How Job Training Must Change in the AI Age

CURT NICKISCH: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Curt Nickisch.

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.

Raffaella Sadun 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 Raffaella.

RAFAELLA SADUN: Thank you so much for having me.

CURT NICKISCH: This is an age-old problem. This is not new in some respects. What’s new is the speed.

RAFAELLA SADUN: 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 softwares, even Excel, changed the type of skills that were needed, where 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.

CURT NICKISCH: Are today’s companies already pretty good at reskilling, or will this new pace really exposed some existing weaknesses?

RAFAELLA SADUN: My impression and my coauthor’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, and we lay out in the argument reasons why 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.

CURT NICKISCH: 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.

RAFAELLA SADUN: 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.

CURT NICKISCH: Those frontier organizations do believe that though. So what conclusions have they drawn?

RAFAELLA SADUN: The frontier organizations we spoke with, and there are approximately 40 around the world spanning from the U.S., Europe, and Asia; they’ve realized, first of all, that the idea of reskilling your workers is not something that you do just because it looks good on paper or because it’s – nothing against CSR initiatives, but 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 they’re 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, ICICI Bank in India. Again, several Japanese organizations. So what’s interesting is that they’re not focusing 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.

CURT NICKISCH: 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?

RAFAELLA SADUN: 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. 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-size 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.

CURT NICKISCH: 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?

RAFAELLA SADUN: 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. And so what I’m going to tell you is 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 it makes sense. HR is in part also, there to take care of these aspects of HR policies.

However, what happens is if it’s only HR that caress about it, and there isn’t a recognition that these type of training programs can be helpful to realize business objectives, the other functions tend to be dismissive. And so a second piece that we talk about in our article 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.

CURT NICKISCH: Is one of the risks there that it’s just seen as just a learning and development… I mean, just 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?

RAFAELLA SADUN: So let me ask you a question.

CURT NICKISCH: Sure.

RAFAELLA SADUN: With getting too personal. Do you like taking part in training programs where you don’t know exactly why you’re doing it?

CURT NICKISCH: 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, or 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.

RAFAELLA SADUN:  Right. And so I think that when you connect these training programs to objectives that are not just learning per se… Which I mean look, I’m an academic, I love learning per se. Don’t get me wrong. But I think that people are so busy, and sometimes they’re actually quite a bit scared of learning new things. We’ll touch upon us in a moment, that it’s absolutely important that their managers understand what are we trying to achieve through these training programs.

And so that’s why 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 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 siloed intervention.

CURT NICKISCH: What’s the job of middle managers in this then?

RAFAELLA SADUN: It’s critical. Absolutely critical. And I think that this is actually one of the aspects that I found most fascinating throughout the interviews, and it’s motivated more work that we are doing now.

The role of middle managers is critical for a 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. And 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 to a different occupation, or even if that person gets promoted. These are things that are called talent hoarding.

CURT NICKISCH: I love that term. That’s great.

RAFAELLA SADUN: And there is wonderful research, by the way. There is a researcher called Ingrid Haegele who’s based in Germany, who is doing a lot of work on this. And 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 created programs, and the takeup 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 takeup 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.

CURT NICKISCH: It seems like there’s also a perception gap that reskilling or training efforts can be a way to move up, where 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 advance in an organization. And some companies 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. And this is almost like another way of promoting and advancing people if it can be seen that way.

RAFAELLA SADUN: Yeah. And in fact, in this new work that we are doing with the surveys and trying to understand what companies do, we asked 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’s 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 of 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.

CURT NICKISCH: 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?

RAFAELLA SADUN: 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. And so that sort of eliminates all the ambiguity for the middle managers because… 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.

CURT NICKISCH: Right. And it’s pretty easy to look at your managerial workforce, and just even statistically know who is talent hoarding.

RAFAELLA SADUN: Yes. Oh my god, you mentioned the word statistics. You make me happy today. Yes, exactly. So this is the work that we are doing actually now with Jorge Tamayo, who is one of the coauthors 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. And 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 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.

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

RAFAELLA SADUN: Yeah. I mean, thanks in part to technological advancement in HR, frankly, for example, the creation of skilled taxonomies, which are these very detailed inventories of skills. And the idea is you break down an occupation. It’s 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 one tool that organizations can use. That’s only the starting point.

CURT NICKISCH: Yeah. And they’re doing this already in their recruiting efforts probably?

RAFAELLA SADUN: Yeah, exactly. So what they do is they use these skill taxonomies to proactively plan what’s going to be our recruitment, 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. It’s just bundled in occupations. Maybe even the employees themselves don’t know that they have the skills, that they’re absolutely critical to realize 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.

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, different functions, they have to get to the agreement of what’s really needed in this occupation, what type of skills do we really need? And getting at that agreement, is in itself an achievement, which can take some time.

CURT NICKISCH: What is the biggest misunderstanding or misconception that companies have to fight when they get to that point?

RAFAELLA SADUN: I think the biggest misconception is to think about these training policies simply as a technological problem, and thinking that as long as we can design… 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 learning platforms, they look like Netflix if not better. I can tell you that if this is only the only thing you do, takeup, 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, and 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-forties. 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.

CURT NICKISCH: 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 not make employees eager for this, but get that buy-in and that willingness to take advantage of it?

RAFAELLA SADUN: I think as in every good change management initiative, it really starts from trust. And trust is a pretty generic word, so let me give you some specific instances of where I think organizations that have understood this friction did well.

CURT NICKISCH: Yeah, please.

RAFAELLA SADUN: 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 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 it changed 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 pathways. 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.

So absolute clarity on why you do it, and as much clarity as possible on what happens next. 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.

CURT NICKISCH: 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 industry-wide, and even work with competitors on developing the skills that they need? What should companies be thinking about if they feel like this is a big effort and they might need some help?

RAFAELLA SADUN: 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. Why? 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’re changing the program from, “This is something that you do here, and if you succeed, 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, “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 overcome some of the, I think, legitimate concerns that they may have. And then also, I think 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 role of the games, and the needs. You also are able, the second piece where economies of scale matter is you can pool 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 examples, and bundles of on-the-job training that may be best served once the companies pool the resources.

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

RAFAELLA SADUN: 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 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.

CURT NICKISCH: Raffaella, this has been fascinating. Thanks so much for coming on the show to talk about your research.

RAFAELLA SADUN: Thank you. It was my pleasure.

CURT NICKISCH: That’s Raffaella Sadun, a professor at Harvard Business School and co-author of the HBR article “Reskilling in the Age of AI.” You can find it at 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 Podcast, Spotify, or wherever you listen.

This episode was produced by Mary Dooe. We get technical help from Rob Eckhardt. 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 Curt Nickisch.