AI may reverse outsourcing

“Work of the heart” will become the domain of technology, the study finds. “Developments in artificial intelligence (AI) will enable technology to assess, interpret and mimic human reasoning, making it better able to communicate in a personal way, exercise judgement and solve complex problems,” the report says. Technology will augment or replace human effort in three ways: automation assistants, cognitive assistances and AI advisers.

The current trend of outsourcing labour to other parts of the world may reverse. With new AI developing each day, demand for cost-effective labour may fall. Measures such as freight costs and proximity to other parts of the supply chain may drive decisions about where to locate workforces.

Successful companies will see that these technologies are most effective when they complement humans, not replace them. A key focus for boards is to be accountable for technology affecting workers and to oversee flexible strategies with shorter lifecycles which can respond fast to shifting dynamics. Downsizing workforces can be seen as a breach of community expectations.

Question for directors

How do we best engage redundant human capacity generated by AI and automation?

Nimble and innovative human capital

Human capital is a core asset for businesses and labour can take up 92 per cent of business costs. However, often the value of this asset is not understood. Only one in 10 businesses nominate staff as their top priority for future planning.

Retraining not only enhances a company’s public reputation, but makes economic sense because it is cheaper to retrain than hire new staff. Australian businesses spend $4 billion each year on training, which is critical to attracting talent. At the 2017 World Economic Forum, 80 per cent of CEOs who are investing heavily in AI pledged to retrain existing staff.

Question for directors

What investment can we make in our staff today to yield reward tomorrow?

More focus on purpose-drive business

Purpose-led businesses are more successful, more likely to grow in revenue and to expand into new markets. Directors should seek to define, understand, codify and monitor the impact of business purpose.

In 2017, 88 per cent of Australian and New Zealand businesses reported that practising social responsibility helped them build their reputation, and 78 per cent say it contributed to brand positioning. Today, institutional investors expect companies to have a solid long-term vision and millennials expect businesses to be purpose-led.

Paradigms that portray big business as profit-driven and smaller businesses as community-minded could reverse, as big business has more resources to invest in purpose. Businesses that don’t pay attention to community expectations may be penalised by investors, consumers and governments. Directors may need to take greater public roles in representing the company.

Question for directors

How do we incorporate more purpose into decision making?

Businesses are becoming more diverse

The report reflects on a shift from most staff working on a permanent basis to a far more complex and flexible picture. “This more agile and responsive workforce is also increasingly diverse in terms of, for example, age, language spoken, gender, ethnicity and sexuality,” the report finds.

Board members are getting younger and business leaders more junior. The proportion of board members on the ASX200 who are under 50 years of age doubled between 2009 and 2015. In the future, junior leaders will play a more important role in setting and implementing strategy.

Leadership will become less about formal authority and more about personal skills and the ability to inspire. Organisations will focus more on a bottom-up approach to identify new leaders.

Question for directors

Does the business allow for all voices to be heard, regardless of seniority?

Increasing focus on workplace wellbeing

Workplace wellbeing initiatives cost money, but can also reap rewards. In the future, an increased focus on employee wellbeing will be driven by fierce competition for talented workers. Today, boards must consider how board decisions impact employee wellbeing, position wellbeing as a performance issue and make resources available to managers.

Businesses with the best wellbeing programs see fewer sick days per year and higher productivity. In the US, 70 per cent of companies offered staff wellness programs in 2017, up from 58% in 2008. Today the corporate wellness market is worth almost $US8 billion in the US alone.

Question for directors

What are our board targets for staff wellbeing?

New metrics may develop

Today, most businesses measure their progress against strategic plans using largely financial metrics. However, directors should consider new ways to align the organisation to its purpose and social and economic impact and check whether traditional metrics impede innovative approaches.

Innovation needs to be a permanent board agenda item and a core part of the strategy to be measured. New performance metrics may include the volume of new ideas the business implements each month, the volume of IP generated or changes to sales due to an improved product.

The report acknowledges the challenges of governing organisational culture in the future of work, from both a performance and compliance perspective.

“Boards will also need to consider how these changes may impact organisational culture, and adjust their focus to suit the context of their workplace. This may include investing in internal engagement strategies, or utilising technologies that enable easy virtual communication, collaboration and even socialising between workers across multiple different workplaces,” the report finds.

Questions for directors

How do we measure innovation and is it incentivised and rewarded?

How will conduct be managed where there is less oversight of employee behavior?

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