Planning a Skill-Based Talent Strategy in the Age of Generative AI

Generative AI is increasing volatility in business, making it more difficult to understand and enhance employee performance. In this article, I'll offer guidance on developing a skill-based workforce strategy that aligns talent to value, anticipates the impact of generative AI, and supports dynamic talent allocation.

Understanding the Impact of Generative AI

The impact of AI will vary in roles, teams, workgroups, departments, and strategic goals within a company. When planning a workforce strategy, you must consider your company's unique situation. However, AI also provides better tools to understand the workforce, its development needs, and how you can align the resources you have.

Rebalancing Resources

AI can analyze your current skills inventory and compare them to the capabilities you need to execute your strategic plan.

As technology advances, AI and machine learning will replace some tasks. New, more skilled work will increase, driving more efficient allocation of human resources, where employees can focus on tasks that require human intelligence and creativity. We recommend considering a flow-to-work model with dynamic talent allocation, where you form skill pools to redeploy skills based on priorities.

Changing your talent strategy is a big step, so we recommend you investigate the process with your team.. 

Investing in Workforce Reskilling

AI will identify the skills gaps in your company and suggest upskilling and digital retraining programs. This helps your people prepare for the changing job requirements brought on by AI integration. It requires a commitment to development, which too often falls short. The MIT Sloan Management Review and Deloitte 2020 Future of the Workforce Global Executive Study found that only 34% of surveyed workers were satisfied with the investment in skills their employers provided.

Advancing New Models of Education and Lifelong Learning

AI can support new educational models that foster lifelong learning—critical when job skill needs constantly change.

Identifying Areas for Human-AI Collaboration

You can build a future-ready work environment by identifying areas where AI and people can work together.

Impact on Roles and Teams

Generative AI, with its advanced natural language capabilities, extends the possibilities for automation to a much more comprehensive set of occupations. University of Pennsylvania researchers estimated that 80% of jobs can bring generative AI technology into work activities today. Roles and teams must adapt to changing job descriptions, skill requirements, and team structures.

The Talent to Value Concept

Sandy Ogg, a former operating partner of the Blackstone Group, built his CEO.works consulting firm with the Talent to Value concept. McKinsey & Co. adopted the strategy and helps clients do the same.

The first principle is that workforce strategy aligns your talent where they will produce the most value. Most companies confuse this with succession planning, where they maintain a program to groom successors for the CEO and perhaps three or four levels down.

But you have critical positions and critical people throughout your organization. When you align them, your workforce isn't only skilled but serves in the roles that contribute to your company's strategic goals.

Dynamic Talent Allocation

Dynamic talent allocation, often called rapid talent allocation, uses the flow-to-work principle to overcome talent gaps. It's the "rapid movement of talent among strategic projects as priorities arise and dissolve."

In the flow-to-work model, resource pool leaders match and deploy workers to projects based on priorities and the combination of skills required. This approach helps companies avoid inefficiencies caused by hoarding skills in specific parts of the organization.

By creating mechanisms to reallocate and redeploy talent based on developing priorities, you can rapidly respond to external changes, including shifts in customer or business demands. Forming flexible teams allows your people to tailor roles to match the required skills, with individuals playing different roles on different teams as necessary.

Changing the operating model this way isn't an overnight task. It requires mindset shifts and process changes. But this way of allocating talent has several benefits:

• It helps you deal with long-term talent trends: scarcity, the need to respond to external dynamics, and the need for flexibility to respond to change.
• You can rapidly deploy scarce talent to your highest priorities.
• Your organization can adjust priorities to respond to external changes.
• Talent mobility and development will be much more efficient.
• You create flexible teams staffed to match the work to be done.

Note that this approach isn't best for stable teams like Finance and HR.

An automation-first model for processes and analytics

Think of the automation-first approach as allowing machines to handle repetitive tasks, freeing humans to concentrate on the creative aspects. So, let the machines take the grunt work, while you unleash creative potential.

The potential Gen AI impact on recruiting strategies

According to McKinsey, a successful talent management strategy involves three elements:

• Rapid talent allocation,
• HR's involvement in the employee experience, and
• A strategically minded planning team.

By understanding these principles and anticipating the impact of generative AI, you can create a robust, skill-based recruiting strategy that ensures your company is ready for the future. Each company's journey will be unique—there's no one-size-fits-all approach to workforce planning in the age of AI.

A Vision for You

If you choose to follow this journey, you can expect an exciting and challenging period of growth. By building your AI capabilities, you can reap the rewards of organizational speed and responsiveness, better talent development, and a fresh path to competitive advantage. In fact, "fast" talent re-allocators were 2.2 times more likely to outperform their competitors on total returns to shareholders (TRS) than were slow talent re-allocators.

It will mean changes to how you approach talent management and a new mindset about how your talent delivers value to the business. And it will deliver outsized rewards.

Results

A company that creates a skill-based workforce strategy and institutes dynamic talent allocation, using the talent-to-value concept, should expect several positive outcomes:

• Increased Productivity and Efficiency: A skills-based approach boosts productivity, efficiency, and effectiveness by aligning workers with work that fits their skills and capabilities.
• Improved Talent Retention: Dynamic and continuous management of the talent allocation cycle is essential to optimize utilization rates, operational margins, and revenues successfully. It also affects employee retention.
• Better Job Performance: Hiring for skills is five times more predictive of job performance than hiring for education and more than two times more predictive than hiring for work experience.
• A Resilient Workforce: Skills-based hiring creates a more resilient workforce and can be an effective strategy for employers to prevent attrition.
• Optimized Talent Utilization: Companies can avoid the inefficiency of hoarding valuable skills in just a few parts of the organization by deploying scarce talent to the highest-priority work.
• Rapid Response to External Changes: By creating mechanisms to reallocate and redeploy talent based on evolving priorities, organizations can respond rapidly to external changes, including shifts in customer or business demand.
• Improved Organizational Speed and Responsiveness: Changing the operating model this way isn't an overnight task, requiring significant process and mindset shifts. However, it can be a critical way of improving organizational speed and responsiveness.
• Better Talent Development: The leaders at such companies understand that reallocating talent to the highest-value initiatives is as important as reallocating capital. This isn't an annual exercise but a never-ending, highest-priority discipline.
• Competitive Advantage: In a survey of over 600 respondents, McKinsey found that the talent-related practice most predictive of winning was frequently reallocating to the most critical strategic priorities.

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