The economics of enterprise transformation are pushing finance and human resources into much closer alignment as companies decide where artificial intelligence fits, where people create the most value and how productivity gains should be reinvested.
At IBM Corp., that convergence is creating what SVP and CFO Jim Kavanaugh (pictured, left) calls a new discipline of “workforce economics,” bringing financial strategy and human capital decisions together as AI changes workflows and operating models. It also puts the chief financial officer and chief human resources officer at the center of decisions once handled independently.
“Today, the economics of business, technology is forcing the convergence … of the human capital strategy and the financial strategy,” Kavanaugh said.
Kavanaugh and Nickle LaMoreaux (right), senior vice president and chief human resources officer of IBM, spoke with theCUBE Research’s John Furrier as part of IBM’s “Transformation Edge” interview series, an exclusive broadcast on theCUBE, SiliconANGLE Media’s livestreaming studio. They discussed how AI is reshaping C-suite collaboration, workforce planning and the economics of enterprise performance. (* Disclosure below.)
Workforce economics brings finance and human capital together
Five years ago, the boundaries between the CFO and CHRO were clearer, according to Kavanaugh. Finance focused on controllership, risk, capital allocation and budgets, while human resources concentrated on organizational design, skills, compensation and culture. AI is erasing much of that separation.
Decisions about workforce capacity increasingly involve questions about whether work belongs with humans, AI or some combination of the two. Hiring and reskilling choices also intersect with the cost of technology, while productivity raises another question: Does new capacity flow to the bottom line or get reinvested in growth and people?
“I call it workforce economics,” Kavanaugh said. “It is strategy, business model, financial model, human capital, culture all coming together.”
IBM approaches productivity as a source of investment flexibility rather than simply a cost-cutting mechanism. The company has generated $4.5 billion in productivity over the past three years and is on track to reach $5.5 billion in 2026, according to Kavanaugh, creating capacity to reinvest in areas designed to drive growth.
That reinvestment extends directly to employees. Companies can no longer rely on human capital systems built around annual cycles when skills requirements are shifting much faster, according to LaMoreaux.
“We pay and reward people for skill development,” she said. “I would argue your business results are what you did for me yesterday. Your skills are what you’ll do for me tomorrow.”
The approach requires finance and HR to work together earlier in the process. Rather than bringing different functions together once execution begins, IBM is trying to break down silos as strategy is formed.
“I think what we’ve done at IBM is we’ve broken down those silos at the C-suite level, because if you break those down when you’re setting the strategy, setting the direction, then it becomes very easy for the rest of the organization to follow that team sport model,” LaMoreaux added.
Client Zero shifts the focus from individual tasks to workflows
IBM’s Client Zero approach provides a practical example of that strategy. Instead of treating AI primarily as a tool for improving individual productivity, the company has focused on redesigning enterprise workflows where technology and employees work together.
“We found that the most value capture was in doing it at the workflow level, thinking about enterprise-wide workflows where agents were working alongside human talent, whether it was procurement or finance or HR,” LaMoreaux said.
One example involves IBM’s shift away from traditional vertically organized shared services. The company found 364 interactions across organizational domains were required to move an order through to cash, creating fragmented workflows and technology architectures, according to Kavanaugh.
The company began redesigning workflows such as quote to cash, hire to exit and record to report. The changes produced “60% productivity, 75% cycle time velocity improvement and 60% cash conversion cycle improvement,” Kavanaugh explained.
The technology was only part of the transition. Employees needed clarity about how jobs would change, which skills would matter and where people would fit as workflows were redesigned.
“Don’t try to sugarcoat what’s happening, how the work is changing,” LaMoreaux said. “Be clear about what you’re trying to deliver, but just make sure that that transparency and communication is there.”
That transparency becomes increasingly important as companies determine where agentic AI actually belongs. LaMoreaux cautioned against starting with the technology itself rather than the business problem.
“We try to keep it at this very simplistic level,” she said. “What do we want technology to do? And what do we want humans to do?”
The answer increasingly requires CFOs and CHROs to make those decisions together, connecting the economics of AI with the workforce needed to turn productivity into sustained enterprise performance.
Here’s the complete video interview, part of SiliconANGLE’s and theCUBE’s coverage of IBM’s “Transformation Edge” interview series:
(* Disclosure: TheCUBE is a paid media partner for IBM’s “Transformation Edge” interview series. Neither IBM, the sponsor of theCUBE’s event coverage, nor other sponsors have editorial control over content on theCUBE or SiliconANGLE.)
