Workday’s CEO on driving growth and transformation in the age of AI

In an old-school start-up success story, Workday was reportedly founded in 2005 in a Californian diner, presumably on the back of a napkin. The concept was a cloud-based software solution for human capital and financial management that would disrupt the market. Having sat on the board since 2018, Carl Eschenbach joined Workday in December of 2022 to serve as Co-CEO alongside cofounder Aneel Bhusri before becoming sole CEO in early 2024. During Carl’s leadership, the company has marked some significant milestones, such as hitting 10,000 customers globally in 2023, and debuting as a Fortune 500 company last year. In this episode of the Inside the Strategy Room podcast, McKinsey Senior Partner and North America Chair Eric Kutcher talks to Carl about taking a ‘coexistence’ view of the role of AI in the workforce as a source of productivity, building an endurable company with a growth mindset culture, and the responsibility of leaders to service the success of others.

This is an edited and abbreviated transcript of their conversation. For more discussions on the strategy issues that matter, follow the series on your preferred podcast platform.

Eric Kutcher: Let’s start with the macro view. We live in a world with declining birth rates, near full employment, and real labor shortages. We need a renewed source of productivity, and some argue AI is that source. How is AI already impacting business, and what impact do you see in the coming years?

Carl Eschenbach: If you go back and look at all the other big tectonic shifts that we’ve experienced in our lifetimes, whether it was social, mobile, the Cloud, the internet, I think AI has the potential to be more transformative than all those combined. And I think if deployed in the right way—securely, ethically, safely—it can drive a massive step change in human productivity. The trick is: How do we make sure this technology enters our lives and the workplace in a way that we will coexist with it to drive that productivity change?

At Workday, we believe there will be a peaceful coexistence of people, or human employees, and agents, or digital employees. Humans figuring out how to work with these new agents, and take advantage of the technology, is what will drive the productivity gains. How do you onboard them? How do you make sure that they’re securely brought into the enterprise, and then managed, and governed? How do you make sure you have access rights for digital employees, just like you have for your human workforce when you onboard them? These are some of the critical things to think through.

Looking ahead, if we think about the power of this technology, we’re going to move from a world where we spend the majority of our time working with technology, to a world of AI where technology now starts to work for us. Today we’re focusing on generative AI, where you’re actually asking a question, or you’re prompting something and getting a response. The real power starts to happen when we move to this agentic world, and these agents become autonomous and start to work on your behalf, without you asking them to. That’s the power and the transformation we’re going to see, but we’ve got to make sure it happens in a secure, compliant, ethical, and responsible way.

Eric Kutcher: One of the things that makes this whole next generation of innovation happen is data itself. An organization such as Workday has access to an enormous amount of critically important data. How do you think about the power and the value of that data?

Carl Eschenbach: At the highest level, when I think about the enterprise, there are three systems of record that power the enterprise. There’s a system of record for your employees, there’s a system of record for your financials, and there’s a system of record for your customers.

At Workday, we have the largest, most highly curated, cleanest set of data for HR and finance. And it’s all running on the same market text or the same code base, which gives us an advantage to actually now start to think about domain-specific agents that can take advantage of that dataset.

The output of your AI is only as good as the data you’re training off of. It’s not the size of the dataset, it’s the quality, the cleanliness of your dataset, and the context of that dataset. You have to know where the data was originated, you have to know why it’s being used, and you have to know who it’s interacting with. Context is critical as well. If you combine a highly-curated set of data that’s purpose built—in our world it’s HR and finance—you know the context behind it and it’s in the business process workflow, you can now start to think about building domain-specific agents off of that dataset. This gives you much higher results than just training off of the internet; we’re not going to have these hallucinations as we’re training off the data. So yes, the data becomes incredibly valuable.

Eric Kutcher: If we think about product, in the old world you spent an enormous amount on UI/UX—that was what made the technology consumable, for example, to make an application usable. Going forward, if AI is really doing its job, all a user has to do is interact with the actual technology, in almost a conversant way—would you agree?

Carl Eschenbach: Yes. But taking it one step further, today we all engage with it—as I said, we ask it questions, it gives it answers, or it prompts us and we respond. When we talk about AI agents today, they’re actually just automating a repetitive task. We think it’s going to evolve to a world where these agents become role based and can do multiple tasks. And as they become more aware of the data they’re training off of and the context of that data, they’ll pick up more skills. That’s where it starts to become autonomous, you’re not even engaging with it—it’s actually working on your behalf and freeing you up to do the much more strategic work that really drives the growth of the business.

Eric Kutcher: You touched on the ethical component of it. How are you seeing organizations start to think about that, from a data governance and AI governance point of view?

Carl Eschenbach: It’s a senior-level conversation in every company. You’ve got to make sure you have strong governance, compliance, and controls around the uses of AI. At Workday, we now have a chief responsible AI officer. Anything that happens inside our company, or any product we build, has to go through this office to make sure it’s being deployed in the highest, most ethical way, with security and safety wrapped around it.

It also requires a lot of education of the workforce, so that people can coexist with this technology. That’s also something we’re working on here at Workday. Every single one of our 20,000+ employees is going through AI training so that they get comfortable with it and understand that it’s being deployed in a very ethical, safe, and compliant way.

Eric Kutcher: You came into the CEO role having inherited a company that was very much founder led. As you’ve moved it into the next stage of development, how have you approached shaping the culture and the evolution of the company—and as part of that, instilling a growth mindset?

Carl Eschenbach: I joined a company that was one of the most successful enterprise software companies of our generation, with one of the most brilliant enterprise software minds I’ve ever met, Aneel Bhusri. Today we talk about AI and its potential disruption, but think about what Workday did 20 years ago. They completely disrupted the HR and finance market and became a thought leader by moving it to the Cloud and off of on-premises solutions. They built an incredible market leadership position, and I had to come in and figure out how to continue to grow from there. What are the things you want to do? How do you think about innovating across the company?

Innovating on the product side, innovating on the go-to-market side, innovating through M&A—there are all forms of innovation, and I focused on innovation to help us drive growth. Yes, we are expanding operating margins and being much more thoughtful and efficient in how we’re running the business, but we want to maintain this notion of being a durable growth company at scale, while continuing to expand operating margins simultaneously. And I think we’ve done a really good job over the last couple years. We’ve expanded into new markets, we have different routes to market, we’ve innovated, we’ve made acquisitions.

One of the things I challenge myself on, and I ask this of the people I get to serve alongside, is: Are we working on something today that will help us grow the company? We absolutely have a growth mindset inside the company—we ask people to think about it, and it’s a key ingredient to leading the company into the future. I think we’re doing quite well maintaining that durable growth at scale, while expanding operating margins.

Eric Kutcher: As a CEO, how do you get individual employees to think about the role they play in that growth?

Carl Eschenbach: The first thing we always talk about at Workday is the values of the company—they are our guiding principles for everything we do. Those values lead to the culture of the company, and the culture of the company is extremely special.

I also really encourage people to think about speed, and having a sense of urgency, and working quickly in decision-making, to bring things to market quicker. I often talk about speed as a business strategy. If we’re faster than someone else, it’s hard to defend. But the other thing is, when you make a change or you drive evolution of a company, you need to tell the people why you’re doing it. If you just tell them to go do this thing without the why, they’ll have a lot of questions. If you give them the why we’re doing it, and the potential impact it’s going to have on our company, our customers, and our partners, they’re much more bought in, and they’ll go and execute against that business strategy. Just saying, “Do it because we have to move faster,” isn’t good enough.

Eric Kutcher: Workday has just celebrated 20 years. How do you think about building an enduring company?

Carl Eschenbach: First, I’ll say it starts with those core values, making sure everyone at the company knows what our values are, and that they are the foundation for the company. And when we hire people into the company, we need to make sure that they understand and align with our values. If not, it might not be the right place for them.

The second thing, for myself and all the workmates I serve alongside of, is to say, “I want to leave Workday in a better place when I leave than when I started.” If we’re always trying to grow, evolve, take Workday well into the future, and set it up for the next set of employees and leaders, I think that’s a great mindset. So, asking the question, “What am I doing to make this a better place for the future of anyone who’s going to work with, or for, Workday?”

The last thing is what we just talked about: having that growth mindset. Growing is fun, growing means you’re winning. It’s about making sure people are coming to work excited, full of enthusiasm and energy to grow us into the future, and to truly disrupt in a very positive way when it comes to the markets we serve. We have so much opportunity, and we’re going to drive value creation across our customers, our partners, our employees, and our shareholders to create this flywheel, and set up this place for more success in the future when new leadership takes over down the line. But we have to have that mindset.

Eric Kutcher: We might use the word stewardship—the idea that leaders are there to hand it over, as you say, to the next generation, better than we inherited it.

Carl Eschenbach: Amen. This is super important and it’s our responsibility as leaders. If we strive to give more than we get and focus on the success of the people we serve alongside, and the success of our customers and our partners, everything else somehow has a magical way to take care of itself.

Eric Kutcher: What are some of the lessons of leadership you’ve learned over the years? And how has your own view of leadership evolved?

Carl Eschenbach: I’ll start with that word “serve.” Once I transitioned from a life of success for myself to a life of significance for others, everything changed. I think that is a key component to leading in this new world that we’re living today. And by serving others, somehow success will follow you—probably even more success than if you focused on success itself.

I also think the attitude that you bring to the office, and to your employees, your peers, and the people you serve alongside of every day is what ultimately will determine a lot of your success. I often say your altitude in life is completely determined by your attitude in life.

And I would say, having interacted with a lot of senior leaders in the world, I think the ones who are the most humble and grounded, and remember where they came from, who remain highly authentic and vulnerable, are the type of people that others will follow.

Eric Kutcher: If you could go back 25 years and give your younger self a little bit of advice, what are some of the things you wish you knew then?

Carl Eschenbach: As I said, when I shifted from a life of focusing on success to focusing on significance and impact to others through influence, that absolutely changed everything for me. I would encourage people to start doing that early in their careers. It doesn’t mean you’re not driven, not motivated, or not hungry to advance your career. But the greatest way to advance your career is by serving others, and for others to help lift you up as you want to go on your own career journey.

The other thing I’d say is build a deep, meaningful, trusting network that you invest time in. I always say the power of your network is only as strong as the number of nodes that are in it. Find those nodes and use them to help you expand your network, because this is one of the gifts that will keep on giving in your career. So, build a real network with others that you can help impact them in the future, and they can help impact you in the future.

And lastly, stay technically relevant. In the world we’re living today, whether you’re in technology, whether you’re in marketing, whether you’re in operations, whether you’re in sales, technology powers the world. Technology drives innovation. Technology is what makes all of us smarter. Lean into technology, don’t be afraid of it. Figure out how you peacefully coexist with it. Figure out how you leverage it to help you in your career, but also how it helps others drive productivity for all of human mankind.

Eric Kutcher: You talked about this idea of being vulnerable and humble. Would you say sharing mistakes, and not trying to hide them is a part of that?

Carl Eschenbach: Yes. And another thing—with all the wisdom, and all the knowledge, and all the experience you gain in your career, it doesn’t mean you have to be the smartest person in the room. Sometimes it’s OK to say, “I’m not sure I know the answer. Does anyone else?” That’s vulnerability. That’s why you have a team. That’s why you focus on others. That’s why you surround yourself with people smarter than you. That’s true vulnerability, and the more you show your vulnerability the more people will align around you to help you ultimately be successful.

Eric Kutcher: How do you measure the impact of your leadership, or the impact of people on your team?

Carl Eschenbach: I think there are multiple ways you can measure it. I think a lot of people would start with the numbers. There are metrics you have to track almost on a weekly, daily, and quarterly basis how you’re running the company through KPIs. You have to follow these metrics and make course adjustments along the way. But I don’t necessarily start with the numbers. I think the numbers follow if you do the other things right.

I look at the people in the organization, I look at their career growth, I look at the success they’re having, the potential impact you’re having on them and their families, and the potential impact you’re having on the company.

And then ultimately, it’s all about driving value creation—for your employees, your customers, your partners. And if you do all of those things right, you’ll measure on the value creation for your investors. And you’ll measure for all the people who believe in your company, and for those cheering for you as you think about creating the most iconic software company of all time. That’s how I’d measure it.