risks there that it's just seen as kind of a. Seen as a learning and development program or training and support for new skills and I guess what makes reskilling different than traditional HR training functions?

So let me ask you a question.

Sure.

Okay. Without getting too personal, do you like taking part in training programs where you don't know exactly why you're doing it?

I think generally I try to be open to opportunities, and so I would embrace that. It often seems to come at a time when I'm busy with other things, and so I might question the value, depending on how it's presented. It also makes you wonder, as an employee, just what's happening? What am I up for? Or how does the company see me? Or why are they investing in me this way? How does this affect my career or perceived career? There are a lot of questions, for sure.

Right. And so I think that, you know, when you connect these training programs to objectives that are not just learning per se, which, I mean, look, and I'm academic. I love learning per se. It's not, don't get me wrong, but I think that people are so busy and sometimes they're actually so quite a bit scared of learning new things, that it's absolutely important that their managers understand what are we trying to achieve through these training programs. And so that's where you get to both the commitment of the many more functions than just hr, as well as their ability to influence the programs and being able to determine what type of programs do we really need and how are we going to keep track of whether this is working out or not. So that's like the second, I would say, important lesson that we drew from the interviews. We saw that several of the companies we spoke with had made more progress in making sure that this was not just a salad intervention.

What's the job of middle managers in this then?

It's critical, absolutely critical. And I think that this is actually one of the aspects that I found most fascinating. The role of middle managers is critical for simple reason. We often, and companies often rely on the ability of middle managers to recognize who needs to be promoted and also who deserves to be trained or who should be perhaps moved to a different function. Organizations, when they do that, they rely on the notions that middle managers will act necessarily in the interest of the firm. Well, it turns out that middle managers have also their own incentives. And for example, if you have somebody who is particularly talented, you are probably not exactly happy if that person moves, moves to a different occupation or even if that person gets promoted. These are things that are called talent hoarding.

Oh, I love that term. That's great. Yeah.

And you know, there is wonderful research, by the way. There is a researcher called Ingrid Hegele who is based in Germany who is doing a lot of work on this. And you know, when it comes to reskilling, that's what we heard from companies. We heard that often they were launching these very interesting programs and well curated programs and the take up was very low. And so they were asking themselves, what's going on here? And in part, I think that the reason for this low take up is that there wasn't this full alignment that is really needed with the middle managers to make sure that they could work with the organization, with the company to identify who was the right person for the program, as well as that the person had the right incentives and the right mindset to participate in the training program.

It seems like there's also a perception gap that, you know, reskilling or training efforts can be a way to move up. Where, you know, you mentioned middle managers are watching for who gets promoted or who they want to promote. And that's often seen as the way to grow or to. Yeah. Advance in an organization. And some companies, you know, end up having a problem with that. They have lots of people who they've promoted to manager and they're managing very few people. This is almost like another way of promoting and advancing people, if it can be seen that way.

Yeah. And in fact, in this new work that we are doing with the surveys and trying to understand what companies do, we ask them, why do you invest in training? And there was the immediate business need that we already discussed, but there was also the willingness to create programs that would create greater engagement and reduce attrition. And so in part, you train because you do want people to understand that the company is investing in them and you want to facilitate their upward mobility or frankly, just the best match between who they are and the type of occupation that they're in. And so that is, I think, the piece that when you go to the day by day, organizations often create frictions because some companies may wonder, why should I invest in somebody who may either leave me if I invest in them or leave me for another job within the same firm? And that's the case of the middle manager or leave me altogether. And that is a barrier that often inhibits investments in training.

And how do you overcome that? What can you as a senior leader be telling those middle managers? Or what have you seen in the companies that you studied? What have you heard tends to work in overcoming that very understandable objection.

I found some pretty extreme cases of organizations that first of all codify the development of employees as part of the responsibilities of the middle managers. That eliminates all the ambiguity for the middle managers. And in some cases, there are even incentives that are tied directly to how many people take training programs, how many people move up. So there is a recognition that internal mobility is good for the organization and that managers are responsible for the development and the training opportunities.

Right. And it's pretty easy to look at your managerial workforce and just even statistically know who is talent hoarding.

Yes. Oh my God, you mentioned the word statistics. You make me happy today. Yes, exactly. So this is the work that we're doing actually now with Jorge Tamayo, who is one of the co authors in the article, and he's also a professor at hbs, we are working on exactly doing that. So using data to identify within three very large organizations which managers are more likely to have their employees taking training programs. You can see it in the data. There is vast variation within the same firm across different managers, which means that. What does it mean for companies? I would say for whoever listens to this, you probably have the data to identify who is really a mentor to the employees or not. And interestingly, at least in the data sets that we are analyzing, being a good mentor matters for business results in the sense that people who train their workers more are able to cope with shocks in a better way.

So how do companies match workers to skills? How do they think about rewriting jobs or moving people to new departments or new capabilities?

Yeah, I mean, thanks in part to technological advancement in hr, frankly. For example, the creation of skill taxonomies, which are these very detailed inventories of skills. And the idea is you break down an occupation is not just a job title, but it's a collection of skills. And there are several organizations, and sometimes companies do that by themselves, where you have a clear sense of what type of skills are needed to perform what occupation. So that's like one tool that organizations can use that's only the starting Point.

Yeah. And they're doing this already in their recruiting efforts, probably.

Yeah, exactly. So what they do is they use. Use these skill taxonomies to proactively plan what's going to be our recruitment, you know, where are we going to push our recruitment next year? And some organizations actually use this to look inwards and they try to understand what type of skills they need, which may be already present in the organization. They just, you know, it's just bundled in occupations. Maybe the employees, not even the employees themselves don't know that they have the skills, that. It's absolutely critical. They're absolutely critical to realizing new business objectives. And so these are tools that are being used both on the external facing activities of the firm as well as the internally facing activities of the firm. In part, the adoption of these tools is a matter of having the resources to get access to these technologies. So there is definitely a scale issue there. But what we found through the interviews is that the adoption of these taxonomies themselves is often a political discussion within the firm where different functions, you know, they have to get to the agreement of what's really needed in this occupation. What type of skills do we really need? And, you know, getting at that agreement is itself an achievement, which can take some time.

What is the biggest misunderstanding that companies have to have to fight when they get to that point?

You know, I think the biggest misconception is to think about these training policies as simply as a technological problem and thinking that as long as we can design, you know, imagine that we do everything I told you, right, skill taxonomies, everything is updated, fine, and then we launch a training program from the top of the organization. We dump it on the employees. And even if you have the best possible platform, we've seen beautiful, you know, beautiful learning platforms, they look like Netflix, if not better. I can tell you that if this is only the only thing you do take up, it's likely to still be quite low because what you've done there is you have not incorporated the point of view of the employees. And so as much as training and reskilling is a function of the supply of these tools, there is a big chunk of work that needs to happen on the demand side, which means how do the employees perceive these training programs? What are you doing for them to understand why this matters and what's coming for them after they've completed the programs? As you can imagine, there may be some anxiety or some nervousness in deciding to change occupation when you are maybe in your mid-40s, right. And what we've seen is that I think getting to the understanding of what motivates people and how do you create, how do you improve and remove perhaps some of that uncertainty is really critical to make sure that the reskilling efforts are successful.

Yeah, it seems like good change management practice here, but what have you seen some of the companies that you and your fellow researchers studied do to get that buy in and that willingness to take advantage of it?

You know, I think as in every good change management initiative, it really starts from trust. First of all, there was an ability to communicate what was at stake. So you have to be able to have a conversation with workers. There are several workers, several occupations, and not just blue collar occupations increasingly. And that's where AI really matters. We're talking about white collar occupations too, where there is a good chance that without adaptation the job will maybe disappear or maybe change dramatically. And I think that people have at a high level a sense of this, that this may be happening. But I think having clarity on what is going to happen if you don't reskill or train or upskill and what are the opportunities that on the contrary may open up if you do that level of clarity is absolutely fundamental to create trust and then the other piece. So it's a lot about how it's communicated. And I think as you communicate why people should be taking up training opportunities, you have to have absolute clarity on the career pathway. You know, if you ask a person to undergo six months of intense training to reskill in an occupation without telling them what is coming out after this, what type of job will be available to you inside the firm or outside the firm, you see what difference that can make. Some companies are bringing the hiring managers into the fold and they let the hiring managers work with people that are being retrained so that they can already evaluate whether there is going to be a good match at the end of the program. And these are things that imply you have a good understanding of the psychology, if you like, of the trainees.

This is a big effort and it may be outside of your own in house capabilities. I just wonder what kind of external partners companies should consider. Do they ever need to look at this sort of industry wide and even work with competitors on developing the skills that they need? Like what should companies be thinking about if they feel like that this is a big effort and they might need some help?

Again, I think from the interviews as well, from something that started happening during COVID and maybe happening now. Also that there are lots of industrial policy discussions that focus on specific industries I actually believe that trying to address this problem as an industry wide problem may make sense because there are economies of scale in a couple of key domains that relate to reskilling. First of all, understanding what skills are needed. So part of the skills that are needed are certainly firm specific. However, part of the skills that are needed go well beyond the firm. And if you're able to define the needs at an industry level, you've just removed some of the uncertainty that may prevent your own employees from taking up these opportunities. Because you are changing the, you know, you're changing the program from. This is something that, that you do here and if you succeed, there means there may be a chance that you find a job here. But if you don't succeed, well, good luck towards an argument where it's, you know, these are skills that are really important to the whole industry. We'd love to keep you if you do it. And if it doesn't work out, you are going to have other opportunities too, or maybe even better opportunities. I know that this may sound counterintuitive for companies that are trying their best to retain their workers, but this is what you need to push people to, you know, overcome some of the, I think, legitimacy, legitimate concerns that they might have. And then there are also, there is a lot of intelligence that you get by understanding where the industry is going at a high level. This is not just a need for tomorrow, but there might be a need for the foreseeable future. And we are seeing in certain industries, industry associations playing an important role as the neutral partner that is able to set the governance and the rule of the games and the needs. You also are able. The second piece where economies of scale matter is you can pull resources to create reskilling programs that work. Part of it you can do in house. And again, for the part that is firm specific, you're going to have to provide your own intelligence. But part of the reskilling efforts may actually have an industry wide component, some of them. Often they include soft skill training, for example, and bundles of on the job training that may be best served once the companies pool the resources.

What else would you like leaders and managers to know about how reskilling might change their work, their management and their organizations?

You know, there is a reason why I'm interested in this topic. This is an area where, if you get reskilling right, you may be achieving something that is really great for your company, productivity wise and you can get the ability to adapt to new technologies. But this is an area where you can also be quite effective from a societal perspective. And there are a few problems in business that have this nature. And when you encounter areas where what you do right for yourself could actually be great for society, it's a pretty exciting space to be. And so for me, the main message is to make sure that whoever is investing in these programs, they put the right not just the right amount of money in the programs, but the right amount of understanding and commitment because they can be game changers for them and for society as well.

Rafaela, this has been fascinating. Thanks so much for coming on the show to talk about your research.

Thank you. It was my pleasure.

That's Rafaela Sedoun, a professor at Harvard Business School and co author of the HBR article Reskilling in the age of AI. You can find it@hbr.org and we have more episodes and more podcasts to help you manage your team, your organization and your career. Find them at hbr.org podcasts or search HBR in Apple Podcasts, Spotify or wherever you listen. This episode was produced by Mary Dew. We get technical help from Rob Eckhart. Our audio product manager is Ian Fox, and Hannah Bates is our audio production assistant. Thanks for listening to the HBR IdeaCast. We'll be back with a new episode on Tuesday. I'm Kurt Nikisha.