The End of HR’s Knowledge Monopoly
Knowledge Arbitrage refers to leveraging the difference in what you know vs. what someone else may know and applying that knowledge from where it’s abundant to where it’s scarce to create value. It’s like financial arbitrage, except this time the “currency” is information and know-how (or Subject Matter Expertise in corporate lingo 😉).
Throughout human history, knowledge has been a key competitive differentiator. Taking this one step further, my perspective is that knowledge arbitrage has morphed HR into a standalone function and a profession. As AI is making knowledge and information more readily available, the closing of this arbitrage gap is what’s driving the sentiment that the function may not exist in the next few years.
Before you roll your eyes, let’s take a quick trip back in time and take a look at where knowledge arbitrage has fueled business innovation, because I wasn’t joking when I said that I went all the way back to the 18th century for this. We all know that textile manufacturing was a central part of pre-Civil War industry and the early American economy. But did you know that it all happened because one Brit decided to memorize British mill designs and know-how (which had an emigration ban on it at the time) and bring it to America? I’m not saying that it’s the right way to create a knowledge arbitrage; I just want to point out that this has been happening for a very long time.
We often cite Henry Ford when it comes to modernizing industry and innovating in business. He, too, borrowed concepts from the meatpacking industry to create the moving assembly line for automobile production. In applying the meatpacking industry’s idea of a disassembly line in the auto industry, Ford cut car assembly time from ~12 hours to ~90 minutes.
Examples like this stretch on for miles. From how W. Edwards Deming’s management techniques, which were not loved in the US at the time, created the quality revolution in Japanese manufacturing that we still cite as best practices today; to how global organizations are pursuing knowledge-driven acquisitions (e.g., Chinese firm Midea’s takeover of German robotics company KUKA in 2016); to how startups are bringing concepts and practices from other industries into HR. Knowledge arbitrage has been a powerful tool in driving innovation, so much so that it gave rise to the whole consulting industry.
HR has also long relied on borrowing expertise and best practices from other places. For example, in Talent Acquisition, Employer Branding and Programmatic Job Posting are adapted from Marketing, and in Talent Management, using data analytics to identify high-potential talent (aka the “Moneyball” approach) is adapted from professional sports and finance.
On the other hand, HR exists as a function and profession because of our unique knowledge and exclusive expertise. After all, can we really expect every manager/executive to know how to price jobs, run open enrollment, deal with employee grievances, understand and work with human psychology/behavior at work, and do ALL that without getting into legal hot waters and making sure all the correct paperwork is retained and filed?
Knowledge arbitrage thrives on information asymmetry. However, with the rise of AI, knowledge is more readily available at a quicker pace, rapidly eroding those asymmetries, and possibly driving fear and conversations around whether this profession will continue to exist. For decades, seasoned HR professionals commanded a premium for their hard-won knowledge (and the time and effort it took them to gain that knowledge), and now that entire model is being put under threat by technology because:
The gap between those who have the knowledge and those who don’t is narrowing rapidly due to AI. Between the Internet digitizing all information and Generative AI being able to summarize and synthesize information rapidly, deep knowledge and expertise is available within a few clicks and keystrokes.
Organizations and managers are customizing traditional one-size-fits-all frameworks for their specific use cases instead of relying on HR to introduce rigid frameworks and approaches. When everyone has access to data, frameworks, and case studies, simply knowing something isn’t enough anymore.
AI is automating tasks based on accumulated knowledge. For example, recruiting used to rely on an experienced recruiter’s mental database of what a good resume looked like, what a good interview answer sounded like, and what the must-have skills were for certain roles in the organization. That knowledge is being picked up by AI and executed on a larger scale (the whole accuracy, ethics, etc. conversation on this is a topic for another day)
All of this can feel incredibly threatening to HR professionals. But to say that an entire profession will go away because the knowledge they have held over the years is now available through technology is a bit of a stretch in my opinion.
Unless we are able to run enterprises 100% through technology and AI, we need to have humans as part of the process somewhere. The moment you introduce humans to any equation, you’re also introducing the “mushiness” of what it means to be human (our values, motivations, beliefs, etc.). And when you have a whole collection of that “mushiness”, which may or may not be conflicting with each other, and you are trying to drive various motivations towards a single common goal of creating company value, things get messy.
I’m sure you see where I am going with this: wherever you have people in the equation, you need someone who actually understands people to be able to motivate them to complete tasks and, ideally, do all of that without going against their will.
So, what does this all mean for HR?
For one thing, I think in an era where more knowledge-based tasks, analysis, and information delivery are automated, HR is in a unique position to focus on uniquely human strengths. The AI era could also be when we start to really see the power of human intuition, judgment, and personal skills. Specifically, these are the areas I think we would start to see HR moving towards:
Ethical Governance and Moral Judgement: While AI is great at providing data-driven recommendations, it lacks a moral compass. HR will need to play a critical role in guiding the ethical use of AI and making the tough judgment calls in ambiguous situations. Policy interpretation, exception handling, and value-based decision making are areas where we will continue to see HR professionals being indispensable
Tacit Knowledge and Contextual Insights: Not everything can be codified into AI. You know that gut-feeling or hunch you get sometimes? Part of that is from the tacit knowledge you’ve gained over the years, and it remains a uniquely human strength. The unwritten rules and historical context behind decisions you know can become advantageous in foreseeing implications and reading between the lines in an organization in a way that AI cannot
Emotional Intelligence and Empathy: AI is not quite there yet in being able to connect with us emotionally. In focusing on building trust and rapport, HR serves as the emotional glue in organizations, and this is an area where the human touch is irreplaceable. AI may be able to detect sentiment based on engagement surveys, but connecting 1:1 and getting to the root causes of concerns remains a uniquely human skillset
Creative Problem Solving: When knowledge is commoditized, the premium is on the ability to apply knowledge uniquely and effectively in your context. HR professionals’ ability to connect the dots across an organization, counsel executive teams, and bring ideas from outside of HR into the function will be the new frontier of HR’s value in the enterprise
So yes, the future of HR will look different, but it will also look more human. I’m not sure about you, but after decades of automating, looking for efficiencies, and figuring out how to measure people as we would with machines, I am kind of looking forward to an era where technology is going to allow us to refocus on what it means to be humans at work again.