Workforce economics emerges as AI reshapes the C-suite

The economics of enterprise transformation is prompting finance and human resources to work more closely together as companies determine the role of artificial intelligence, where human talent contributes the most value, and how productivity gains should be reinvested, according to Jim Kavanaugh, SVP and CFO of IBM Corp. This convergence creates a new discipline of "workforce economics," merging financial strategy with human capital decisions as AI reshapes workflows and operating models.

Kavanaugh and Nickle LaMoreaux, IBM's senior vice president and chief human resources officer, discussed this transformation on IBM's "Transformation Edge" interview series.

Five years ago, the boundaries between the CFO and CHRO were clearer, with finance focusing on controllership, risk, capital allocation, and budgets, while HR concentrated on organizational design, skills, compensation, and culture. AI is erasing this separation, with decisions about workforce capacity now involving questions about assigning tasks to humans, AI, or a combination of both.

These choices also intersect with hiring, reskilling, technology costs, and the impact of productivity gains on the bottom line or reinvestment in growth and people.

IBM views productivity as an investment rather than a cost-cutting mechanism, having generated $4.5 billion in productivity over three years, with a target of $5.5 billion by 2026. This approach requires finance and HR to collaborate earlier in the process, breaking down silos in C-suite decision-making. IBM's Client Zero approach redesigns enterprise workflows where technology and employees collaborate, leading to significant productivity gains and cycle time improvements.

Transparency and clear communication are crucial as companies determine the role of agentic AI, with CFOs and CHROs making joint decisions to connect AI's economics with the workforce needed for sustained enterprise performance.