The Boardroom View: HR’s Role in Building Long-Term Success

Focus on Clarity Amid Chaos

REIMER: I’d like to pick up on the point Jeannie made about how different leadership teams handle today’s challenging times. A former CEO made the comment recently that this current period feels a bit like the early days of COVID, except that the COVID crisis felt more predictable.

DIEFENDERFER: I’m always watching for management’s process for solving problems. In times of stress, many leaders tend to tighten up and think that they need to have all the answers. In sunny-day scenarios, they will get input from others. But when things get hard and they get stressed, they tend to close in and say, “I have to take care of this, and I’m going to make decisions and start executing.” 

That’s often a mistake because, particularly in infrastructure businesses, the people below the CEO usually have strong ideas for what to do in a particular situation. You should empower them to do that. 

GILLAI: There are similarities to COVID in that everyone is forced to focus on what they can control. And as with COVID, your competitors are in the same boat as you. If your company can no longer ship to China, your competitors can’t ship to China either. It’s almost as if competitors in a specific industry have to operate like a team, trying to figure out the implications of whatever policy was announced that day. 

Another point is that it’s easy to feel in times of stress and crisis that you have to do something. But sometimes, not doing anything is the better course of action, rather than doing something immediately. If COVID taught us anything, it’s that “second-level thinking” is really important.

Rethink First Instincts

REIMER: Can you unpack that thought about second-level thinking for us? 

GILLAI: First-level thinking is to follow your instincts, based on what you’ve done before. That makes you think you know what to do. Second-level thinking is to say, “Hold on a second. Maybe this is not another pattern that I’ve seen before. Let’s examine this as a clean slate, because maybe it’s something different. Maybe I should talk to a few people before we just go off and execute on what we assume initially is the strategy.” 

That’s really hard for anybody to do. And it is an opportunity for the board, because they’re better positioned to stop and ask questions, to slow people down and help push management to that second-level thinking. 

Invest in Your Talent 

REIMER: I want to ask about talent. How should boards be thinking about whether they are making the right investments in talent to provide a strong leadership bench for the future?

LUBEL: A big part of the talent question is the generational shifts that are underway. Think about all the people who are going back to the office after COVID. I worry more about this generational shift’s impact on the corporate culture, and especially for heavy manufacturing companies, how it affects the safety culture. 

Before COVID, safety culture was built through person-to-person contact, making sure that people knew what they’re doing before executing tasks. My adult children only communicate by text right now — and they’re no different than a large swath of today’s workforce. There is no substitute for face-to-face communications; texts can’t capture all the nuances of some of these issues. 

When a company sees a spike in safety issues, the leadership team, with board encouragement, needs to emphasize the importance of getting back out in the field and making sure people are talking through all the potential outcomes of a particular project and that everyone’s on the same page.  

DIEFENDERFER: AI is creating new challenges in terms of how companies think about investing in the talent and skills they need for the future. Even technology companies can struggle with leveraging internal experimentation to understand the skills and experience they need to maximize value for the company. AI is such a larger phenomenon than anything we’ve dealt with. And there is so much still that we don’t know about how all this is going to play out. 

That requires some vulnerability to say that we have to learn as fast as we can with imperfect information. And that starts with the board. What is the board itself doing? We have to be in this mode of constantly experimenting and not having an arm’s-length relationship with this technology. Directors have to immerse themselves too. 

GILLAI: Boards always have to remember that the most important talent is at the bottom of the company. There is a natural tendency for leadership to focus on the one or two levels below them, but the real stars at the end of the day are the early-career or midcareer folks. When I ask about the top performers in a company, I want to make sure that people in all the different bands are getting recognition, and not just the usual characters at the top.

In terms of AI, I find that leaders are too busy running the business to actually think properly about the implications of AI. This is where the board needs to play an active role in provoking their thinking. One way is to say, “If you were to start this company from scratch today, how would you build it with current AI tools compared to the way you run it now?” It’s not that you’re going to change things overnight, but you can at least start developing a model of what the company should look like and how it should operate long-term.

Pretty soon, the people coming out of schools will be AI natives. The bigger challenge, from an HR perspective, is turning the people who are already inside your company into AI natives. People can get defensive and worry about how AI is going to take their jobs, so they just don’t engage with it. So, it’s the role of HR and leadership to explain to employees that they should view AI as a way to improve your career and make you more relevant. 

Some people are paranoid about AI. And many of them should be, because the first people who will be displaced by AI are the people who refuse to use AI in their jobs. HR has to advocate for figuring out how to get the workforce to adopt AI and make sure that the tools are available to everybody. 

DIEFENDERFER: There can be at least five AI consultants per capita in every company. Every person who thinks they’re an AI expert wants to come in and educate everybody, including the board and management. For people who are not comfortable with technology, the tendency is to think that they can check the box just by hiring the right consultants and following somebody else’s playbook. The mistake in that, of course, is that the people who are hired as experts don’t have a clear understanding of how AI can help the company, because they are often so removed from what actually matters in the business.

I finally said to a couple of my organizations where I am a director, “Let’s just pause for one minute before you bring in another AI consultant to talk to me. Let’s first talk about relevancy. What’s the impact we’re looking for? What matters most, rather than having someone just give us a stock presentation?” 

GILLAI: I agree with you 100%. The most important thing is for people to forget the consultants and educate themselves. And the way you do that is to look at what the best companies are doing. Look at what startups are doing. Look at what people who are actually running AI companies are doing internally. 

Leaders don’t need to understand how the technology works in detail. They just need to understand capabilities and limitations. Talk to people who are using it and play with it yourself.

Take people in your company who are curious and tech-savvy and put them in a room and tell them to go play. They’ll likely come back after about a month with ideas you can use. It’s not rocket science. If you have strong people in technology in your company, just give them the time, and they’ll figure it out.

Empower Teams with AI

REIMER: How do you see the potential impact of AI on job elimination or creation? 

LUBEL: The conversations in my boardrooms are more around the enabling aspects of AI. It’s harder to recruit people into heavy manufacturing work, so how do we use AI in a way that enables our workforce if we’re having a hard time attracting talent to the industry?

So it’s not about hiring people; it’s really about doing more with the workforce we have. How can we enable them to do their jobs better and more efficiently and more safely? I’m not sure AI is going to create a ton of new jobs, but I do think it will change the nature of every job. For instance, many people are using AI as co-pilots to do their work, but will AI ever be acting as captain instead of co-pilot?

GILLAI: AI will definitely change jobs. It’s going to make people more efficient. Some people then say that if you make the workforce more efficient, then you will need fewer people. Well, maybe, or you can use AI to help the company do more. 

I’m a bit skeptical about some of the talk about autonomous AI, having followed autonomy in the last 10 years and having been in technology for 30 years. There’s always that last 5 or 10% of the work that AI can’t do, and people tend to skip over that. AI still has a lot of problems, and I wouldn’t dream of using it in any unsupervised way. I’m an optimist. I think that it will make humans better and more capable. 

Hire for Strategic Agility

REIMER: What are the leadership implications for the C-suite, particularly CHROs, as everyone is leading through this transitional period?

LUBEL: The strongest CEOs and leaders are the ones who know what they don’t know, and they look to hire people who are more talented than they are. That’s the ultimate success for a CEO — surrounding yourself with people who are smarter than you. If you don’t have the AI or technology skills, then you bring in someone who can help enlighten the team and bring the company along. So have enough self-confidence to say, “I don’t need to know all the answers. I just need to have people around me who can help me get all the answers.”

GILLAI: In addition to understanding what they don’t know, leaders need to appreciate that people who are more flexible will do better. Even areas of
your business that you think are steady and stable will not remain steady and stable. Your industry may be flipped upside down because of some change you didn’t see coming. You need leaders who embrace the challenge of change rather than fighting it. 

DIEFENDERFER: My advice to CHROs is, rather than acting as an advisor, be an immersive CHRO who uses your own function as a laboratory. Don’t be afraid to use AI for your own work, because there’s no better way to learn. And you can be an example for other people as you ask them to adopt similar pathways. The key word is agility for me. There are some leaders who are comfortable making decisions on the fly with incomplete information. You have to have the maturity to know when to make decisions and to put in guardrails, as needed.

LUBEL: It’s an interesting moment to be a CHRO. They’re not always burdened by the day-to-day operational technology that’s required. They can actually step back and look at things differently. What are the impacts on people long term? What the CEO and the board  [need] is a strategic CHRO to help us think differently. It’s an opportunity for CHROs to step even more into the limelight.