If you’ve a people problem, you’ll have an AI problem

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“I know I need to do something about AI”.

I find these words reverberating around the corridors within the world of work quite a lot. From the discovery calls between the Technology vendor and enterprise prospect, to the 121 meetings between the CEO and their HR or IT leader.

Technology has moved rapidly up the curve. Organisational systems thinking not so much. And that spells danger for the deployment of intelligent AI into our SMEs.

When it comes to cultural infrastructure, we have advantages to utilise. As previously discussed here, the resourcing challenge is an additive one, given we didn’t have the capability beforehand. And a recent study has once again confirmed that the SME sector retains a structural advantage to build from, as shown by employees working there are:

• More optimistic about their career

• More satisfied in their role

• Experiencing less-pronounced negative sentiment change.

• Enjoying their job more

• Less burned-out

• Less eager to quit.

• Rating their managers more highly

• Feel more belonging.

But, as I’ve stated before, that’s only part of the story.

The important subplot is not to conflate happiness (where so many SME HR agendas start and end) with productive outcomes. Because while happiness is a powerful ingredient, it’s not the only thing that matters. And taken with this, there’s evidence of a growing, latent desire among SME employees, not just to feel good, but to learn, to be challenged, and to do work that matters. The new employment deal is alive and kicking.

And so, in mid-2025, the SMEs best placed to thrive in the AI era are those enabling their workforce to excel, within the right organisational system:

“Breaking down silos, fostering collaboration and ensuring the entire organization works toward common goals.”

No SME running an outdated organisational playbook will reap the benefits of a digital transformation, no matter how happy the survey concludes their people may be, or how much the digital budget is.

We need sound foundations for optimum success.   

The Foundations for Success

So, what does this look like? As our world is now some 4 decades into an era of market complexity, you’d like to think this is more widely distributed. But it’s not.

Through a combination of addiction to old management fads and an irritating network of leadership and cultural snake oil salesmen, we have work to do.

Whilst arguably we are working it through, patterns reflecting successful SME cultural infrastructure do exist, and they contain the following:  

• Recognising value creation is at the periphery, not the centre – Decentralising your organisation over and over and minimising hierarchal control. Technology can’t drive innovation or responsiveness if teams aren’t empowered to act on insights or customer needs.

Takeaway - AI and digital tools amplify edge teams, but only if they have autonomy. Rigid job descriptions and siloed thinking are the enemy of progress.

• Social Structure & Trust - Building a network of relationships, teams, trust, and collaboration across the organisation. Technology, such as Collaboration tools, AI-driven knowledge sharing, and digital platforms are ineffective if people don’t trust each other or aren’t willing to share and learn together.

Takeaway - Bin the stack ranking, annual appraisal systems and the parent : child values statement.

• Openness to experimentation - Fostering a culture were trying new things, learning from failure, and iterating are all encouraged. Technology’s biggest benefits, (namely automation, data-driven insights, process innovation), all require teams to experiment and adapt.

Takeaway - If experimentation is stifled, technology adoption stalls. Cleanse the punitive response to mistakes or rewarding conformity over curiosity.

• Distributed decision-making - Pushing decisions to where the knowledge and mastery resides, at the front lines, not at the top. Technology, in the shape of AI and analytics can surface insights, but if decisions are deferred and still centralised, the organisation can’t respond quickly or fully leverage tech-driven opportunities.

Takeaway - With AI closing the gap between ideation and execution, there is so much value left on the table where the culture destroys it, especially the hierarchical approval chains for simple asks.

• Purpose-Driven Leadership - Leaders articulating clear values and purpose, allowing teams to align around client and tech initiatives with a shared mission. Technology investments become fragmented or misaligned if not anchored in a clear purpose.

Takeaway - Employees need to see how their digital tools and AI connect to what matters most. What are we solving? Not for the sake of the next shiny toy dropped into a dysfunctional environment. That ultimately risks creating even more complexity and deepens employee frustration & cynicism.

Get this right and when existing cultural foundations are strong, Technology then becomes a powerful force for productivity, innovation, and growth.

Get it wrong or fail to critically look inwards and you’ve created one of the reasons for the 70% failure rate in the transformation and change industry.

What Should SME Leaders Do Next?

When confronted with the question, “I know I need to do something about AI,” the answer is not to rush into technology purchases or delegate the issue to IT to find a solution.

The real work begins with appraising your organisational system because your biggest barrier is not technical but cultural. To make AI a true enabler, the leader’s role is to:

• Challenge Outdated Thinking - Move beyond seeing AI as a plug-and-play solution. It’s true value requires a fundamental shift in mindset, embracing AI as a catalyst for learning, adaptation, and value creation, not just efficiency. This means the Executive Team must question old assumptions about control, hierarchy, and risk, and being open to new ways of working where data, experimentation, and cross-functional collaboration are the norm.

Build out in the open and involve the wider team. End the cascading diktats!

•  Create Space for Experimentation - A successful AI journey starts with creating “safe spaces” where teams can try, fail, learn, and iterate without fear of blame. Leaders should encourage pilot projects, internal hackathons, or proof-of-concept initiatives, celebrating lessons learned from both successes and failures. This experimentation is the cultural engine that fuels AI’s potential and helps teams build confidence with new tools and approaches.

Can’t fit it in? Easy. Eliminate many of your existing time-wasting meeting rituals as a public sign of positive intent.

• Feed the Desire for AI Learning - AI readiness is built on curiosity and skill development. Leaders should invest in ongoing training, knowledge sharing, and open dialogue about AI’s opportunities and challenges. This could mean hosting AI awareness sessions, sharing relevant case studies, and supporting employees to attend workshops or online courses.

 By making learning a visible priority, leaders show that AI is everyone’s business, not just a technical upgrade, but a shared journey.

•  Look Inward and Build Strong Foundations - Before any major AI initiative, leaders must assess whether the organisation’s data, decision-making processes, and team structures are fit for purpose.

Is there trust?

Are teams empowered to act on insights?

Is data managed well and accessible?

Technology will only amplify what already exists, so if silos, mistrust, or rigid hierarchies persist, AI will magnify those problems, not solve them.

Finally, learning will likely throw up some unintended consequences about the nature of our job, what we value and prioritise and maybe even how you charge for it. We have got to be ready for this and be vulnerable to playing out these issues in a very public and manner.

Final Thoughts: Intelligence Is the Real Prize

I can see the pressure to act. And for SME leaders, this is a moment of real opportunity, but a moment of clarity is required because one truth stands out:

“The cultural and organisational foundations you build will make or break your AI transformation.”

The fear is that businesses rush to adopt AI as a proverbial “shovel”. A tool for digging faster, automating tasks, or squeezing out incremental productivity. But in today’s uncertain and fast-moving, complex environment, the real differentiator isn’t speed, it’s direction.

For AI’s true value lies in its ability to help us build “maps” for the future. Modern SMEs must see data not simply as a record of what’s happened, but as the raw material for insight, foresight, and strategic action. When your cultural foundations support curiosity, learning, and open collaboration, AI becomes a “treasure map”, surfacing patterns, weak signals, and new possibilities that change the very basis of competition.

But if your culture is rigid, siloed, or focused only on efficiency, even the best technology will simply automate yesterday’s habits. Without a foundation of trust, experimentation, and data-driven curiosity, AI can’t help you see what’s possible. It can only help you do more of what you already do.

That’s why the most important investment you can make isn’t just in AI itself, but in the foundations that allow it to flourish: strong data practices, a culture of continuous learning, and leaders that encourages both exploration and alignment.

With these in place, your organisation won’t just keep pace, it will chart your own course, using data as your map for ongoing progress and sustainable success.

What are you waiting for?

Overwhelmed by AI Transformation and other workplace complexity?

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• Identify your biggest leadership challenge.

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About the Author

Barry Flack is an award-winning Fractional & Interm HR Leader who wants to use this platform to ensure that as many SMEs as possible know how to make great workplaces!

Learn more about Barry's services by visiting his website.