This article was co-written with Chris Davis.
Summary: People, not technology, are the true center of any digital transformation initiative. The half-life of skills is rapidly shortening, necessitating a mindset that embraces change, an adaptable skill set, and a workforce plan that ensures an organization has the talent necessary to operate at speed and scale through hiring, automating, upskilling, and sourcing.
Putting talent at the center of digital transformation
The biggest challenge of any digital transformation is not revamping technology, but rather shifting the company’s mindset to embrace new ways of working. Just like you can lead a horse to water, but you cannot make it drink, little can be achieved by making the latest tools available to an organization that is anchored to traditional processes.
Transformation efforts should have people at their core, and leaders must be intentional about inspiring, listening, and investing in change management to bring everyone along on the journey. We find that organizations typically under-communicate by a factor of 5X, don’t clearly articulate a pathway for current employees to help be a part of the future, and take an imbalanced approach to closing skill gaps.
With that in mind, there are three steps to developing an effective talent strategy for transformation:
- Start with why: Communicate the rationale behind the transformation and the path you expect it to take; inspire, listen, and communicate relentlessly
- Assess your skills strengths and gaps: Identify the skills, knowledge, and traits you need for the future and build a coalition of change agents and key talent that can serve as force-multipliers
- Define a workforce HAUS: Develop a staffing model that allows your company to achieve digital transformation goals that accelerate growth through hiring, automating, upskilling, and sourcing
While not an exhaustive list of activities to drive a transformation, executives that do not prioritize the people component of change management will inevitably fail.
Start with why and communicate relentlessly
People do not change their beliefs, values, and attitudes without good reason. They are especially unlikely do so when the norms, practices, and measures of success are inherited from a company legacy that has historically been successful. Success forgives a lot of sins, and even when there is a collective recognition of a need to change, it feels safer to endure the predictable way of working rather than venture into the unknown. This is why author Simon Sinek, whose TED talk amassed 48 million views, encourages leaders to “start with why.” In practice, that means explaining why the team is undergoing the change, what the expected impact and outcome will be, and how the firm and its people will benefit as a result of the transformation.
Communication must be personal. We regularly find that a senior leadership team will spend roughly 50 hours agreeing on a transformation plan, but an individual contribute receives less than ten hours of cumulative explanation. As those individual contributors are most directly affected by the change, this ratio is dramatically disproportionate. In this scenario, by the time the message reaches individual contributors the rationale for change is unclear, which can prompt fear and resistance. Develop a communication plan that segments personas by seniority, functional domain, and project/product team. Establish a communication campaign cadence per persona that specifies varying levels of detail tailored to the channel of communication (group meetings, training workshops, webcasts, 1:1s, etc.)
To catalyze the change, focus on creating a compelling vision for the future and explain how the leadership team will work with individuals to ensure a smooth transition. Communication is bi-directional, so ensure there is an active feedback loop. Workshop role-specific examples of new work patterns. Even if people raise concerns, it is more valuable to identify active resistance and change “detractors” early on than to succumb to passive resistance that erodes momentum. However, to create an environment of trust, it is critical not to shame anyone that has a concern into submission. Be judicious about delineating whether a voiced concern is someone being obstructionist or whether it is sign that the leadership team is not being effective in its communication.
In addition to the qualitative feedback loop, it is important to define and track outcome-oriented metrics that drive desired behaviors. Monthly dashboards at different levels of the organization can help transformation teams promote a successful, sustainable digital transformation. Done well, they can highlight areas where the right talent and skills are missing, monitor the achievement of key transformation change management milestones, and gauge the sentiment of the team. The metrics should serve as a compass to enable leaders to make data-driven decisions on how to steer the transformation when waters get choppy.
Assess your skills, knowledge, and traits and identify gaps compared to future state needs
Digital transformation will require people across your company to learn new skills and adapt to new ways of working. These skills typically fall into one of three buckets:
- Technical skills, such as knowing how to use data analysis tools or program automation scripts (e.g., creating Tableau dashboards or Selenium test automation)
- Analytical skills that help people connect the data generated by reporting and visualization tools to overall business goals (e.g., creating and understanding the business insights)
- Leadership and people skills that help managers develop and retain top talent (e.g., leading and influencing others)
First, functional leaders should partner with HR to conduct a skills assessment and identify gaps between existing and needed skills. When speaking with employees, it is critical to communicate that this is not a performance evaluation. Otherwise, you may run the risk of employees overselling their abilities and skewing the results of the assessment. Instead, think of this as a way to identify and prioritize where the organization will dedicate its training and development resources. Explain how the newly acquired skills will advance one’s career and personal brand so that there is motivation to be vulnerable rather than self-aggrandizing.
Identify the people whose work creates the benchmark for the skills, knowledge, and traits your transformation needs, and deputize those high-performing and high-potential individuals as change agents for new skill adoption. Some practical skills to measure include consultative and technical skills, product and project management, and self-development and adaptability traits.
Next, develop a plan to close existing skills gaps and align it with the firm’s overall goals. Create training plans, with clear goals by level and function, and turn this into a digital transformation workstream like those used to manage other process or organizational changes. Set realistic timelines for skills adoption so employees are not paralyzed by the enormity of the change. One large financial services company set a bold vision to move its entire infrastructure to the cloud but was clear with employees that it would do so over five years and offered an internal “university” to certify people in new technologies like AWS S3. As a leader, you cannot just tell people to improve. You need to show them how to improve and invest in their development.
Define a balanced workforce plan around hiring, automating, upskilling, and sourcing
As companies define and identify skill gaps, they also need to develop a strategic staffing strategy that will help them achieve their transformation goals through the HAUS model:
- Hire: Based on the skill inventory, it will be critical to hire top talent — perhaps at a market rate above what you pay existing employees — into leadership roles. Full-time hires should be focused on core competencies that are unlikely to change and require long-term thinking, such as product management, technical architecture, or heads of user experience.
- Automate: Organizations’ often throw more headcount at a transformation and assume that will solve a problem. However, an explicit mandate for any digital transformation should be to create a platform that allows the company to scale exponentially, not just linearly. In the near term, you may need burst capacity to provide the right level of customer support, but the mid-term should enable the ratio of customers to customer support agents to improve by a factor of 2X to 5X.
- Upskill: As mentioned earlier, any transformation will require an investment in hard skills training, but it is also critical to invest in training on new process adoption, mindset, and storytelling. Training programs should be targeted to both technical workers and employees throughout the business who will be responsible for digital product management, product marketing, and organizational change adoption.
- Source: Sourcing is often the first lever executives look to pull during a transformation because it appears fast and easy: “Company X has done this exact thing, has an army of people, and we can mitigate risk by ending the contract as soon as we are done with the project.” While sourcing is an absolutely essential component of a workforce plan, it should be considered the last option and executed with extreme clarity of intention. Any digital transformation will involve a shift from a project- to a product-based mindset, which requires a complete re-thinking of long-term knowledge, accountability, and skills that you want in-house. Sourcing should be used selectively when there is a clearly finite body of work that will not repeat itself (such as a merger & integration), when the urgency to get to market is such that material opportunity will be lost if recruiting cannot move fast enough, or if there is an emergent technology for which talent is in very limited supply.
The HAUS model allows leaders to decide how to fulfill their talent needs across core, value-added and transactional activities. For example, a company may decide to hire its head of DevOps, automate its software delivery value chain through CI/CD, upskill its current developers to learn to use the new tools, and in the interim source talent that can “teach to fish” while implementing the first wave of the new approach.
Another example can be drawn from the first wave of mobile app development. In 2010, iOS development was a fairly rare skill, so any major non-tech company developing its own mobile app was likely hiring an agency. Fast forward a decade, and you’ll find that most companies with major mobile-powered commercial operations will have in-sourced that skill set to have more control over their own destiny. The next wave of skills following this pattern is artificial intelligence and machine learning; most companies are outsourcing this skill set now but will likely have more internal talent in 2030. In this way, the HAUS model becomes a living, adaptable framework, instead of a one-time solution.
People and behaviors lead digital processes and tools, not the other way around. Putting people at the heart of the transformation while tracking results and behaviors is key to ensuring a successful and sustainable talent strategy. Your talent strategy must be managed as an equally weighted workstream within the overall transformation portfolio in order to ensure that the company’s most important assets are not overlooked. Finally, be humble. No transformation is perfectly planned, so be prepared to communicate, listen, and transform yourself first, if you want others to follow you.