Joe Fuller: Electric vehicles (EVs) constitute a bright spot in an otherwise flat 2023 global auto market. But the transition to EVs is dauntingly complex. Among the biggest challenges is transforming the workforce. The shift to electric vehicles requires redesigning the job of virtually every employee. Assembly-line workers no longer need to integrate complex drive trains; the process requires fewer production steps with different types of equipment, requiring new skills for both frontline workers and their colleagues in maintenance; and product development and engineering teams require deep expertise in areas like software and digitalization, skills that were peripheral in the internal combustion era. Success depends on reskilling employees, attracting new types of talent, and fostering a stable, collaborative workplace. The stakes could not be any higher for human resource leaders.

Welcome to the Managing the Future of Work podcast from Harvard Business School. I’m your host, Harvard Business School professor and non-resident senior fellow at the American Enterprise Institute, Joe Fuller. My guest today is Hanna Fager, chief people officer at Volvo Cars. The company, which operates in more than 30 countries, has an ambitious target of an all-EV lineup by 2030. We’ll talk about its talent management strategy and HR’s evolving role. We’ll also discuss how Volvo Cars seeks to align its day-to-day operations with a corporate culture grounded in human rights, ethics, and trust. One expression of that culture is a generous parental leave benefit. We’ll consider the return on that investment, as well as the company’s broad commitment to diversity. Welcome to the podcast, Hanna.

Hanna Fager: Thank you very much. Nice to be here.

Fuller: It would be great for you to just introduce yourself a little bit to our listeners and talk about your path from across your career ultimately ending up in the C-suite at Volvo Cars.

Fager: I grew up in Gothenburg here in Sweden. In my last period of university studies, I came in contact with Volvo Cars when I was writing my thesis work. And what struck me was the openness, the culture. So when I got the opportunity to stay here at Volvo Cars as a summer intern, I took that opportunity. And I must say, when I sit here about 20 years later, it’s still what keeps me in the company is the people, it’s the competence, it’s the values that we take a decision on and that we contribute to it every day. So I have done many different things within the company, but I’ve been within the HR profession all the time. I work with company transformation, building up new organizations, starting up and giving the prerequisites to go to China after the Geely ownership came in. And I was part of listing the company, and now have full focus on our transformation into the future.

Fuller: I'm sure our listeners who are academics or students are inspired that your undergraduate thesis led to your job. What was the thesis about?

Fager: It was about competence transfer from the first XC 90 project into the next project, how people transferred competence from one core project into another. And my conclusion was that a lot stayed with the people—white books were written, but a lot was actually moving people with the right competence from project to project. And my recommendations were to make it more in a structured way and not be so dependent on people. But I think still that we are very dependent on people, and that is a strength within the company.

Fuller: Well that's a great theme for today's HR function, where how you keep what we call “tacit” or “implicit” knowledge in your company—while preparing people for their roles for the future—as skills requirements change and technology changes. How have you seen the issues that HR functions—and particularly as part of a global group now in Volvo Cars—how have the issues changed?

Fager: I think for me the biggest change is actually that we are much more contributing to global growth. It’s also so much more about develop and challenge our organization. And that really requires an in-depth understanding about the business. In the past, I think we did a lot of one-to-one coaching to senior leaders. It was a lot about team development, while now I see the last five years, it has been a lot about competence—understanding both how we upscale, reskill, how we attract talent and to a more analytic degree than we have been able to do before. We also have a big service leg, where we try to be more efficient in terms of how we actually provide leaders with service and also produce answers on quick questions on more complex issues. So I think it’s much more strategic input and impact that we are driving today within the HR function.

Fuller: Hanna, it's interesting that you talk about providing service to other executives to advise them. Could you say just a little bit more about that? I haven't heard that description from some of your colleagues in HR functions and other companies.

Fager: We provide them with framework, policies, working procedures, and also making sure that we have the insights that can guide them and their decisions. I think in the past we had a tendency to take over certain part of the leadership responsibility when it came to the people leadership. Today I think modern leaders, they are ready to take both the people leadership and also the technical leadership. We have over 3000 leaders, and of course, we would like them to lead in a way that we have designed within Volvo Cars as the best fit for leadership for the purpose of our company, according to our values and the culture that we would like to create within the company. And we do that by global processes, by different type of procedures that we make sure that leaders get trained in and that they also then can everyday use when they are leading their people.

Fuller: Certainly, one thing we’ve heard some other executives talk about is the notion of, really, now every manager has to become an HR leader. And specifically, they need to have a greater sensitivity on the issue of building trust with colleagues, trust in the company, trust in the company’s direction, trust in the integrity of management decisions. How do you view the issue of trust, and how does that reflect itself in your approach to these global processes you mentioned?

Fager: First I think leadership is very much about inspire people to walk in a certain direction and to stand for a certain set of values. And to be able to get people to follow you, you need to have people's trust. And from time-to-time trust can be broken due to that you behave in a certain way or the person doesn’t feel comfortable the way that I'm taking action or a decision, for example. So I think just to dare to talk to people upfront and be honest and also be humble enough to say that something didn't feel right or that I see that you're not fully trusting me in those occasions. What can I do to make you feel different? So I think that that is something that makes people feel respected and I think all of us would like to go to work and belong to a team and a leader where we all feel respected because we have so much more to give.

Fuller: Like a lot of companies in the auto industry, you are engaged in a type of very bold transformation, moving your entire mix of models to electric vehicles, so-called EVs, by 2030. That’s bringing a lot of change to the company. And, of course, that draws on that reservoir of trust as you make that transformation. Talk a little bit about how you view, from a human assets point of view, this strategic transformation of Volvo Cars to all EVs. And what kind of issues does that bring up in terms of reskilling? What types of communications burden does it place on you? How do you change and modify your approach to talent management in light of such a sweeping transformation?

Fager: It starts with having very engaged and strong leaders who are good at articulating where the company is going and what competence is needed to get there, what is possible to train, and what is possible and to upscale, and how do we do that together? We also changed the organizational structure, which means meant that everything that was straight connected to combustion engines, we put into a separate part. And then we actually put that into an external company, which means that what we have in our company today is fully fit for the purpose of being a fully electric company by 2030. It’s still a lot of training going on to make sure that we are there. And bringing in new competence within that area, in a company where we have a very strong culture of collaboration, means that all recruitment we do comes in with an ability to collaborate with others. And we know that over 70 percent of the learning comes from the day-to-day work. Learning is not sitting by a desk; we all know most comes from the interaction we have and when we interact with other people. So a lot of people have developed with our company, and we have had that as part of our culture since long [ago], because we’re a company where people tend to stay quite long. So they need to develop with us, and we need to develop with them, because we don’t become stronger than the competence we have inside the company.

Fuller: How are you managing that skills transformation and balancing the need to bring the incumbent workforce along with hiring talent that has those skills but maybe no prior experience in the automotive industry and certainly not at Volvo?

Fager: So I think the open dialogue within the company is very important to understand—what do I need to develop myself within to be able to be employable also in the future? And here, I think within certain parts of the organization, where the transformation has been very active and actually moving quite fast, is where we have seen an appetite to learn new things faster. And we have curiosity being one part of our culture. But, of course, we need to bring in thousands of new people into this company. So onboarding will continue to be a super important area for us to make sure also that the competence we bring in can impact the competence we already have on board. But we have also had formal trainings, of course, in terms of supporting people to learn new skills. But it also connects into a new global footprint, understanding where in the world do we have what competence, because the competence we are looking for also other companies, of course, are looking for. So we took a decision quite early to start to learn from other industries, standout automotive industries, to see both how they are working with learnings but also in terms of where in the world to find competence—people who might be in an area that we are looking for competence, but being in an industry where they have come further than we have done within automotive. And we have been able to attract people from many different types of businesses and industries, and that is really interesting to see what we can learn from that.

Fuller: Hanna, you've spoken about how the company is infusing new capabilities and specifically new technologies in the Volvo Cars in order to make this aggressive transformation. How does that manifest itself within the human resources functions? What tools or technologies are you adopting to digitalize the function, to have better access to more actionable and accurate and recent data for decision making?

Fager: This is a very important area for us where we put a lot of everything right now to actually build the backbone in the right way, making sure that we know what data points we want to be able to get from each individual and by that actually be able to—by the data and the measuring points that we have—abstract that up to become analytics, which means that we actually can already before read in and understand what will happen in the next step. I mean, if we use all the input we get from onboarding surveys, employee engagement surveys, and different data points that we will get along the talent journey, we could foresee what will happen in the next step among our employees, but also to understand what competence we have where. And linking that to performance and reward and those topics, that is very important from an employee point of view. So we are right now building the prerequisites to be more data driven and go also to take the step up to analytics.

Fuller: Are you relying on outside capabilities? Are those tools you're developing on your own? Is it a blend?

Fager: No, we have a platform that we are working with, but we have in-house competencies that are working with that. We are working very tightly between HR and our digital core team in a very good collaboration, making sure that we see the same view. So the one, for example, who is responsible for the performance management process, also then has a product owner that she's teaming up with from Digital Core.

Fuller: Well, we talk a lot about how AI is going to affect work, but I think the prospect of AI playing a huge role in giving companies more visibility into the attitudes of their workers—the motivations of their workers, where our breakdowns and company culture, where our potential emerging skills gaps—has been under investigated, and that AI is going to be a very, very powerful tool for HR leaders in the future.

Fager: It definitely is, and I think it's very important to have the right backbone, to have the right governance. You always have up-to-date data. So I think it requires an effort to really know what you want and how you also maintain all the data and to not go too far. So everything became data driven, because it'll be so cumbersome to maintain it. So you need to find the right balance there, to not only have sort of a gut feeling or a belief, or I mean, we can also now help the organization to take the right decision based on the data that our processes can deliver.

Fuller: How are you working with labor unions, works councils, with your incumbent workers to bring them on this journey? Because certainly in the production functions, building and assembling an electric car is radically different and requires quite different skills and often fewer workers than building an internal combustion car.

Fager: On the factory side, I must say we are very helped by the very solid structure we have. I think a lot comes from the values of being a Swedish company. That means that we have a union relationship that we take very seriously. We have always aimed for having an open and transparent dialogue and our unions are good representatives for our employees. They are caring a lot about the company, making sure that we both treat people and the company's long-term strategy to life. I think when union relation works the best is actually when we put a problem on the table and ask for their input early enough so they actually can impact it in terms of finding the right solutions. It is challenging and it is very, very cumbersome from time to time. But if we do that right, we have a good strength in the different roles and we to be challenged both as a company and as union representatives. But I think we do it in a good mix and I hope all our union representative feel respected and feel being part of creating the Volvo Cars future.

Fuller: Many large companies, of course are confronting this challenge of reskilling, whether it's because they go undergoing a fundamental transformation in their product technologies is happening in passenger cars or beginning to prepare for further penetration of artificial intelligence in their work processes. How are you approaching the reskilling, specifically? Are you creating programs that happen during the workday, or the ancillary learning resources being used, or are the workers being compensated to learn new skills or just encouraged to learn those new skills? It's a very delicate process and many companies don't really feel they know how to organize it yet.

Fager: What we try to do is always to blend work experience with the new competence that you need to learn. It's the same when we have internship programs, when we have graduate programs. The purpose is never that they should go alongside with someone. They should actually be in the business, have a concrete things that they should do. So we are a company that strongly believes in blended learning, when you learn new theories and actually practice in reality, because we are a very hands-on organization, and that is how you best learn. But now, of course, when we have a lot of new e-learning opportunities, that is something that people can do when they have either a downturn in the business or actually when they have planned for taking learning activity during their work time. But it looks different, depending on what country we are in and what type of both union and support structure we have in the society and for that country.

Fuller: Another major decision that the company made was to bring a lot of software development in-house. That's a very bold move and also a big bet on the HR function's ability to attract and to retain talent in that highly competitive area. Can you talk a little bit about the genesis of that decision and how you've responded as a global HR function to make Volvo Cars an, attractive place for world-class talent in this very in-demand field?

Fager: If I just reflect back, like five to seven years, and we talked about the shift from hardware to software, I think that is a shift that we really have done. If we look into the new features in our products and also into how we would like to reach customers in the future, we see that software competence is the key to get there and also to have shorter loops in terms of making sure that we can make improvements and continue to develop faster. We get faster cycles if we own that competence, ourselves. And that has been and is of course a very interesting challenge to bring on, because you get in people, leaders, employees from other industries coming—from small startup companies into a well-established global company for example. So it's a very, very diverse workforce that we get into our company and not only to blend with the great people we already have within Volvo Cars but also coming with different requirements and different expectations of us as a company. What we now are looking into, from an HR and people experience point of view, is where should we have one set of standards of doing things within our company, and where will we actually diversify that, in terms of working with succession, working with development, and also working with compensation, for example. We need to be able to diversify the offer we have as an employer to a greater extent and we have today, for example. We also see as a strength there is that we have a leadership that is very up-to-date, that is coming in with new ways of working, where we try to tap in and look into, okay, what is the best practice?

Fuller: You talked about how, in different jurisdictions, you are approaching reskilling and the approach to infusing new skills in the company differently based on differences and perhaps national policies, employment law, regulation. What are the big public policy issues that are affecting your decision making and that you keep track of?

Fager: I think something that is affecting us a lot—and also is a change in the HR role—is of course, everything when it comes to sustainability, when it comes to human rights, ethics, and those type of topics, but also the data privacy, data security, and things like that, because we keep a lot of data, of course. We want to be leading in those areas that we think are important for us. One area that we are looking into is, for example, the pay structures and making sure that we live up to the standard that we have set as a company. Of course, that is, as a minimum, living up to the different formal requirements being there. But having new legislations on its way in, it's important for us to keep up to date and making sure that we are in forefront of that. It's about training, but it's also about assessing.

Fuller: Another issue, of course, that the HR professionals are wrestling with worldwide is a different definition of diversity, which, of course, involves diversity in terms of gender roles, racial diversity, creating more equal opportunity for people. How are you thinking about that in the context of this transformation, when you’re also bringing more diversity to the skills base, to prepare for full electrification of the fleet, for being more vertically integrated in software? Tell me about your approach to that, especially given the fact that you’re running a global operation with a substantial presence in Europe and China and in the United States.

Fager: If I look to the customer base that we have and the people we want and aim to have in our ecosystem, diversity is key to get there. And looking at our technical transformation, our commercial transformation, nothing would be possible if we couldn't attract the right talents and to open—I mean going from a small pond of fishing in to open the whole ocean, we need to be an employer that can attract people from all types of diversity. Our focus is to create the culture of inclusion and belonging. And we will by that also be able to get all the benefits of diversity. So I think it is key for us to be a company that welcome differences and we also have that as one of our five leadership competences—that we should be able to lead and attract diversity. But we are a company with very, very clear values, and we start also to take decisions based on those values. And we took a decision to offer a family bond, which for us then is to offer parental leave for all our employees. When we have a diverse set of talents, the culture is what is most important—that all people feel included, that they feel a strong belonging, that they feel that they can contribute on equal terms and that they can be themselves. I mean, we really would like to see the differences also here at Volvo Cars—not only that they on paper come with a diverse background, we also would like to see the differences in the dialogues, in, I mean all the creative talks that we have. So we need innovation and creativity and that comes from the diversity that we are aiming for.

Fuller: Perhaps you could say a little more about the family bond program, because it's quite innovative and kind of a universal commitment to parental leave, and that's something that we see in a lot of cultures. There are policies, but often particularly male workers don't take advantage of the policy. Also, a lot of companies—certainly here in the United States, where there's a very active political debate about parental leave and guaranteeing compassionate leave for various reasons, as well as for welcoming new members of the family—there's quite a lot of discussion about, well, isn’t that terribly expensive? And even that imposition of various views of the need for diversity in the workforce on the independent decision rights of companies? How do you think about the economics of it? How do you think about how it will affect attracting and retention talent? What's your experience with it?

Fager: We are a Swedish company, and we are a very family-friendly company. We want all our employees to spend time with their new family members. We know that it's important for people, and we think also that it is important. So what we do is that we opt people in. We take for granted that you want that you will spend time with your family, new family member. So what we implemented two years ago is that we have at least 24 weeks of paid leave for all our employees that are employed by us. That is revolutionary in many countries, in terms of not being common offered like that. And if I look into the number of requests we get, just like you said now, what does it cost? How much did you invest? I would say that values are the new horsepower. That means that it is hard to predict exactly what it'll cost, but you really get such a strong power out of taking action based on your values. We have today 850 people globally that have taken this benefit outside Sweden, because in Sweden we already have those benefits in place. And if I look into the joy and how that has developed the people within our company who have taken out the parental leave, according to our policy, and the loyalty and the engagement they feel within the company, I think it has been worth it. And it's hard to count on what it costs, actually. I think we all see a very strong benefit and a strong value of having it, and it gives so much in return to us as a company.

Fuller: Hanna, I think when executives hear about the importance of culture, the importance of trust, they embrace it, but they don’t know how to implement it. They don’t know how to make it real, particularly in a global context, where you’re dealing in radically different markets, different cultures, different HR challenges. How are you thinking about the challenge of causing people to not just embrace the idea of culture, but to live it, to model it, to role-model behaviors and values that they want to see new employees, younger employees, embrace—and also to remind long-term employees of what the company cares about.

Fager: What we have done is that we have taken our values, we have taken our culture, and we have set four core competencies that everyone within Volvo Cars both are recruited on, based on that we are assessed on when we do our development talks and where we also have training and development activities. And it's also a definition, it's four definitions for each of the four competencies, understanding a bit how I am then living up to those behaviors. And that is helping all leaders to look at talents from the same base, which I think makes us very strong as a company. And on top of that, what we saw a need for was also a clearer definition for leadership. What is a good leader? What is a Volvo Cars leader characterized by? And there we have now set five leadership competencies, which is also behavioral, because that is when you can start to assess both in recruitment, in development, and when you reward and promote people, because values are very subjective. And here is a way of reducing the subjectivity, and it gives more clarity and it gives more fairness, also, that people know what we are expecting. But what I like with the model that we have in place is that it goes all the way from recruitment, development—and sometimes also when we need to let people go due to that you are not taking action in terms of being in line with our culture, being in line with our values, by actually not living the core competencies or the leadership competencies.

Fuller: You mentioned previously Hanna, that Volvo Cars has enjoyed very high retention of employees over time, that many people make long careers at Volvo. What do you think drove that historically, and what will drive it in the future? Will it be the same types of factors that keep people engaged with the company and wanting to stay? Or is it going to have to change?

Fager: I think people here within Volvo Cars, they come here and they stay here because they are curious, they want to learn new things, and they want to work together with other people. We are a global company, we have operations in 34 countries. We have everything from early design, procurement, R & D, manufacturing, and sales. So, I mean we have the full value chain: a lot of different career opportunities and also, I mean, offering people to work abroad from their home country. So if I look into the people that stay long, which is many, normally what they say to us is the culture, it's my colleagues, and it's the development opportunities that I have had within the company. So I think we see career from a long-term perspective, which means that family bond for us, having people out for 24 weeks, is nothing if we put it into a long-term development point of view. So I would say it's an amazing journey to be part of. And I think that drives also a very high retention.

Fuller: Do you anticipate other—having to add other factors to the formula? Many, many companies believe that younger workers, workers, recent university graduates, others really are seeking something a little different from their employment experience than perhaps their older siblings or even their parents or uncles and aunts.

Fager: I think we have been learning new things from different generations and I think in terms of the appetite to take on more risk assignments and to go into the unknown, which is something that I see a big, big trend of from the generations that are coming into this company. I would say when I look into also the ones that have been with us for long, everyone is very keen to learn new things and also contribute with those learnings into the company.

Fuller: Well, Hanna, given the rate of change that you’ve experienced in your time as a senior leader in global HR for Volvo Cars, I’m sure that you, it’s been a real challenge to keep up. But what are you anticipating having to be ready for in the future? As you look forward, what are the challenges that you think you’re going to have to overcome in the next decade, as you try to complete this very aggressive and ambitious transformation to an all-electric fleet by 2030?

Fager: I think we need to be very quick at adopting new technologies, not only technologies into our products, but I mean now we see AI coming, for example, all those different type of learnings that we can do as a company to be quicker in our internal processes to find the answer to the question we try to solve. Speed will continue to be super important, but most important is that you have a strong strategy in the bottom that you have value—so what actions to take and how to take them. And I also think that to be able to have a diversified employee offer I think is very important because I think we will continue to be a global company, which will be very important also to tap into the different competence groups out in the world. But also because I see that people tend to have different ambitions with life—and by that I think also that the reward offer needs to develop over time. What type of benefits are you interested in? And, I mean, some years ago you had the cafeteria model and so on, but that became too complicated to sustain, I think. But I think we need to look at much more diversified both employee offers and benefit offers.

Fuller: That’s a very interesting thought to begin to end on—that historically we’ve had actually rather restrictive and general policies that affected everyone, but over time they’ve just been overwhelmed by complexity and the uniqueness of individual employees’ needs and the capacity to provide people flexibility and choice within the construct of making sensible economic decisions that help the company prosper and create more opportunities for workers. But that willingness to embrace complexity and customization is a new frontier for HR, and one that might really bestow competitive advantage on companies that learn to master it.

Fager: I agree, definitely. And I think also that something that I see is becoming very important and especially now of the pandemic, is also being in an environment where my values resonate with both the company and my colleagues, and that my day-to-day experience is in line with what is close to my heart. I also see a trend that a lot of people are much more picky on what they spend their time on. So I think time efficiency is important to continue to follow, and also time versus money, and when people take vacation and things like that, I think is something we need to look into what future will tell us there about how we best offer that to our employees.

Fuller: Hanna Fager, Chief People Officer at Volvo Cars. Thank you for joining us on the Managing the Future of Work Podcast and sharing your journey and the company of journey going forward to its transformation.

Fager: Thank you, Joe. It was really pleasant to talk to you.

Fuller: We hope you enjoy the Managing the Future of Work podcast. If you haven’t already, please subscribe and rate the show wherever you get your podcasts. You can find out more about the Managing the Future of Work Project at our website hbs.edu/managingthefutureofwork. While you’re there, sign up for our newsletter.