The rise of generative AI has surfaced many new questions about how the technology will impact the workforce. Even as AI becomes more pervasive in business, people are still a core competitive advantage. But business leaders are facing a host of talent-related challenges, as a new global study from the IBM Institute for Business Value (IBV) reveals, from the skills gap to shifting employee expectations to the need for new operating models.

The global skills gap is real and growing. Executives surveyed estimate that 40% of their workforce will need to reskill as a result of implementing AI and automation over the next three years. That could translate to 1.4 billion of the 3.4 billion people in the global workforce, according to World Bank statistics. Respondents also report that building new skills for existing employees is a top talent issue.

AI’s impact will vary across employee groups. Workers at all levels could feel the effects of generative AI, but entry-level employees are expected to see the biggest shift. Seventy-seven percent of executive respondents say entry-level positions are already seeing the effects of generative AI and that will intensify in the next few years. Only 22% of respondents report the same for executive or senior management roles.

AI can open up more possibilities for employees by enhancing their capabilities. In fact, 87% of executives surveyed believe employees are more likely to be augmented than replaced by generative AI. That varies across functions – 97% of executives think employees in procurement are more likely to be augmented than replaced, compared to 93% for employees in risk and compliance, 93% for finance, 77% for customer service and 73% for marketing.

Employees care more about doing meaningful work than flexibility and growth opportunities, but leaders aren’t always in lockstep with their needs. With AI primed to take on more manual and repetitive tasks, employees surveyed report engaging in impactful work is the top factor they care about beyond compensation and job security—more important than flexible work arrangements, growth opportunities and equity. On top of that, nearly half of employees surveyed believe the work they do is far more important than who they work for or who they work with regularly.

However, employers seem to have missed the memo about what matters. Executives surveyed said impactful work was the least important factor to their employees, instead pointing to flexible work arrangements as the most important attribute beyond compensation and job security.

The world of work has changed compared to even six months ago. Leaders are starting to believe that the enterprise of tomorrow may not be able to run with yesterday’s talent – and tomorrow’s talent may not be able be rely on yesterday’s ways of working.

HR leaders can play a critical role in how organizations adapt to the changes driven by generative AI. These leaders can be at the helm of navigating these challenges, redesigning work and operating models to shepherd their organizations into the future. Here are a few actions to consider.

• Redesign the work, leading with the operating model. Automating bad processes won’t make them better. Rather than automating the same activities you’ve always done, go back to the drawing board to find a better way forward. Process mining can analyze how work is done and where bottlenecks or other inefficiencies exist. From there, you can re-think and re-engineer how work gets done, identifying tasks where AI or automation can be applied to free up employee time for higher value tasks where their touch is critical. For example, IBM’s HR team re-examined the highly manual and data-intensive quarterly promotions process, applying a custom watsonx Orchestrate solution to automate data gathering and thereby empowering human staff to devote more time to high-value tasks.

• Invest in talent as much as technology, preparing the workforce for AI and other technology disruption. This is a pivotal moment for HR leaders to step up to help define the organization’s transformation strategy and how people—and AI—will combine to deliver it. HR leaders will drive workforce planning, design and strategy like defining higher-value work, identifying the critical roles and skills of the future and managing hiring, shifting people into new roles, retention and more. That can include reviewing roles, identifying and eliminating repetitive tasks that can be handled by AI, merging roles to create new roles, expanding roles to include tasks like applying or managing AI tools, and creating targeted skill development for the higher-level tasks driven by people.

• Put skills at the center of workforce strategy—for today and for tomorrow. Leaders should be thinking about how to increase the overall technical acumen of the workforce. That can serve as a broad foundation upon which employees build new skills, such as how to work creatively and responsibly with AI. That doesn’t mean every employee will have to learn how to code–but most will have to familiarize themselves with new AI solutions. It’s very important for employees to have a basic understanding of AI and its capabilities so they can be both critical thinkers and users of the technology. Everyone should be empowered to ask questions about models’ training data, how it came to its predictions, potential biases and more. Technology can help with skills and career development too. Interactive career roadmaps with dynamic prompts can help employees see what’s expected for them to progress. At Delta Airlines, IBM Consulting implemented a skills foundation and a talent platform that enabled their IT workforce to upskill into critical new technologies. The future pipeline of talent is an important consideration too. The global AI skills gap is an urgent need facing many companies today across industries, and this will require strategic investments.

• Give jobs more meaning by putting the employee in the driver’s seat. AI has the potential to transform the employee experience. It can automate repetitive tasks, letting people focus on what they are passionate about, freeing up their time for skills development or work-life balance, and potentially create exciting new job roles and career paths. It’s important to engage employees in this process. For example, give teams a forum to recommend tasks that could be automated to make their jobs easier and more fulfilling, leveraging digital channels for a continuous and open feedback loop. This kind of openness to feedback and company-wide growth mindset can also help develop your next generation of leaders. Cultivate an environment where leaders at all levels are encouraged to bring new ideas and creatively apply technology within their roles.

We’re at a pivotal point in the world of work and there’s a massive opportunity in front of HR leaders, but there are risks as well. As businesses further embrace AI, successful change will only come if organizations—by way of HR leaders—prioritize a new approach to talent and operating models where people and technology come together to boost productivity and drive business value.