Building Skills-Powered Organizations in the AI Era with Ravin Jesuthasan

Speaker A: You're listening to the Change Management Review podcast where we bring you the best tactics, strategies and actionable insights for organization change. We talk with impactful organizational change practitioners and leaders. And now your host, Teresa Moulton.

Speaker B: Welcome to the Change Management Review podcast. My name is Teresa Moulton and I'm the editor in Chief of the Change Management Review. I'm here for an interesting discussion today with Ravin Jaithusazan and he is a recognized futurist and authority on future of work, human capital and AI, and is a senior partner and global leader for Transformation Services at Mercer. He is a member of the World Economic Forum's Future Skills Executive Board and Global Foresight Network. He is a member of the faculty at Caltech. He is the author of the Skills Powered Organization with Tanuj Kapila Shahrami, the Wall Street Journal bestseller Work Without Jobs through the MIT Press, as well as Transformative HR Lead the Work and Reinventing Jobs. Welcome, Ravin.

Speaker C: Thanks, Teresa. It's lovely to be here with you.

Speaker B: I'm so glad that you could come. It's such a, uh, timely topic, uh, in terms of AI and skill based hiring and the future of leaders. And you've got some really important perspectives to share. Um, one of the questions that I just wanted to dive right in on is, uh, really talking about skills powered organizations and what they look like.

Speaker C: Yeah, you know, um, I'll, uh, maybe start with um, a perspective on kind of why skills now, Teresa. And then we can talk about how they're manifesting in terms of organizations. So, um, in January of this year in Davos, um, Sam Altman, uh, the CEO of OpenAI, said at no point in time in human history have we seen the volatility and velocity of change be what we're experiencing now. Maybe a little overstated, but, uh, two months later the IMF came out with their uncertainty index and it showed that global uncertainty was 2.5 times its historical 30 year average. And it's the result of not just AI, as we've seen the last couple of years, gen AI specifically, but the confluence of AI, the climate crisis, the geopolitical crises and the energy crisis, and all four of those things coming together, they are rapidly shifting the skill premiums associated with different bodies of work. If you think of communities in Florida that were struggling to respond to the two hurricanes, the new types of work that were created as a result of those issues, the new types of skills now being required by municipalities that they didn't require before those two awful, uh, hurricanes. Um, so this volatility and velocity of change has really come to the fore and it's driving and shifting skill premiums and, and it's why. To come back to your question, um, why organizations are struggling to keep up with how quickly their jobs and their work are changing. And in the book we talk about three ways in which organizations can think about organizing work with and make skills the currency for work. The first is that age old fixed model, that one to one relationship between a job and a job holder. Um, but updating those jobs with the new skills required of them. Right. As AI changes work, as um, operating models change, what are the new skills required of work? Work is still done in jobs, but a bit, a lot. Much stronger focus on the skills required to do the job. The second model is what we call the flexible model. As you know Teresa, um, so many organizations have introduced AI marketplaces in their organizations. This notion of connecting talent to work through gigs and projects and assignments, even if they might be employees. And that's where you see this hybrid state of both people in jobs and using their skills to take on projects and assignments to both express their skills and acquire new skills. And then the third model is this flow model of work where everyone might be an employee, they're just not organized in jobs. I think of it as agile on steroids where people are connecting to work through gigs and assignments and projects a la a consulting model. Um, but ah, they may all be employees. They're just connecting to work based on where their skills are demanded. I think what makes this thing interesting is that all three of these models are existing within progressive companies today.

Speaker B: Yeah, that's really surprising because the flow model, uh, I don't think I've seen that happen yet in my consulting work. So that's very intriguing that it's existing today.

Speaker C: Yep. Yeah. And it brings with it a whole set of challenges. Right. Because instead of HR and business leaders being indexed to one way of doing work, I now have to think about three ways. But the beauty of this is that the juice is truly worth the squeeze because as we've shown in the book, that the companies who actually are able to navigate to these new ways get to productivity, agility and efficiency gains that have previously never been achieved before. We have a case study in the book of an insurance company that moved its data scientists from that fixed model to the flow model and saw a 600% gain in productivity over 18 months. Um, I don't know if another management sort of theory or architecture that can get you those sort of gains.

Speaker B: I don't either that's pretty amazing. Yeah, that is really pretty amazing. And how hard is it to make that shift? Um, from one of model one or model two to the flow model.

Speaker C: Yeah. So it really requires three things. And, uh, you may have seen in the book, the last chapter, um, because Tanuj and I really wanted to write a book for the practitioner. So this is not a theoretical book. You know, you've got, yes, you've got theory and frameworks, but it's all illustrated with the journey at Standard Chartered bank and a bunch of other case studies. But in the last chapter, we actually end with, how do you get started on this journey? Um, and there are three things, Teresa, that have consistently, you know, stood us in good stead as we look at all of the organizations I've worked with, as we look at the journey that Tana has taken her organization on. Um, the first is having an enduring North Star that can guide you on this journey. Um, one that quantifies the gains that we expect and what this journey will look like and feel like to leaders, managers and employees. Mhm. Secondly, um, we talk about going narrow and shallow. What I mean by that is narrow is picking a specific business problem, a particular challenge and using it as a proof of concept to realize the ROI you've articulated in your North Star. Um, and then shallow would be to take a particular aspect of the people experience. It could be the talent acquisition process, it could be your internal mobility process. But how will that process, process be reinvented as a result of going from being a job based to a skills powered organization? What's the data required? What's the tech? How will technology change that? But how will ultimately talent acquisition, internal mobility look different? And then the third element of, or the third part of this journey is, as you know, Teresa, from all of your years of, you know, doing change management, it's really hard to resist the temptation to throw technology at a problem. Right. Um, and that's what we see on this journey is there's so much great technology out there. The problem is so many organizations have thrown tech at the problem and then said, oh, hang on, what are we really trying to solve for? And what will solving for this problem actually get us? And so in the book, we end with the eight change levers that we think are essential for organization. You know, how do I change the behavior of leaders? Right. No change ever stakes unless leader behavior changes. Right. Um, you know, how do I rethink traditional control mechanisms like budgeting and accounting management incentives? How do I rethink the role of A manager. Because now I'm telling her that, you know, for years I told you build a really strong team and you'll be moved up the hierarchy. And now I'm telling you, Teresa, you got to share your best people with Ramen who might steal that person from you, you know, and, and so how do I, you know, motivate people to change their behavior and reframe our expectations of them? So we've tried to make this book really hands on and practical and I hope those three steps, um, you know, can be useful.

Speaker B: Yes. You know, as you just mentioned around, um, know, sharing your people and hoping that your peers don't steal them from you, it seems to me like the first step was in the matrix organization. And we tried to do that with the dotted line and the solid line and um, but we never learned the skill and the, you know, um, management capability of how do we actually behave, uh, and think in order to let our resources free flow so that they can help the company as a whole. Um, what do you think of the mindset that's required for um, a manager or a leader to be able to let go of some of their best people and trust that the whole organization is going to be doing the same thing?

Speaker C: Yeah, um, that's a great question and I love your framing of trust that the whole organization is going to do the same thing because trust, as we know, is a commodity that's in short supply these days. Um, so I would say, uh, a couple of things. In the book we talk about the six skills that leaders need to start developing. Um, and I think that needs to happen, Teresa. I think alongside a change in the management decision making, management support system. And I'll come to that second point in a second. But in terms of the six shifts we talked about, um, the first being this pivot from leading with hierarchical authority to leading with empowerment and alignment. Uh, the second being this mindset of every time new work emerges, I've got to go fill a job or open a requisition. Well, actually no you don't. Because we don't have the tolerance in our fast paced world today to keep increasing resources as growth increases. And so this capability of redesigning work, particularly with the number of AI options that we have, as you and I were talking about, you know, before we got on this podcast, there are so many options that managers need to understand how we redesign work around these new options before defaulting to say, I'm going to go out and hire someone, um, from this technical view to a more humanistic view of automation from thinking of diversity, equity and inclusion as being this episodic compliance thing that I might be focused on to a continual focus. Because what DEI does is that it lets you bend the supply curve of work in a fundamentally different way. Increasing the access of um, non traditional talent to the work in your organization, people you might not have traditionally considered. And so it's not just a politically correct thing, it's an economic necessity as we've known for some time. But with a skills space, skills powered model, you start to see the opportunities for talent that are called stars, you know, skilled through alternative routes to have access to the work in your organization. Um, from a low bar of digital savvy to real AI fluency. And the kicker is that sixth skill of thinking about work is being done in just processes where I have to organize people around the work to increasingly that more humanistic view of uh, how do I organize the work around people and the skills they bring about, um, and how do I sort of architect and orchestrate that new way of working. So those six skills I think are ah, absolutely pivotal.

Speaker B: Ah, those are phenomenal. The point you made about the dei, um, perspective on skills and you know, really that it's not a policy, it's really an economic value to the way you look at your talent and opportunity. It brings to the actual equation of, of how, how you empower work. I think that's amazing. Um, and then you mentioned a little bit before that you talked about the AI component of the skills and really redesigning the process around the person. Um, how is that working?

Speaker C: Yeah, so AI actually plays a pivotal role in this journey in two ways. One is, as we talked about at the beginning, it's the trigger for so much of the change we're seeing. We did a piece of analysis earlier this year based on um, the framework from my, my, my fourth, my third book, um, Reinventing Jobs. And we combined it with research from Goldman Sachs and OpenAI and others. And what we showed was that you know, if you think of the composition of tasks within a job, the transactional, the relational and the expertise AI in combination. So gen AI in combination with the previous three generations of AI and process automation are going to have this truly transformative effect across all three of those broad categories. A lot of the transactional work is really going to be substituted by process automation and AI. A lot of the expertise work increasingly being augmented by gen AI and a lot of the relational work, the work we do of communicating and collaborating with customers and colleagues, increasingly being AI augmented M& so it's a trigger for the changing skills, but it's also our salvation because that same technology also gives us greater visibility to the skills of the people we have. So we're not limited to the headline of the job they sit in.

Speaker B: Mhm.

Speaker C: It also allows us to infer skills. Um, AI becomes the matchmaker, if you will, to connect skills to emerging bodies of work. So AI giveth and AI taketh, I guess, by equal measure.

Speaker B: Yeah. So for that flow model, it seems like AI is the enabler then of the flow model.

Speaker C: Absolutely. You're so right there, Teresa, because that's really the only way that flow model reaches fruition. Because I'll go back to your early example of the Matrix organization. If I'm someone sitting in a role and I'm either moving up or moving sideways. Mhm. The limited permutations there, ie 2, are easily managed by my manager and HR. But if now we have these squiggly careers and squiggly opportunities, right, where that unique bundle of skills, I.e. teresa versus Robin, have numerous, countless different ways in which they could productively express their skills, that's too much for any one human to manage. But it's the perfect problem for AI because not only is AI obviously built to manage lots and lots of data, but the actual act of managing that data creates a whole bunch more insights for the organization. Right. Because now I get to see every time Teresa takes on a new project, she's adding to, uh, her portfolio of skills, opening up new and different career paths and opportunities where she could contribute and where she could grow. Um, and that quote unquote skills passport, which Standard Chartered bank has and many organizations have, is continuously being populated and updated with the new skills and the different ways in which Theresa could contribute. I think this is really important, Teresa, in a world where, given what we started with, the velocity and volatility of change, uh, what we need is, what we no longer need is a workforce that's built for just in time, meaning for a predictable world, but a workforce that's built for just in case.

Speaker B: Love it. Love it. That's really, that's really well said. And as you were speaking, I was thinking, how then does this arrangement impact performance management, career path, um, and those types of concepts within the organization?

Speaker C: Yeah. Oh, great. Great question, Teresa. It, it really does require organizations to rethink all of those traditional processes because they were all built about 140 years ago for this operating model where the job was the singular currency of work. And it's one of the reasons why every chief people office I've talked to for coming on 35 years now has progressively said performance management stinks. Right. And, um, it was built for an era where things were predictable and stable. You know, I set you your goals at the beginning of the year and then we'll come back at the end of the year and, you know, we'll assess how you did against them.

Speaker B: Right.

Speaker C: Worked 30 years ago today, those objectives have changed seven or eight or 10 times over the course of a year.

Speaker B: Right.

Speaker C: Um, the skills I need to do my work at the beginning of the year, probably insufficient to do my work at the end of the year because of the pace of change. And so we're seeing organizations question and challenge this. And you need a bit of the carrot and the stick. Right? So let me give you an example. I have a very large client in, um, Asia Pacific, a large telecom organization that had introduced a skills based marketplace. And the chief people officer very rightly said, my goodness, guys, if we just throw technology at this, how managers will roll their eyes and say, let's just, you know, this too shall pass. Let's just wait for the next HR thing that they throw at us.

Speaker B: Right.

Speaker C: And so what she did was she said, look, we're going to make them, make them change their behavior and ensure that we are, you know, pulling on all of the levers of this change because if we don't, our business is going to pay the price. So she did something very simple. You know, when I talked about those eight change levers, uh, she said, look, we're going to hit them where it hurts the most and that's in their bonuses. And so she introduced a very simple rule of 10%, which was you don't get a bonus if 10% of all new work is not resourced on this internal marketplace and 10% of the capacity of your team is not made available on the marketplace.

Speaker B: Oh, wow.

Speaker C: And my goodness, you know, they went from rolling their eyes at the new technology to literally weeks later, everyone was engaged. Because you know what, you know, the minute you, you start, you say, I'm going to take money away from you.

Speaker B: Right.

Speaker C: People start to notice. Right, right. Not to say that comp is the single change lever that's important.

Speaker B: Right.

Speaker C: It's an important one. Right. That needs to be pulled on.

Speaker B: Yeah. And I like the two dimensions that she, um, set the performance to. I think that was clever.

Speaker C: Yes. The give and get. Right. You have to give your people and you have to get from elsewhere. And it just immediately, Teresa, as you might expect, Right. Uh, reframe this question about how am I leading here and how am I going to grow? Because if now, you know, my old method was to hoard the best talent, don't make them available so I could get a bigger job, it's now actually saying, well actually now I'm acknowledging everyone's an enterprise asset and I'm here as a steward of the talent in the organization to tap into, to grow, develop, to make accessible to the rest of the organization, the people I've developed. That's such a different, you know, to your earlier question, mindset, right?

Speaker B: Yes, it is. It's a totally different mindset and it's very exciting. You know, uh, it's probably one of the most exciting business concepts that I've heard of in a long time, really long time and not to date myself, but coming from the business process re engineering era, this is fantastic. I love it.

Speaker C: Thank you, thank you. I appreciate that.

Speaker B: Yeah. And so, um, the book explores how AI will be at the heart of every business model and um, leaders will need to move from being digital savvy to real AI fluency. And one of the questions that um has been coming up is how can leaders begin that journey? How do you help them along that pathway to AI fluency from where they probably are right now?

Speaker C: Yeah. Oh, that's such a good question. You know, I've lost count, Theresa, the number of times I've business I've been in speaking at large conferences and I asked business leaders, you know, for all of the stock of gender, how many of you have actually used chat, GPT or your company's equivalent and uh, at the C suite it is like in, at best the single digits.

Speaker B: Oh my goodness.

Speaker C: And you know, and I think this is where this is a massive problem because AI, every business model is going to be an AI augmented one. There's just no escaping that. You just don't have the luxury of sitting this one out. Um, and any business leader who is not actively using gen AI and the way you described, right, using it to sort of, you know, develop ideas, using it to develop marketing pitches, using it to develop my internal comms. Any leader who is not playing with this and understanding and genai is to be clear, right, is just but one element. It's just but one technology. The real benefit is the multiplier effect of gen AI on top of machine learning, on top of process automation or rpa. Um, that's where you see this multiplier effect. But if leaders aren't using these technologies, then their ability to both lead in the organization and their ability to frankly understand what they're getting from their people is significantly compromised.

Speaker B: Well, they'll become the bottleneck for the, for the organization. And then my, my question is, what happens to them then? Will they then have to be kind of moved out because they can't grasp the bigger future?

Speaker C: Yep, absolutely. Yeah. And it's, you know, it's, it's going to be this population of, you know, the next generation of the Luddites. Right?

Speaker B: Yes.

Speaker C: From way back when. And it would be really unfortunate if it was business leaders who were the ones who became that roadblock.

Speaker B: Right. It's countercultural, really. I, um, mean, it really is countercultural. And yet, um, I find to your point, alignment with the 1% across a lot of the top of organizations in terms of adoption of ChatGPT or augmentation to the work. And as an entrepreneur personally, I can't live without it because it's just expanded my horizons and my capacity so exponentially. It's like having three other employees.

Speaker C: Yeah.

Speaker B: And, um, so I'm all excited and juiced up to see how, you know, how my customers and clients will embrace it. But there's still, as you know, that fear of what is it? How does it work with me and what I do? And where you're coming at it, it sounds like, is this whole strategic, systemic perspective. So we have the individual employee or worker worrying about, should I adopt this? How do I adopt this? And I think you're painting this picture of, listen, you can't get away from it, it's going to happen. And then I come to this question of how do we help, uh, reskill people not just to learn the AI, but to shift their mindset so that they can see the opportunity and reduce the fear of trying this thing that's something new, because they're going to get taken over by a tidal wave.

Speaker C: Yeah, no, you're absolutely right. And I think that the beauty of this technology, Teresa, unlike so many others, is it's accessible to everyone today. Right. Because anyone can access it through their laptops. But you've made an important point there. You have created in your work the space for learning, in the flow of work. You've created the space for you to play with this tool, to experiment with it, to learn from it, to understand where it can be used and where it can't be used, where it can be trusted to generate output without much oversight from you versus where you're going to need to check it, because it might, you know, hallucinate and spit out some nonsense that you can't afford to, you know, uh, to not check. But I think that's a key point because, and we talk about this in the book, the need to design in space for learning in the flow of work. M Not just for employees whose technical skills are changing, but frankly for leaders who need to keep up.

Speaker B: Right, right. So what are some of the downsides of this, of this model and getting there? What kind of barriers or challenges are you uh, anticipating or seeing with the current clients moving towards the flow model?

Speaker C: So I think you know, with everything Theresa, it has to be um, you have to eat the elephant one bite at a time.

Speaker B: That's right. They're still big.

Speaker C: Yep. Um, and I think that's where you know, this is the uh, this is a challenge because we have 140 years of learned behavior management control systems that ah, are essentially indexed to that legacy. And so as I was saying earlier, you have to start with a North Star. You have to start with experimenting in these narrow areas, these narrow zones to be able to both create the proof of concept and start to build the new muscle.

Speaker B: Mhm.

Speaker C: And you have to pull on these different change levers to ensure that you're not just throwing technology and hoping it'll solve this problem. But you're changing leader behavior, you're changing the way managers think and operate. You're changing the way employees are engaged in this journey. And then the other part of this is also recognizing the flow model is but one of three. Right. Need to figure out where does the flow model make sense, where does the fixed, the old fixed model still make sense. And it's largely one of where compliance and control are the name of the game. So the next flight you and I take on an airline on a, you know, I'd like my airline pilot to be doing that job full time rather than having her drive or something. Right. So that fixed model makes sense for airline pilots, drillers on oil rigs, etc. The flexible model though is one where if you look at companies like Unilever who've been on this journey for over six years now, um, all of their white collar talent have the flexibility to post projects and take on projects even though they're still in jobs. So the imperative shifts from one of control for the fixed model to one of capacity management.

Speaker B: Mhm.

Speaker C: And then the third model of um, the flow model, it's really about capability deployment. Right. How can I take those scar skills like data scientists who I need across my company and make help them Connect to work and contribute and not be captive in a function.

Speaker B: Right, Right. So how would you do that?

Speaker C: So, so I think it's. It's starting with a couple of things. One is, what's the imperative for work? So do we really understand the work?

Speaker B: Right.

Speaker C: Understand which model is sort of fit for purpose?

Speaker B: Right.

Speaker C: First thing. The second thing then is once we've made that determination, pulling on those, um, you know, the, the three steps I talked about. Right.

Speaker B: Yeah.

Speaker C: What's the minute staff of moving people from a fixed model to a flexible model?

Speaker B: Right.

Speaker C: How will I improve quantitatively my productivity, my agility and my efficiency? Um, what are the. That's the first part. The second part is how will I experiment with that? Everyone who's moving into the flexible model always starts with a particular population. You know, it could be a people in a business unit, could be people in the geography. Um, and then the third part is to say, you know, what are those eight change enablers that, you know, we talked about? What's the role of new technology? What's the role of supervisors and managers? How do I need to change accounting rules? How do I need to change, um, what HR does to support leaders operating in this flexible way? And the same thing would apply on that flow model as well. So the journey map is pretty much the same one that we have in chapter eight of the book.

Speaker B: Right. So, um, being from the organizational change strategy, um, and implementation space, what's, what's coming through my mind is, okay, so you've chosen your narrow, uh, and shallow, um, place to do this. And I'm thinking of a basic re. Engineering model or the seven star model or some model that hooks all the elements of an organizational system together. How do you know? Um, well, how do you actually pull which string do you pull first to change? Because it seems like they're all codependent. Interdependent on each other.

Speaker C: Yeah, no, that's, that's a great question. And what we've seen is, you know, there's certainly some, some non negotiables. Right. Absolutely need leaders to champion this because otherwise it very quickly becomes, quote unquote, an HR thing. And the thing we try to do in the book and, you know, having Tanuj, who is both Chief Strategy and Chief People Officer. Quite a unique title.

Speaker B: Yes.

Speaker C: Um, is, is. Was been really helpful because the thing they started with was to say, you know, this is a business problem that we're changing. And they started with one number to get their board to sit up and pay attention because, uh, what you showed the board was, hey, we're going through this massive transformation of this hundred and thousand person organization. And did you know that we can save 50,000 British pounds per employee by reskilling people from this, our sunset roles to our sunrise roles? Oh, that one data point made this thing of skills a, uh, key part of the overall strategy. Just as the capital plan was a part of the strategy, not an HR thing, but it was a business strategy. And that then led to all of these investments of saying we need to bring our leaders and managers along to build a learning habit. So how do we ensure that skill development is not something that we do when times are good? It's not something that we asked Teresa to do at 10 o' clock on a Saturday evening when the kids are in bed. But how do we get intentional about giving people these demand signals for how work is changing, Showing them the skills they need to acquire, giving them the space and the assets to acquire those skills, and then giving them the opportunity to deploy those skills to work, whether that's moving into a new job, taking on a project or an assignment or a gig. So they can actually express those skills for productive gain and understand what it means to move from HR into IT or finance, or from um, basic consumer banking into becoming a senior relationship manager in the high net worth business. Um, so people start to express their skills and gain proficiency as they're doing so.

Speaker B: This is really breakthrough thinking. Yeah, I know it's not rocket science to you, but for me I'm like, I am very intrigued. I'm really going to do a deep dive into this. Um, we're about out of time. Um, what would you like to leave our listeners with? Is there a key concept that you're really trying to get out to people around this work and this book?

Speaker C: Yeah. So, um, you know, we have, uh, the website for the book is www.skillspowered organization.com and your listeners can download a free excerpt from the book that I think they will find helpful in laying out why this is important and what the journey looks like. So before they go, I obviously would love for them all to buy the book. But before, before they do that, they can get a taster, if you will, of what the book is about. Um, but I think my ask would be for us all to challenge ourselves to say why we need to change and what that change looks like. And again, as I said at the beginning, what we really wanted to do with this book was to make it a practitioner's guide and make it something that every leader and manager could use not just for their business, but also for themselves in their own personal change journey.

Speaker B: Mhm. Yes. And the excerpt is wonderful, so I would say it's definitely a prelude to the book. Um, great. Well, thank you so much for your time, and I'm very excited to bring this out to our listeners. And good luck with everything you're doing. And I'm going to be looking for, uh, different case studies and more from you both as you progress through implementing this stuff.

Speaker C: Thank you, Teresa. It's been lovely to be here with you.

Speaker B: You too.

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