Evolving teams and skills: The human infrastructure behind the AI revolution

Evolving teams and skills: The human infrastructure behind the AI revolution

A collaboration between The CEO Institute and Claire de Carteret, Managing Director APAC, Gallup

The next skills crisis will not be caused by people being unable to learn how to use artificial intelligence. It will be caused by organisations asking already depleted people to learn, adapt and lead at greater speed, without rebuilding the hope, clarity and managerial capacity that make change possible.

Australia is approaching that point now.

At The CEO Institute’s Connect: Unlocking Productivity, Claire de Carteret, Gallup’s Managing Director APAC, began her presentation by asking every leader in the room to imagine their life as a ladder. The top represented the best possible life they could imagine and the bottom the worst. Where were they standing today? Where did they expect to be standing in five years?

Gallup uses these questions to assess whether people are thriving, struggling or suffering. The measure captures something traditional economic and workforce indicators often miss: whether people believe their future will be better than their present.

Australia remains one of the strongest-performing countries in the world on life evaluation. 55% of Australians are classified as thriving. Yet that figure has fallen to a decade low. Claire described what is happening as a “thriving recession”. The country continues to look prosperous from the outside, while confidence in the future is gradually weakening underneath.

That should concern every CEO and board because prosperity, productivity and human flourishing move together.

Australia’s productivity problem has a human dimension

Australia’s 20-year average annual growth in GDP per hour worked has fallen from approximately 1.8% to 0.8%. Longer-term labour productivity growth has slowed even more sharply. Australians are collectively working more while producing less value for each hour worked.

At the same time, the proportion of people who believe their lives are progressing is declining.

These should not be treated as separate economic and social stories. They are connected signals from the same system. A workforce that feels less confident, more stressed and less connected to its work will struggle to absorb continuous transformation, apply judgement and produce sustained productivity growth.

Most organisations closely manage the financial economy of the business. They measure revenue, margin, utilisation, cost, capital expenditure and return on investment. Far fewer understand the emotional economy operating inside their workforce.

Yet the emotional economy shapes how people interpret every strategic decision. It determines whether employees approach change with curiosity or fear, whether managers translate strategy with conviction or exhaustion, and whether teams contribute discretionary effort or retreat into the minimum required of them.

This is one of the largest blind spots in modern leadership. A transformation plan may be commercially rational, technically robust and carefully sequenced. Employees will still experience it emotionally. They will ask whether they remain valuable, whether their job is safe, whether they can master what is coming and whether the organisation has a credible future in which they have a place.

When those questions remain unanswered, resistance should not surprise us.

A workforce can stay and still leave

Australia and New Zealand remain among the world’s stronger labour markets, but the underlying workforce signals are deteriorating.

Employee engagement across the region has fallen to 21%, only marginally above the global figure of 20%. Another 66% of employees are not engaged and 13% are actively disengaged. Younger workers have experienced one of the sharpest declines, while the engagement advantage traditionally held by managers is also shrinking.

At the same time, confidence in the employment market has fallen dramatically. Sixty% of employees still believe it is a good time to find a job, but that result is 12 percentage points lower than the previous year, one of the steepest declines recorded globally.

This creates a dangerous organisational paradox. Employees may remain in their roles because they feel less confident about finding another one, not because they feel committed to their current employer.

Low turnover can therefore create a false sense of security. A stable headcount may conceal a workforce that has emotionally withdrawn. People continue attending meetings, completing tasks and meeting the basic requirements of their roles, while becoming increasingly ambivalent about the organisation’s success.

The online language of “quiet quitting”, “bare minimum Mondays” and “job hugging” can sound superficial. The behaviour beneath it is not. It reflects a growing number of employees who are present contractually but absent emotionally.

For boards, retention alone is no longer a reliable indicator of workforce health.

The workforce is being asked to transform while under strain

Almost half of employees across Australia and New Zealand, 49%, report experiencing stress for much of the previous day, compared with 40% globally.

The pressure is concentrated in several of the groups most critical to organisational transformation. Daily stress rises to 58% among employees under 35 and 51% among managers.

This matters because AI transformation depends on human energy, experimentation, judgement and trust. Yet organisations are introducing new technologies into workplaces where many people are already operating close to their emotional capacity.

Among employees working in organisations that have implemented AI, only 12% strongly agree that the technology has transformed how work gets done. Evidence presented during Claire’s session also indicated that 95% of organisations have yet to see a measurable impact on profit.

The technology is moving faster than organisations can redesign work around it.

Many businesses have concentrated on acquiring tools, distributing licences, running pilots and establishing policies. Far fewer have reconsidered roles, workflows, decision rights, measures of performance and the day-to-day experience of work.

The skills gap is therefore larger than technical AI fluency. Employees need to understand how to use new tools, but leaders must develop the capability to redesign work so those tools can create value.

That requires judgement, prioritisation, coaching, communication and the ability to distinguish between work that should be automated, work that should disappear and work where human contribution becomes even more valuable.

AI transformation is increasingly a management capability.

Managers were the original prompt engineers

Claire offered one of the most useful reframes of the discussion: people managers were the original prompt engineers.

Long before generative AI entered the workplace, effective managers were prompting better performance. They clarified expectations, ensured people had the resources required to succeed, recognised strong work, listened to ideas, encouraged development and connected individual contribution with a larger purpose.

Gallup’s Q12 research identifies the recurring conditions found in consistently high-performing teams. People perform better when they understand what is expected of them, can use their strengths, believe their contribution matters, trust the quality of the people around them and have genuine opportunities to learn and grow.

These conditions remain remarkably stable even as technology changes. In an increasingly complex workplace, they become more important, not less.

Yet the organisational layer responsible for creating those conditions is under growing pressure. Since 2022, global manager engagement has fallen by nine percentage points, accounting for much of the broader decline in employee engagement. Only one in four managers strongly believes they are equipped to be effective in their role.

The reason is visible inside almost every business. Managers are expected to deliver their own operational outcomes, manage performance, demonstrate care, translate strategy, resolve conflict, protect culture and absorb pressure from above. They must now also lead the adoption of AI and help employees navigate uncertainty about what the technology means for their roles.

Many are attempting to do this while carrying layers of administration, reporting and internal meetings that leave little time for the work only a manager can perform.

Sending these managers to another isolated leadership programme will not solve the problem. CEOs need to redesign the role itself.

Gallup’s research points to a deceptively simple practice: one meaningful conversation each week between a manager and every direct report. These conversations create clarity, surface barriers, support development and help people understand how their work connects with the organisation’s future.

Making space for them may require eliminating low-value reporting, reducing unnecessary meetings, simplifying governance and reconsidering spans of control. It also requires organisations to treat management as a profession, rather than the default promotion offered to the longest-serving or technically strongest individual contributor.

Hope is an organisational capability

Gallup’s research into the needs of followers identifies four central expectations of leaders: hope, trust, stability and compassion. Hope is the strongest.

Hope is not vague optimism or an insistence that employees remain positive. It is the belief that the future can improve and that there is a credible path from the present to that future.

This makes hope a practical leadership and productivity capability.

Employees need leaders to explain where the organisation is going, why that destination matters, what will change, what will remain stable and how their contribution will help the organisation get there. Strategy must be repeated frequently enough to become part of the organisation’s shared language, rather than something presented once at an annual conference.

A future of work plan becomes meaningful when employees can see themselves within it. Without that connection, transformation remains something being done to them.

This is where evolving teams and evolving skills intersect. Organisations need technical capabilities, but they also need people who are willing to move from observing change to exploring it.

Most employees are not active advocates for transformation or determined opponents of it. They are observers. They are watching leadership, assessing whether the plan is credible and waiting to understand what the change will mean for them.

In the absence of clarity, fear will fill the space. Agitators and resisters will shape the narrative. When leaders provide direction, guardrails and trust, observers can become explorers. They begin to experiment, learn and contribute to the change rather than protect themselves from it.

The next productivity advantage

The next productivity frontier will belong to organisations that treat human flourishing as an operating condition rather than a peripheral wellbeing initiative.

These organisations will measure engagement honestly instead of confusing it with employee satisfaction or advocacy. They will examine what people need to perform at their best, not simply whether they would recommend the organisation to others.

They will look beneath retention statistics and recognise that people can remain employed while emotionally withdrawing. They will invest in managers as the critical link between enterprise strategy and the daily experience of work.

They will also redesign work before expecting AI to transform it. They will decide which activities should stop, which can be automated, where human judgement creates the greatest value and what new capabilities teams will need.

The objective should not be to make people work faster inside the same system. It should be to build a better system.

Across a working life, a person may spend approximately 81,000 hours at work. Those hours can drain human capacity or build it. They can leave people feeling less confident, more anxious and less hopeful, or they can provide meaning, development, contribution and connection.

The organisations that win the next phase of the productivity race will understand that distinction. Their advantage will come from leaders who can combine technological capability with humanity, evolve skills without eroding confidence and create teams that believe tomorrow can be better than today.

The question for CEOs is not whether people can adapt to AI. It is whether their organisations are creating the conditions that make adaptation, performance and human flourishing possible.