Adapting to a digital age will require organizations—and not just employees—to equip themselves with new capabilities.
By Bryan Hancock
What story will people tell about your organization over the next ten years? Will they celebrate an enthusiastic innovator that thrived by adapting workforce skills and ways of working to the demands of the new economy? Or will they blame poor financial or operational results, unhappy employees, and community disruption on a short-sighted or delayed talent strategy?
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Predictions show that by 2030, up to 30 to 40 percent of all workers in developed countries may need to move into new occupations or at least upgrade their skill sets significantly. Research further suggests that skilled workers in short supply will become even scarcer. Some major organizations are already out front on this issue.
The pace and scale of technological disruption—with its risks of unemployment and growing income inequality—are as much a social and political challenge as a business one. Nonetheless, employers are best placed to be in the vanguard of change and make positive societal impact—for example, by upgrading the capabilities of their employees and equipping them with new skills. And employers themselves stand to reap the greatest benefit if they can successfully transform the workforce in this way. Many leading businesses are realizing that they cannot hire all the new skills they need. The better solution is to look internally and develop talent they already have, as this approach is often not only quicker and more financially prudent but also good for morale and the company’s long-term attractiveness to potential recruits.
By taking concrete steps now to build an infrastructure that supports the future of work, companies can set themselves up for success in this new competitive era.
Rolling out the road map
A successful transformation involves three broad phases. First comes an initial period of scouting. In this stage, the company develops a single vision of its digital and automation future and the total value of that future. It also identifies the most important skill gaps—looking at future needs, not just extrapolating from the past (the norm in much workforce planning). Then it assesses the organization’s readiness to deliver.
Second, there is a period of shaping, to redesign work for the demands of a more digital future and to create upskilling programs, often together with employees. This phase also involves developing the infrastructure of a talent accelerator to facilitate the deployment of talent in the most important future roles.
The third phase requires shifting the organization’s suite of talent-related activities onto a bigger scale. This work constitutes an acknowledgment that institutional capabilities to help employees adapt to the future of work are just as important as near-term (and seemingly more urgent) talent priorities.
Scouting the potential, assessing gaps, and reviewing readiness
The first questions to ask are, “Is our aspiration and plan ambitious enough?” and then, “Is there a central view of the total value of our digital strategy if we achieve the aspiration?” In other words, is the company capturing the full opportunity of automation and new technologies, not just the opportunities to cut costs?
Indeed, many companies make the mistake of focusing too much on just the costs and ignore the potential of new technologies to generate new revenues. Mired in the many small, localised, and often siloed individual initiatives that typically abound in organizations, most such companies have a hard time justifying needed investments and injecting a sense of urgency. They end up falling behind, never having grasped the magnitude of the opportunity in front of them.
For example, consider the insurance company pondering how to get enough qualified software developers to staff digital initiatives. Company leaders sought to choose between two proposals. One suggestion was to upgrade the skills of existing tech employees and redeploy them to new auto- and home-insurance businesses that were set on a critical new digital path; another idea was to offer higher wages to compete in the external market. On closer examination, the insurer’s transformation office discovered that the potential additional profit of the digital initiatives came to more than $300 million a year when it added up the estimated benefits (including revenue growth) and the more obvious cost reductions likely to flow from automation, digitalization, and more agile ways of working. The company’s top team could now see the big picture and the opportunity it represented—almost $1 million a day of earnings before interest, taxes, and amortization (EBIT). They quickly agreed on a number of measures, including both new skill programs for current employees and higher starting salaries to attract new hires.
Diagnosing the existing capabilities of the workforce and comparing them with future needs are important parts of the scouting phase. Fluid workplace transitions make point predictions pointless. But even a rough up-front analysis is useful for estimating the gaps ahead, it can be particularly helpful to look at competitors that are further ahead in anticipating their talent needs or at “aspirational” firms, such as start-ups. Honest reflection on the capacity and quality of your organization’s learning-and-development unit is crucial, and so is the organization’s broader health, notably its employee value proposition. There’s no point enduring the expense of retraining and redeploying expensive talent if the newly skilled employees think that competitors are more attractive and thus walk out the door.
Shaping work and developing the right infrastructure
The scouting phase is largely centralized and top down. In the shaping phase, employers are better off taking an approach inspired by design thinking. To integrate technology, now and in the future, companies should gain a deep understanding of the way each employee and team does their present work and have them take part in redesigning their roles and ways of working. Involving employees in that process will undoubtedly spark better ideas about how roles might be split up, which activities require which skills, which technologies will be utilized (and how), and which new ways of working will be needed. Moreover, such involved employees will also surface and address pain points early on. Instead of generating the fear and resentment that can haunt strictly top-down initiatives, the process will give employees an opportunity to shape their own paths.
The balancing act. Outside–in analytics and expert input also can help to generate answers, at least when organizations introduce new work. By closely studying the experience of other players, companies can replicate—with confidence—the sorts of structures and roles that work elsewhere. Nonetheless, research at Stanford University has shown that “job crafting”—involving individuals in the design of their own jobs—creates stronger skill matches and smoother transitions. One way is to start with parts of the business that have the most to gain from new technology, notching up early wins, and then cascade the message to other functions by using the well-tried and -tested techniques of the McKinsey influence model.
This collaborative approach to designing new roles can create unexpected, novel, and value-adding types of work. One payments player, for example, found that a new prediction engine based on its customers’ online and account behaviour saved valuable employee time at its call centres. The employees used some of that time to work with the company’s products and services, bringing the customer’s voice to discussions in a way that improved operational outcomes and gave employees a more diverse set of learning and career experiences.
The future-of-work talent accelerator. Redesigning work is about far more than changing existing roles. Digital strategies are creating entirely new, mission-critical tasks, and companies are undertaking them in new ways (including project-based work in agile teams). In response, some leading organizations are looking inside—developing structures to help systematically place the best-fit internal employees in roles—versus reflexively filling them with permanent hires from the outside.
These structures—talent accelerators—are similar to an internal marketplace for talent. Their responsibilities include identifying the most relevant project-based work across the organization; defining the knowledge, skills, attitudes, and experience required; and then finding the best-fit talent. In some cases, employees may be identified and deployed on project teams directly; in others, the accelerator provides training and support to build new capabilities and skills, as much as possible through on-the-job learning.
A company’s history—and current requirements—will no doubt determine how that organization defines the scope of an accelerator and sets it up (including supporting it with the latest technology). There are several options. Will the accelerator largely be a tech “talent-matching and learning” platform? Or will employees actually be located “inside” the accelerator at any point? Should the structure ultimately embrace all available talent, including contractors and temporary employees? How are employees selected? Most companies will probably start small, focusing on high-performing people whose roles are changing and placing them, perhaps after project work, in some of the most critical roles for the future.
Shifting the workforce at scale
Implementation at scale can start once the organization has begun to redesign the work of some units or functions and has established a pilot of the talent accelerator. As companies ramp up their efforts, they should expect two additional challenges.
‘Offboarding’ with sensitivity. Not all employees affected by change will find opportunities within their current company. Despite their best efforts, some may fall short of acquiring the skills needed to make the transition to new areas of work; others may prefer to seek new employment than to change. The scale and pace of workplace transition demand enormous sensitivity. Companies increasingly understand the importance of thoughtful outplacement, both as a manifestation of good corporate citizenship and as a basic necessity in the increasingly difficult war for talent.
Many are forming partnerships with new, tech-savvy outplacement firms that help prepare employees for fresh opportunities by encouraging them to acquire skills likely to be useful elsewhere and by activating growth mind-sets. Other companies help employees to find the next role more directly—for example, by making arrangements with other local employers or encouraging people to explore new roles at suppliers or vendors (or, in Amazon’s case, to become a supplier to the previous employer).
Accelerating the skilling engine. The company’s learning-and-development engine will also probably expand during this phase as more employees embark on more diverse journeys. Critically, companies will need to measure the return on their investment in employee skilling—for example, by evaluating how successful they have been in giving their employees new skills and comparing the cost of these efforts with how much they would have spent on hiring. That expense should include the opportunity cost of waiting to hire in a highly competitive market.
Leadership energy is an essential building block for new skills. At one Europe-based technology company after redesigning the roles and work of an important business unit, the company turned to its newly enhanced learning-and-development function. This group, in turn, worked with technology and learning vendors to design role-specific learning journeys, which have helped upskill and reskill more than 20,000 employees.
The company consciously used the results of an initial pilot study to improve both the digital and in-person learning modules for later cohorts. It also created “sounding boards” to hear about and respond to the questions and concerns of employees. To show the connection between the skill-building initiatives and developments in the business, leaders made a point of speaking honestly and frequently about the transformation at meetings and on calls. These leaders insist that the program will not be a “one and done” effort and that lifelong learning and reskilling will become embedded within the organization.
CEOs increasingly worry that talent shortages will upend their strategies and that talent decisions may upend the communities where they operate. Yet companies can start putting the right people in the right places and turning the challenges posed by AI and automation into an opportunity rather than a threat.