Hybrid work and the rise of AI: How leaders can navigate a future in flux
Some of the hardest questions business leaders are facing right now would have seemed silly—or even a little hysterical—to dwell on even just four years ago.
Questions around how to prepare for a global health calamity or what to do about bots that are capable of passing the bar exam may have always been important, but they didn’t exactly top anyone’s to-do list. Now, during this period of extreme uncertainty in the economy, the workforce, and the evolution of technology itself, many of those once far-off questions are now urgent ones.
To make sense of them, McKinsey is publishing its State of Organizations report today. It offers predictions for major shifts that are barreling toward the workplace and includes suggestions for how organizations can most effectively navigate them. State of Organizations is based on a survey of more than 2,500 leaders across 16 industries in eight countries, who were asked to identify which emerging trends seem most relevant to their businesses right now.
Their concerns run the gamut, from the emergence of AI to the continued complications of navigating a remote workforce. But one commonality seems to be a shared anxiety among leaders that their companies aren’t ready for whatever’s coming next. According to the report, just half of the respondents said they were prepared to anticipate external shocks to their companies, and two-thirds viewed their organizations as too inefficient to properly react.
“CEOs together with their leadership teams around the world have been operating in a highly volatile and uncertain environment. They have had to cope with the COVID-19 pandemic and then with the economic slowdown and soaring inflation that followed, compounded by geopolitical disruption from the war in Ukraine,” the report reads. “In such an unsettled period, it’s no surprise to find that efforts to strengthen short-term resilience have dominated the agenda at many companies.”
The pandemic shift
Some of the shifts that McKinsey has identified have obvious roots in the pandemic. More than 60% of respondents, for example, said that investing in resilience—which is to say, having surplus capacity and contingency plans—will become more important, not less important, in the future.
The report also offers evidence that the shift toward hybrid work is here to stay, with more than half of respondents saying that they believe remote work will only become more common in the future. That finding aligns with other research on remote work, which has found that full-time workers in the United States now spend about one-third of their working days at home, compared to about 5% pre-COVID. According to one monthly survey focused on work from home trends, workers now value hybrid work as much as an 8% raise.
The most obvious advantage of a hybrid model, according to the report, is the ability to hire talent anywhere. That’s certainly been the case for Vanessa Stock, chief people officer and cofounder of Pitch, a Berlin-based company that makes software for presentations. Pitch embraced remote work even before COVID and now has employees spread from New Zealand to Canada. “We noticed really fast that we’re not going to get the best person if we force them to move to where we want them to be,” Stock says. “We wanted to hire for skills and not for the location.”
But adjusting to this trend has been a challenge, particularly for managers. McKinsey’s survey found that just 15% of managers feel “very comfortable” overseeing remote teams. This anxiety is obvious in the long list of major employers who, after initially embracing remote work, are encouraging—or even forcing—workers back to the office.
To manage the transition to a “true hybrid” workplace effectively, McKinsey suggests that companies create some structure around the hybrid model. That means establishing clear communication channels for remote workers, recalibrating performance reviews so that they’re focused on outcomes not the time people spend working, and being purposeful about where people work. “Many employees don’t want to come into the office to do work they can just as easily do at home,” the report reads.
The rise of the bots
McKinsey’s survey was conducted between May and June of last year—or about six months before the public debut of OpenAI’s ChatGPT—but the need for organizations to adapt to AI was already obvious. In a separate global survey on AI, McKinsey found that between 50% and 60% of respondents were already adopting AI in some way within their organizations. Another two-thirds predicted that these investments would grow in the next few years.
Yet the risks of leaning too heavily on this nascent technology are also clear. Another McKinsey survey on digital trust found that 55% of executives found that AI produced “biased, incorrect, or otherwise problematic results” that either undermined trust in the system or cost them money. The survey also found that lots of organizations don’t feel that their employees are well-equipped to work with these systems, with 40% of respondents to the State of Organizations survey citing a “capability gap” in digital and analytics roles.
To weather this shift, McKinsey recommends that companies staff up on AI-savvy leaders, who can help them understand not just how this technology can be applied to benefit their organizations, but also how to mitigate its many risks.
Adapting to empowered workers
Although some of the shifts identified by McKinsey relate to relatively new developments, there are other trends listed in the report that have always been important. It’s just that now more business leaders seem to be treating them that way.
One such trend is the need to invest in employees’ mental health. “The message is clear: Most employees are directly or indirectly affected by mental-health-related challenges, and they can’t be treated in isolation from the workforce or excluded altogether; they are the workforce,” the report reads, pointing to a separate McKinsey survey that found that 60% of employees revealed having at least one mental health challenge.
Another perennial issue that’s becoming more urgent for leaders is the need to invest in diversity, equity, and inclusion at work. McKinsey’s research has indicated for years that the most diverse companies outperform their industries in terms of financial return. Now, the State of Organizations survey shows that more than 40% of respondents are taking some action to address bias and discrimination and are working to make things like pay and promotion more transparent.
This apparent uptick in attention though still isn’t making a dent. Recent layoffs in the tech industry, in particular, have disproportionately affected women and workers of color, due at least in part to the fact that workers in these demographics were newer to the companies to begin with. McKinsey’s survey found similarly underwhelming results in terms of actual impact. According to the report, 20% of respondents weren’t sure if their companies would be considered inclusive places, a number that the report notes should likely be much higher given that leaders aren’t always well-positioned to judge inclusiveness anyway.
Making progress on this front requires being as strategic about DEI work as anything else. It means setting clear DEI goals for company executives and holding them to those goals. And not just in the human resources department. “It’s up to everyone—the CEO and other C-suite leaders included—to ensure that managers understand what’s expected of them,” the report reads, “that managers have what they need to achieve DEI goals, and that managers take responsibility for delivering results.”