Cultural Change and Leadership Advice

This episode of the Business is sponsored by PWC. Markets are shifting. teechnology and AI are reshaping industries. Druption is unavoidable Staying ahead and finding new opportunities for growth demands bold moves. This is where PWC makes things happen Working with you, combining the industry expertise, data insights, AI capabilities and business change experience. to help you reinvent and lead from the front PWC accelerates what's possible so you can turn vision into value. Discover more at pwc. co. uk This week in this bonus episode of the Business sponsored by PWC, is AI the key to more jobs in Britain? maybe if we get it right. There is a lot of uncertainty and fear. They don't know if technology is going to take their jobs, they don't have clarity around the narrative in terms of how companies are going to use technology to disrupt their business And part of what we've been working with organizations on is how you turn that uncertainty and fear into hope and opportunity Welcome to the businessus. I'm Dominic O'Conll, Times columnist and the Business reporter at Times Radio. And I'm Hanne Prevet, associate Business editor at the Sunday Times, and we are here for a bonus episode of the business, sponsored by PWC. And todayay we're talking about the future of work and artificial intelligence. And I think it's safe to say that anxiety about AI has intensified over the past year or so Companies talk about AI when they announce job cuts. The number of graduate roles being advertised in the UK is down by about a third, and all this, of course, againivs us more worrying backdrop about low levels of participation in the workplace generally Hannet, you talk to entrepreneurs all the time. that's your kind of thing. What do they tell you about AI adoption and what it means for employment? Well, obviously, you've got kind of tech founders, but if we put those to one side, just people kind of running small and medium sized companies throughout the UK, I went to an AI summit recently and there was not a spare seat in the house, right? People are absolutely clamoring to learn more about this kind of stuff. And speaking to them in the coffee break, what they were saying is they're essentially trying to do more with less. And when employment costs are so high as well, they're saying rather than taking on that additional person, they're saying if they can do it in house with better use of AI. Well where are we going all this? Is AI going to make a wonderful future where we all sit around drinking peina coladas while the robots do all the work O Is it going to take our jobs and leave us with nothing to do? To help us find our way towards the answer, we're join by Carol Stubbings, who's the managing partner at PWC and by Sir Charlie Mayfield, who was of course, the chair of the John Lewis Partnership, now the lead reviewer of the Gvernment's Keep Britain Working review into economic inactivity. Thank you both for being here G'sreat to be here. It's great to be here too So Charlie, you released the report from Keep Britain Working Review just recently, which was commissioned by the Government's Look at the employment crisis Can you give us a sense of UK workforce participation right now, particularly within a historical context? L is it actually worse than it's ever been before So it is true that we are getting older and we're getting sicker sooner. And that is being reflected in the workplace participation statistics. So one in five of working age adults are not working for reasons of ill health or disability if we matched some countries which do a better job of keeping those people in work, We could have as many as two million more people working in the UK, which is a lot. Now, I think there's another question, interesting question about whether we need two million more people, given some of these advces in technology we're going to come on to. But in and of itself, that is a huge economic loss or economic opportunity. It's also got massive implications for the individuals affected. I imagine if you're not in work you lose out on all the social benefits and all the sort of the prosperity gains that you can get through being in work. So it's a big, big problem. It's also a fixable one And so looking at the historical context, is it worse than it's been or is it a different demographic? So often we talk about NETs, don't we? So NETs obviously being people that are not in education, employment or in training. So is it the increase in those specifically that we're particularly worried about? Yeah, so there has been a marked increase. There's eight hundred thousand more people now than there were in twenty twenty who are falling into the category I've described. and the forecast arethers will rise by another six hundred thousand by twenty twenty nine. So these are big numbers. wo big drivers of that. The first is young people with mental health issues. There has been a sustained and continuing increase in the incidence of mental health issues amongst young people, which are leading to more of those people leaving the workforce prematurely The other big driver is largely issues to do with aging, like muscular skeletal issues at the other end of the age spectrum Those two things are the biggest single drivers of that inactivity level. Carol, you speak to clients all the time and we've heard there the kind of context, the macro context of some of the challenges we're facing in the workforce today. Obviously, there's a huge issue here around AI as well, right And whether as Charlie said, some of those jobs could perhaps be done by AI instead. You speak to clients all the time. What are they actually saying to you in terms of how they're using AI today There is no doubt that organisations are spending a lot of money on AI There's also no doubt that they're not really seeing the ROI that they were anticipating return on money on investment We did a recent survey where we surveyed over one thousand two hundred senior leaders. And interestingly, the benefits from AI, seventy four percent of all of the benefits sat with twenty percent of the organizations So just spending money on AI is not going to drive value and it's not going to drive the outcomes you need And really, organizations are starting to think about How do they get that return on investment? So giving all of your employees co pilot check GBT, whatever that might look like will probably create incremental benefit for employees. Now we're talking about ten percent to fifteen percent. If you don't harness that incremental benefit and redirect it into other value added activities, guess what? People find other things to fill their time with So the real magic is when instead of helping people do their work better you reinvent the way that work gets done. So this isn't the co pilots or the chck GBTs. this is the agents can really drive outcomes and workflows in different ways. Just to go back a step Col, so return on investment What kind of typical return would one of your clients be looking for from a new IT system? And how would they measure it If we're looking at IT systems, if you're looking at implementing a finance system and HR system You know, they can typically spend hundreds of thousands of pounds implementing that the saving and the productivity gain, but also the outflow and the output drives better business decisions. So you might get a activity gain, you'll get a better business decision gain, which means that you can drive the business outcomes further. But you are definitely looking at two to three times the benefit over a sustained period of time. So it would pay for itself within a couple of years. itself That's the idea. I mean, the world is littered with failed technology implementations, I would say. becausecause the real point here is the technology itself It's not going to drive the productivity, it's not going to drive the business outcomes. It's how humans work alongside it. That's the important thing. And surely part of the problem, isn't it that businesses aren't quite sure what they want to do with this. They just feel like they should be doing something And so it's not very joined up. They don't know what the outcomes are that they want. So therefore, how can you measure a return on investment Yeah, where we're seeing real value is when they put AI to work from an agent perspective on a real business problem So an AI agent is basically utilizing things like Claude and anthropic or Gemini and actually creating an agent to do work for you or do workflows for you. And what we're seeing with organizations is when they combine different agents that have different powers where you get what we call a human in the loop So instead of the human doing the work with the agent helping them, the agent is doing the work and the human is actually reviewing what the agent is doing. And the reason this is topical at the moment is because this is the year when all these big AI firms have released their own sets of agents for law firms for advertising firms to automate individual work streams. So that's here and now, isn't it? Yeah It's absolutely here and now I have the ability on my computer today to build an agent. My team have built a carol agent. I'm not quite sure what it does, but apparently it's pretty good. But actually again, everybody building their own agents, whilst it's really important to get people to do that The real value is the speed in which these agents can work, the outputs that they can drive. And where most organizations have spent their money is in the back office and productivity, the real value is to grow the business because if you want to do, like you said, more with less, you need to find new revenue streams, you need to find new products, you need to find new customer bases, you need to go into different industries. That's where the revenue and the uptick and the value is going to come from AI not necessarily just on the productivity. Yeah. And that's something I was speaking to businesses about recently as well at that same summit. So they were talking about the productivity gains, but also using it to identify gaps in the market for certain products and then kind of innovating around that. Charlie, how do you feel hearing this kind of conversation and hearing about AI agents within the context of what it is that you're doing, is it going to make the problem that you're trying to address, frankly far worse I think the first thing I'd say is that technology has always changed the world, and I think this technology revolution will change the world. I think that's pretty much a certainty Having said that, there's also a pretty well worn sort of old adage which says that people tend to overstate the impact of technology in the short term and they underestimate the significance and how profound it can be in the long run I think if you're looking at the wider economy and all of the jobs that exist in that wider economy I actually think the impact of AI so far has been relatively mild and modest. And the reason Hannah why when you were at a summit with a bunch of tech entrepreneurs They don't have legacy systems. they don't have large organizations.'ve got people who are real techno sort of adopters and they just want to run fas at stuff and they'll do things really quickly. They will adopt it at warp speed But the reality is a lot of the economy isn't like that. You've got very large organizations that have got very significant legacy systems. And the fact of the matter is, transforming those operations, which AI can definitely do is really hard Because data is the fuel of AI. If you don't have good data or if you have contaminated data you're not going to do very much of any particular work with AI because it relies on having that. Secondly, very, very often, you there is a multiye investment requirement in order to achieve transformation. And the truth of the matter is that currently right now, Stock markets and analysts and stuff don't necessarily reward management teams for multiyear investments that lose money for many years and then then suddenly make loads in the future. They reward tech firms for that because they're doing it like they're spending money like bandits at the moment and they're getting loads of rewards for it. But that's because people are bought into that sort of first mover advantage. But for a lot of companies, they're not like that. So it's difficult for management teams to really do that Thirdly, there is a real organizational load here. I mean reskilling, reorganizing, changing the way you operate. That's a difficult thing to do. It's got people at the end of it. and they've got rights, you've got responsibilities, you have to do a whole load of stuff with them And then the fourth point I would make is that there's risks around this. Aually every single time you introduce a new system into an existing suite of systems You may introduce new capability But you also introduce risk because the interoperability of some of these systems is incredibly complex. I mean I remember my time at JLP, John Lewis P partnership You wouldn't believe how complicated the systems are and even introducing something fairly innocuous, you'd think it was very simple was much more complicated than you might might imagine. and you have to test every single one of those things Can let just come back to you made that point earlier about just adding the IT, adding the AI doesn't necessarily help you. you might get some incremental benefits by buying a copiluct license for every disc in the firm But it's the change management. It's all the changing the way you do things to eliminate some steps or give some steps to AI. Without naming names, can you identify an organization that has actually done that and taken out a whole layer or given that whole layer something else to do? Does it actually happen So the complexity of large organizations and the unormity of their technology stack. makes it really, really complicated In a number of organizations we talk to, there is a lot of uncertainty and fear. in their employees. They don't know if technology is going to take their jobs. They don't have clarity around the narrative in terms of how companies are going to use technology to disrupt their business And part of what we've been working with organizations on is how you turn that uncertainty and fear into hope and opportunity Because if you can get people behind a narrative That means that the company will help to upskill them. They will give them the right tools. They can have a career pathway that actually looks really promising and they can lean into the technology and the AI, they are much more willing and able to embrace it and to drive change. Wh you've got organizations that basically tell people how to use the technology without really providing the context of what they're going to do and where that organisation is going, that they fail. Have I seen organizations do it? Yes, I have. There is a very large insurance organization in the States who has fundamentally transformed their business. Now has that resulted in huge job losses? No, it hasn't Has it resulted in significant increase in revenue? Absolutely. So as I said before, if you want to keep the same number of employees, you've got to grow the top line, you've got to grow the revenue But what it's also done is replaced their need to have business process outsourcing in India becausecause actually they've gentified all of their back office But it's allowed their people to have more insight, more perspective and more opportunity to do what humans are best at, which is the human skills that we need And that's really interesting because it relates to an episode of the podcast that we recently recorded with Anish Rahman, who's the chief economic opportunity offfficer at LinkedIn. but they talk about this a great deal. and it's that concept that your job won't necessarily be taken by AI, but somebody using AI might take your job So it's about not burying your head in the sand, giving them the tools to do so, but also encouraging them to use it. But crucially with some guardrails around it, right? Because that's the other thing we see. If you don't give them the decent tools, then they will go and use something else that you don't want inside your organisation. You don't want it having access to your proprietary data as well. So is there a concern around that with organizations? A massive concern most organizations create kind of a walled garden or technology that basically can only be shared within their own organisation. If you look at very highly regulated organisations as well, if you look at financial services, You know, you will have the regulator asking, how do you make sure that people are using AI in the right way that they're using it responsibly, that you can trust the AI that they're using? There was a piece of work we did with one large financial serervices organization where they basically used AI to deliver basasic investment advice in the front office And the regulator quite rightly had asked the question, how do you know that that advice is not biased So we were asked to come in and have a look at it. Now it turns out The investment advice was biased because if you have James and Sally asking the same question James had a much riskier portfolio of investment advice than Sally did. Now that's not the AI being biased, that's thousands of years of bias built into the system So what is the fix on that? Well, the fix is quite simple. When AI gives the advice, you take the gender out before it goes into the AI. And then you get the same advice, But it's very basic, simple things like that. How do you trust that it's doing the right thing and it's being fair. What sickers are most exposed to AI? job losses I'm talking about Well, look, I mean, I work in professional services. We are under no illusion that we are going to be massively disrupted. And you know our view and the view of most professional services, to Charlie's point, we are seeing so many new entrants, so many tech startups Our competitor base used to be what we call the big four. know you can have three pages of competitors today all doing all sorts of different things. So I always say to my team, we have to disrupt ourselves. We can't wait to be disrupted But you know what? I reckon in twenty years time, there'll be just as many people, if not more people working in professional services than there are today.. We're in the middle of this big disruption. There's obviously uncertainty about what's going to happen Right now, you know, obviously the sort of the theme that people are talking about is you don't need as many junior people or entry level people for the senior people to do the work they used to do because the sort of pyramid model is changing And so I think that is probably true right now But what it doesn't take into account is the fact that you're releasing capacity and also you're increasing the potential for professional services firms to do a lot more than they're doing today Human beings being human beings and being competitive animals. they're very unlikely to let that capacity just sort of sit there. or that potential for intensification of work just to sort of be squandered. The forces of competition will mean that people like your firm, Carol, will use that. And what they'll find is they need perhaps slightly different people, but they still need people and they'll be doing slightly different jobs And also, as you said, there will probably be an explosion of competition. new disruptterors coming in who haven't had to sort of go through the organizational problems of reorganizing the existing organization. They just build a new one that's designed for the future from day one. So very few technology disruptions have long term led to less jobs. And I think this will probably be the case here. is not to say there won't be significant disruption and real impact on certain individuals in the short term. And so we've talked a bit about professional services and banking. What about your old beat retail? How do you think retail iss going to be disrupted? Because we still need know shop assistance, you know, P part of the experience of going to John Lewis is that you being served by fantastic partners in store What do you think going to happen there Well, so again, I mean, it's going to make a massive difference to retail., I think retail has been massively disrupted or enabled by the internet. And you if I think about my time at JLP, know, the increase in productivity, which we achieved through use of the basically Web technodities, which are now old fashioned extraordinary and it allowed us to more than double the size of the organization, trouble the profits vastly improved the productivity of the organization. and actually net net in terms of sales per person reduced the size of the organization. So it was very disruptive The other thing to think about with technology, I talked about capacity and intensification. But the other thing that AI does is it enables you to handle more complexity And what you can do with that is you can then become much more personalized in how you deploy it. What about at the most basic level on retail? Because one thing we haven't talked about is robotics, which is the thing coming after or coming with AI. Elon Musk the other day was talking about the old mododel S factory in Fremont, California. It's going to be turning out ten million do their optimus robots a year So these things are coming to your household, whether you like it or not. Oh yeah. Are they taking away the warehouse jobs But that's already happened massively. When we opened JLP, we opened our Magna Park campus if I compress about ten years into a link of the eye Yeah, you went from probably having to employ fifteen hundred people to do X amount to employing maybe a thousand people to do X times ten in the space of five to ten years. And was that was largely through deployment of technology and basically automating or, if you like, roboticizing a lot of the operations within a warehouse context These are very exciting places I I used to love going to visit because you would constantly see the frontier of innovation going on with new robots being put in to test, can we make this particular process slightly faster, slightly more effective, slightly more accurate It's an amazing thing. I don't fear it. I mean, of course, if you were one of the people who was in one of the jobs that got robotized out, it's not good for you But net net, there is an overall increase in capacity and an opportunity to add more value. And I think it's an example of where the disruption will be felt keenly by individuals in the aggregate for the whole economy over a period of time I'm of the view that this will add, not subtract So let's think specifically about graduates because there's been lots of reporting recently about the impacts on the graduate job market and again, particularly in professional services firms. The fact is that AI tools can do lots of those kind of entry level jobs. and the same is probably also true in journalism, right? You know writing press releases and stuff like that can all pretty much be handled now by some of these tools. So how much damage is all of that doing to the graduate job market, Carol Yeah, lookook. I mean, I think if if I look at Air we took on two hundred graduates less last year than we normally would. I would say that was more the economy than it was AI, to be perfectly honest We used to have seventeen ways of getting into PWBC on the graduate schemes. We've completely limited a lot of those. We've now narrowed it down to five. We may narrow it down further And you know if we don't take people at the graduate level, we will never have the skills for people to be managers, senior managers, directors, partners But we are reimagining how our people come into the business. We're reimagining what they do, and we're reimagining the learning pathways. I do think there is a lot of anxiety out there Part of it is to do with AI, but the bigger part is really around the stagnant economy, the cost of hiring people. There's all sorts of different reasons why the graduate market is where it is today. that the other thing I would say and you know we talk about industrial revolutions always create more opportunities than they lose. The reality is in this one, it's the speed that's the challenge So how do we reskill people and redeploy people into those new jobs and give them the right skills. We need to work with government, with business, with civil society, with educators to actually identify and nurture the skills to enable people to participate in the workforce. Well I was going to say, Charlie with your workplace review hat on might we have to face up to the horrible reality that we're simply producing too many graduates I think we are is the truth. There's a deeper point behind that Great sympathy for people young people graduates trying to get jobs at the minute. I think it's incredibly hard. And also I think it's being made harder in some respects by the hiring methodologies which are often technology enabled. know All these aptitude tests and then interviews which are basically not with a person but with a machine, incredibly difficult. I wouldn't have wanted to go through that, so I have enormous sympathy for people having to do so, and it is difficult But I think probably the majority of the issue in terms of lack of graduate roles is to do with the state of the economy. We've got an economy which isn't been growing at the same time as a technology a revolution taking place And I think what this is exposing, though, is something which is bigger and deeper and longer standing which is that we've been living in this world where we believe that qualifications equals careers. That connection between one and the other is far more tenuous than it used to be. and I think people are basically waking up to that. By the way, I don't think it's necessarily a bad thing becausecause I also think that a consequence of our obsession with qualifications equals careers is we've kind of lost sight of the critical importance of actually nurturing and developing good pathways to get young people into work You know, I'm on the advisory panel for Alan Milburnne's review. That's looking specifically at the neat problem. People who are not in education employment or training. And as part of that, I I've seen quite a bit of the work that's g on and also spending time in places around the country where you see this very starkly. And the truth is we have allowed the mechanisms that people who are not going into universities and graduates and all that st of things to decay with the result that people who haven't got great qualifications haven't got advantages trying to enter the workplace are significantly disadvantaged in doing so. And then we all say it's terrible that we've got all these people who are sort of disengaged in the workplace or who we need. Well, the answer is we need to do something about that and that requires structural change So although I think I've got sympathy with people who are graduates trying to get jobs actuallyctually I've got more sympathy with the people who aren't graduates, who don't have the backgrounds, who are finding it incredibly hard to get into work. And I think we've got urgent work to do to sort of figure out how we recreate better pathways to get more people out to transition from youth and education into long term successful career. Where does AI play into that So I think AI has huge potential. I mean onene of the things I do in my portfolio roles is I work for an Ed tech business and it is doing some incredibly exciting work within education about using technology, using AI to improve reading skills of young people in primary And this is not reading on devices, by the way, this is reading real books. And so it's not about sort of getting people hooked on screens at all But it's AI powered in terms of achieving that outcome. company? It's called Sparks. I think there's actually a lot that technology can do for us to change and improve education and thereby equip people better for the future than has been the past. I mean, I think education is a conservative sort of world and it's very hard to change But I think it will be disrupted and probably needs to be disrupted by technology and can be improved. I want to just emphasize I'm not talking about getting people on screens the whole time. I definitely don't think that. I think it's using technology wisely and sensibly in order to improve outcomes. Carol, do you think that higher education facilities, so universities but also kind of colleges and polytechnics are doing enough to prepare young people for the world of work. You know, Are you seeing some skills come through that are lacking? Yeah. I mean I would fundamentally say yes, I don't believe that they're doing enough to prepare people for the world of work in the U.S, for example, where you've got an explosion of ed tech companies, and we're seeing that here in the UK. A lot of that is really designed to bridge that gap between people coming out of university or colleges and actually being fit for the workforce. And if you think about this AI revolution, You know, we talk a lot about the edge is going to be the human edge Critical thinking, resilience, adaptability, emotional intelligence All of those things are going to become more and more important. And we still have an education system that's Victorian, I would say, that is by definition very slow to change because you want stability and you want certainty. But the reality is we now have people entering our workforce. They are afraid to use AI because they've been told if they use it in exams p So they're really fearful of it Actually, what we should be doing is working alongside it and teaching people how to use it properly And so that's a problem for the education system to try and fix in partnership with the government and employers. But particularly on the employer side, say you get somebody into your company into PWEC that doesn't have some of these skills. know how can other employers listening to this kind of train them up and equip them with the skills that they need both on the AI side and on those all important kind of Soft skcaill side that you mentioned earlier Yeah, so when we look at hiring people, we do a lot of psychometric testing now to test for people having emmotional intelligence, critical thinking, adaptability. Does it work? Well on the whole and in the main, it does work I mean, we used to hire amazingly bright graduates from Oxford and Cambridge and the Russell Group with first class degrees in accounting and math. Turns out actually they're not always that great with clients. So we completely changed our hiring strategy a number of years ago, and we are very, very big supporters of social mobility You know, our clients have to look at us and they can see them in us. so we have to have you know, a real breadth of diversity within our organization. And what we're finding is that people come into the firm with different needs And you talk to clients and you know we talked earlier about mental health issues or having ADHD or being on the autistic spectrum. And the good news is people are prepared to say that that's what they have and they're prepared to accept the help for it And actually creating that inclusive environment is really important because if you don't do that, people don't thrive and you're not getting the right skill set. I was talking to a client a couple of weeks ago actually, and they'd promoted a number of individuals, but these individuals had decided that for whatever reason, we call them the frozen middle in an organization. You know, you've got the top where they've set the strategy and they want to drive transformation and real ambition. and you've got the more junior people who see the opportunity and the hope And they want to get things done and you've got this frozen middle. who literally just everything happening because they're afraid of it or they don't want to be disrupted, and they quite like the way that their job's been for ten years and they don't want it to change And we were talking about how you kind of defrost that frozen middle But actually when we looked at it for this organization, there were pockets of individuals. It was typically a third, a third, a third. You know, a third of people actually did want to change and they did want to make a difference. A third were a little bit, well, if I have to, I'll kind of do it. And then the other third were like over my dead body. Give my c Iid There's an enormous opportunity there's a challenge with the workforce, but an enormous opportunity for employers get it right to harvest a lot of talent here Oh, undoubtedly, I think the fit will get probably fitter and run faster in this context. And so I think the frozen third? Yeah, well, the frozen third, I think I mean my view on that is is that human beings have got a lot more capacity for change than sometimes they realize in themselves The truth is that for a lot of people, if you talk about change Some people think, great, that's exciting Wh quite a lot of people think that sounds a bit worrying and it feels like it's going to be loss So to get to unfreeze them, I'm not quite sure the flamethrower is quite the right analogy I would use, but I think it's the warmth and the engagement of great leadership can transform a lot of those people and in doing so, the potential that they have in themselves. And Carol, a final thought from you, a bit of advice for employers. I mean, I think at the most senior level, you need to lean into this I think looking from an AI perspective, this isn't about technology, it's about a massive cultural change. It's about real clarity in message It's about giving confidence and hope. opportunity to your teams