IESE’s Professor Reiche: HR, you’re ‘doomed to fail’ if you take a blanket approach to AI

There is a temptation with AI to “run too fast” and “do too much”.

Organizations are jumping on this AI moment as an opportunity completely rethink everything that they’re doing.

In the view of Professor Sebastian Reiche, a HR, management and work design academic from IESE Business School, this approach is a bad one.

As Professor Reiche tells UNLEASH in an exclusive interview, organizations are trying to experiment too much with different AI projects; this runs the risk of them having no time to “actually do business”.

Instead, it’s important that organizations think carefully about which processes are working, and also “where do we currently face challenges, and where can AI help us?”

Then, businesses can experiment with specific use cases – and figure out where AI can bring true return on investment.

Professor Reiche cautions against buying into the viewpoint that because “my competitors are doing that, I should be going all in without actually having stress tests”.

Ultimately, “if you trying to outsource too much to AI, you may not actually make the best decision”.

In an expansive conversation, Professor Reiche shares his expertise on work redesign, and his advice to organizations, and specifically the HR function, about how to seize the opportunity of the AI-powered world of work.

Is bottom up or top down the best approach to AI adoption?

No-one has a crystal ball about what the future of work powered by AI will look like.

That’s why Professor Reiche believes that a bottom up approach to AI is the right one.

Yes, CEOs might be excited about AI, however, “since we don’t know where we’re heading to have one person sitting at the top saying these [are the] things we should be doing” doesn’t seem like the right approach.

Let your people innovate with AI, and share their learnings with their peers and other teams – “that’s how good process innovations scale through the organization”.

Having said that, the C-Suite needs to set a strategic direction, and determine the purpose of bringing in AI.

Without a clear purpose, “everyone experiments in a very fragmented way” – you end up with 10 or even hundreds of different ideas; some of which might be ‘workslop‘.

If companies have a shared goal, then it focuses the direction of AI innovation, but also allows each team to optimize their AI approach – Professor Reiche is clear that AI usage will “look very different from one function to another”.

What I am missing in the current [AI] debate” is that “some teams may look different, but we’re trying to do a blanket version of how to adopt AI” – “that’s doomed to fail”.

Contract work (plus AI) can help close skills gaps

Organizations are grappling with significant uncertainty – not just technological with AI, but also geopolitical and economic.

Skills shortages are also a huge challenge – “we have new capability needs that we cannot fill, at least in the short term” by upskilling existing employees.

This where, in the view of Professor Reiche, organizations need to lean into contractors and freelancers (as well as AI – “I don’t have to upskill a human team member, I can train an AI that can adapt to my needs”).

Yes, there’s a precariousness of freelance and contract work, but it also provides flexibility to people’s lives, plus opportunities to grow through the work.

Professor Sebastian Reiche, IESE Business School.

In fact, Professor Reiche sees project work as a solution to AI “killing” entry-level positions, and the impact that is having on employer’s career paths and organizational structures.

“How does the typical partner model work if you’re not bringing in graduates” who previously would have moved up the levels until they reach partner?

“A partner is someone who has moved through these different stages, has had client exposure”, meaning they have the expertise to manage, build and develop new business.

How can project-based work “simulate or replicate some of those experiences you’d have in an entry-level position”? Can projects help students build those skills before they enter the workforce?

“I, as an organization, have to change my talent pool, to make sure I find people who’ve been exposed to the type of skills and capabilities I need” – and then “we can bring them into a different career path”.

The corporate world is only just waking to this challenge – and it is going to be a big one, in Professor Reiche’s view.

CHRO, shift your focus from operations to strategy

Professor Reiche has a clear message for CHROs in this uncertain, AI-powered world of work.

He sees HR as one of the most important functions in an organization – “talent for many organizations is a key asset”.

The issue is that traditionally, HR has not been seen as “sexy” – it doesn’t help that employee touchpoints with HR are often negative, plus Professor Reiche notes that HR has traditionally been “fairly homogenous”.

This is changing – “people from the outside the function are increasingly attracted to HR”, and this has built up “strategic credibility”.

Despite this, it is easy for HR leaders to “get bogged down in operations” – this doesn’t leave them much time to strategize and plan for the future.

For Professor Reiche, merging HR with IT or Finance won’t solve this strategic challenge.

In reality, these mergers can actually make HR be seen even more as an “administrative, back of house function”, when HR needs to be leading the conversation on “how do we develop our assets, our talent, so that we can serve our future needs”.

This challenge also won’t be solved by changing the name of the function – whether that’s to People, People Operations, Personnel or beyond – “unless you’re freeing HR executives from operational roles, or giving them enough slack to actually sit around the table to make strategic decisions, you’re not going to solve that”.

The key to freeing up the operational side of HR is for every line manager to understand they have important HR roles; they’re responsible for their people.

I don’t think you need to have a HR department” per se – “but someone needs to own the strategic issues”.