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Part 9: The People Challenge

Part 9: The People Challenge

“Technology is the easy part – it’s really people issues that are at the Center of Digital Transformation challenges”. This sentiment was echoed by virtually every executive we were talking to during our research, no matter which functional area they came from.

Three elements of the “People Challenge” stood out in these conversations:

  1. The challenge to re-skill and up-skill employees on a large scale, and fast;
  2. The challenge to attract and retain digitally savvy talent;
  3. The challenge to change mindsets, especially the ones of leaders who are digital immigrants.

1 Re-skilling and Up-skilling

Digital Transformation goes hand in hand with a major shift in the structure of the work, as many current jobs will become obsolete, and new capabilities are required. According to a recent study by the McKinsey Global Institute, 62% percent of executives believe they will need to retrain or replace more than a quarter of their workforce between now and 2023 due to advancing automation and digitalization [1].

And recent global research by Adecco and the Boston Consulting Group suggests that 66% of workers expect changes in their job within 5 years, and 32% are concerned about losing their job due to the new digital context of work [2]. And these may be conservative estimates.

The exponential dynamics of the digital context put massive pressure on large organizations to find strategies that help to quickly reconfigure the capability profile of tens of thousands of employees, many of them “digital immigrants” who are up to fifteen years away from retirement.

To exacerbate this challenge, in many countries restrictive labor laws and a high degree of unionization limit a company’s flexibility to quickly shift the composition of its workforce through hiring and firing.

The traditional toolkit of people development is too slow, too cumbersome, too expensive – and it reinforces a mechanistic, transactional approach

The traditional toolkit of people development – annual performance reviews combined with a classroom-based, instructor-led approach to learning – faces severe limitations here; it is too slow, too cumbersome, too expensive, and it reinforces a mechanistic, transactional approach.

The speed of change and the massive scope of transformation requires a paradigm shift of the learning and development practice, such as peer-based feedback and reputation systems, shifting the accountability for ongoing qualification to the learner, creating a learner-driven culture, the deployment of large-scale (digital) learning systems that enable self-organized just-in-time learning, reverse mentoring systems, and more.

2 Digital Talent Management

At the same time, competition for the scarce digital top talent on a tight labor market is already fierce and will get fiercer. All the organizations we spoke with, each of which have well-established and admired brands that in previous decades would have had at any time the pick of the employee-market, now struggle to attract top-notch technology-experienced talent.

Experts in software development, data science, artificial intelligence, robotics, and so on are in short supply, and they tend to join rather start-ups or major digital employer brands such as Google, Amazon, or Facebook than the mega-corporations of the old economy.

The traditional paradigm of talent management is ill-suited to address these challenges. It is obsessed with “owning” talent, and with its internal systems to groom it and maximize its performance – only to see people leave if the company’s culture is not up to par.

Companies must expand their perspective from a focus on resource ownership to creative resourcefulness

Providing a purpose people can identify with, and creating a culture that allows people to thrive, is key for attracting and keeping evasive talent – something which becomes harder with increasing size and complexity of an organization.

Despite best efforts in this domain, a significant segment of desired talent population – especially those with an entrepreneurial spirit – may not be up to corporate life. Companies must expand their perspective from a focus on resource ownership towards creative resourcefulness; they must learn how to best access and leverage talent that may never sign a traditional contract, or that works within the wider space of a company’s business ecosystem.

Today’s corporate talent strategies are set up for people that are targeted to become employees, or who are already part of a company and thus can be “commanded and controlled”; little is currently available beyond.

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However, leveraging people’s talent in the digital age requires additional institutional mechanisms that serve not only employees but also a diffuse, fragmented and hard to-manage talent pool which does not belong to a single organization.

This fluid “free talent space” is usually neglected by traditional talent management. Dealing with this space must become a critical part of a company’s extended enterprise strategy.

One element of such a strategy relates to managing alumni talent relationships. Obsessed with a paradigm that only focuses on “talent ownership”, most companies forget about people once they have left the firm. Losing great talent is regarded as a major setback, and few recognize the opportunities that open up by keeping a changed relationship.

Consulting firms like McKinsey & Company, for example, are famous for turning their talent turnover into a competitive advantage by placing “alumni” in senior executive positions at clients, with all the obvious benefits that result from that practice. While their art of “externally networked talent management” may be industry-specific, it still can serve as an inspiration to think beyond the boundaries of one’s organization.

3 Mindset Issues

“Many people that are now working in “Swarms”[3] have worked for Daimler for many years – and of course they have a corporate mindset. Now they are urged to be entrepreneurs and take decisions. It’s tricky to find the right balance here”.

This statement from Stefan Maurer, Daimler’s Head of Future Transportation@Vans’s, illustrates the perhaps most severe people challenge: changing mindsets, which is widely regarded as the major issue in any company’s digital transformation efforts. “The way things are done” is deeply ingrained both in people’s neural pathways and the tacit normative system that constitutes the culture of an organization.

Most senior executives of large corporations grew up in the pre-digital age; their cognitive maps and attitudes have been shaped by the paradigm of the 20th century organization – command and control, linear processes, silo mentality, stable business models, product orientation, clear industry boundaries, zero-sum game competition, etc.

While this modus operandi may continue to be justified in certain segments, an increasing share of business activity requires quite the opposite: participative self-organization, non-linear processes, cross-boundary collaboration, ongoing business model innovation, customer centricity, fuzzy industry boundaries, co-opetition, and more.

The way things are done is deeply ingrained both in people’s neural pathways and the tacit normative system that constitutes the culture of an organization

The normative power of the factual is tough to transcend, may it be the logic of hereto successful business models, may it be the letting go of established processes and routines – both internally and within the current value chain (which in most cases gets disrupted, too).

It’s not easy to take on risk and decision power in a culture that punishes initiative, courage, and the unavoidable failure. And it is not easy to let go of supplier relationships which were the basis of past success but become obsolete in the new value creation system.

Organizations face a difficult conundrum here, as culture, structure, and mindset form a self-reinforcing vicious circle: Changing mindsets requires a different structural and cultural context, and changing the context requires leaders with a different mindset, who feel comfortable in agile environments.

Experiments in holacracy, scrum, design-thinking, or learning journeys to Silicon Valley won’t help much if people return to or remain in their old organizational life. It is important to understand that addressing mindset issues is both a people challenge AND an organizational challenge.

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[1] Re-training and Re-skilling Workers in the Age of Automation. McKinsey Global Institute (1/2018)

[2] Future-Proofing the Workforce. Accelerating Skills Acquisition to Match The Pace of Change. Research report by Adecco Group and Boston Consulting Group (11/2018)

[3] “Swarm Cells” are cross-functional agile teams that were introduced as one of eight “game changers” in Daimler’s Leadership 2020 initiative designed to kick-start and support cultural change within the corporation. See article #5 in this LinkedIn series: Agility in Practice: The Swarm Organization @Daimler

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This article is the ninth part of a LinkedIn series about Digital Transformation Challenges in Large and Complex Organizations. It is based on a qualitative study conducted by the Center for the Future of Organization at the Drucker School of Management at Claremont Graduate University.

If you would like to get immediate access to the entire analysis of our findings, you may download an electronic copy of the report at no cost here, or get it as a physical booklet here. In return, we’d love to learn about your perspective – feel free to comment and/or share your experience with the subject. Thank you!

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