The story of the technology talent market has always been one of haves and have-nots.
Pure-play technology companies have always been awash in tech talent and, in fact, have been bullish on hiring over the past five years. Incumbent organizations, by contrast, have perennially struggled to attract, develop, and retain the data scientists, engineers, software developers, product managers, and other technology experts they need—an especially troubling problem nowadays, as digital transformation has risen to the top of every CEO’s agenda.
The tech talent story may be changing, however.
In response to inflation and economic instability, pure-play technology companies are parting with tech talent who are, in turn, landing new roles in traditional organizations—and relatively quickly: according to McKinsey analysis conducted over the past six months, more than 80 percent of laid-off tech workers find new jobs within three months, often with incumbent players. Technology firms are becoming a little less “techie,” while incumbents are becoming more so.
Recent McKinsey research and our experience in the field both suggest that, to continue to close the gap between haves and have-nots and capitalize on the current environment, traditional organizations should adopt an end-to-end approach to HR. Such an approach keeps the needs of technical talent front and center all along the talent journey: from talent planning to attracting and onboarding, to talent development, to talent management.
In particular, HR and technology leaders can experiment with new approaches to sourcing, supporting, and scaling up technology expertise.
- Sourcing. HR and technology leaders should emphasize skills, rather than pedigree, when trying to fill critical technology roles. They should take time to understand which roles create the most value for the organization and then target the skills required for those roles. After all, McKinsey’s research and experience in the field shows that the top 25 to 50 roles can create the bulk of a company’s potential value.1 HR leaders must look inside the company as well as outside; sometimes the highest-potential employees can be found in the fields or functions furthest away from the tech stack or the data center.
- Supporting. As they source and onboard technology talent, HR and technology leaders should themselves use digitization wherever possible to empower people and streamline processes. Digital tools and approaches, such as psychometrics and generative AI, can help to accelerate hiring processes and, once offers have been accepted, bring new employees up to speed on critical tasks and organizational objectives. Such digital tools and approaches are not just for new technology hires; they can also help HR and technology leaders assess the existing talent pool and make matches between tenured employees and new opportunities. Or they can help HR and technology leaders propose specific trainings an individual might need ahead of a specific meeting with customers or suppliers or in anticipation of an internal process change.
- Scaling. The job is not done, of course, once people are hired. To sustain a skills-based working model, HR and technology leaders need to ensure continual upskilling and reskilling.2 It’s the only way to ensure that the organization is meeting individuals’ ever-evolving development needs and keeping up as new tools and technologies emerge.
To understand how these three elements of the end-to-end HR approach reinforce one another, consider the digital transformation at a large South American bank. The bank wanted to launch new digital banking products and services, which meant shifting from brick-and-mortar operations to a cloud-based platform. Rather than outsource cloud expertise, as it had been doing, the bank would need to hire dedicated technology talent, but such full-time talent was in short supply in the region.
Sourcing. HR and technology leaders at the bank identified the types of skills involved in standing up a cloud-based banking operation and redefined employees’ roles accordingly. Given the shortage of tech talent locally, HR and technology leaders reconsidered their hiring qualifications and, using digital tools, incorporated more “testing hands on keys” to find the cloud-savvy talent they needed. They expanded their search beyond the usual suspects inside and outside the organization.
Supporting. HR and technology leaders at the bank empowered their best technologists to build and roll out training programs designed to upskill “novice” or “advanced beginner” technologists from across the organization so those individuals could reach “competent” and “proficient” and eventually “expert” status.
Scaling. HR and technology leaders at the bank created new recruiting and performance-management capabilities. They hired the bank’s first full-time digital recruiter, for instance, someone with deep ties to local technology communities as well as a comprehensive understanding of software development and other technical topics. HR and technology leaders at the bank also embedded technology coaching and capability building into all employees’ performance discussions.
The bank had braced itself for a long transformation process, but within six months, it had reduced its internal talent gap by 13 percent; and within a year it had increased its hiring volume by 30 percent, focusing on mid-senior-level technologists. The bank also managed to reduce its time to hire from 75 days (on average) to four weeks, end to end.
As this example suggests, HR and technology professionals have a critical role to play in identifying the top echelon of technology creators (no matter where they come from), positioning them and the organization for sustainable success and driving change management from the top down.
Sourcing: Take a skills-based approach, and revisit talent profiles frequently
Emphasizing skills rather than roles or pedigree as the focal point for talent searches can reveal diverse and perhaps unexpected sources of technology talent to HR and technology leaders. Such an emphasis can also reveal the nontechnical skills and capabilities (in communications, leadership, and so on) among potential candidates or existing employees that may be going unnoticed and unused.
Additionally, moving away from a role-based to a skills-first approach can be a strong signal of a company’s commitment to employee development—which can be a critical factor for reducing voluntary attrition and mitigating the costs and risk of employee turnover.3 In a June 2021 Gallup survey of 15,000 US workers, 61 percent said that the opportunity to learn new skills is an extremely or very important factor in deciding whether to stay at their current job.4 And McKinsey’s Great Attrition research reveals that a lack of development opportunities is one of the top reasons that employees have left or will leave a company.5
What can HR and technology leaders do?
HR and technology leaders should plan to revisit tech talent profiles frequently and dynamically allocate talent to the highest-value positions.6 The theory here is that the right tech talent solution is only ever a temporary one. Organizations’ products and services may change to accommodate customers’ needs, calling for new digital tools and approaches—which, in turn, may require new kinds of technical capabilities. Even now, the fast rise of accessible forms of generative AI are prompting executives to begin to think differently about roles and responsibilities: How could the application of gen AI support certain back-office functions and, if so, how would requirements for those back-office roles need to be redefined and rewritten?
HR and technology leaders should never be completely satisfied with their digital-talent profiles. In fact, McKinsey research shows that the companies that revisit their talent profiles frequently (at least quarterly) were more than twice as likely to outperform compared with companies that reviewed their profiles less frequently.7
HR and technology leaders can work hand-in-hand to maintain an inventory of skills, knowledge, and attributes correlated with high performance in technology roles in their organizations. This will mean deconstructing actual business tasks and mapping them to the organization’s strategic priorities. It will also mean creating flexible processes and structures for technology workers.
A fashion retailer’s digital transformation
Industry demands were converging in a threatening way for one fashion retailer—among them, the rise of e-commerce in the industry, customers’ growing expectations for hyperpersonalized sales and services, and ever-increasing supply chain complexity (which had grown only more so during the COVID-19 pandemic).
Senior leaders at the retailer pinpointed several actions they could take to address these demands: improve omnichannel offerings, pull more insights from all the data at the retailer’s disposal to inform those offerings, and implement agile ways of working to get everything done more quickly.
To do all those things, the retailer would need to transform its technology operations.8 Senior leaders proposed merging three business functions into one centralized digital unit and moving existing full-time IT employees into new roles. HR and technology leaders at the retailer took this opportunity to reimagine the company’s IT talent architecture and performance management systems. They reviewed existing job titles and tasks in traditional IT and moved away from the ones that didn’t reflect the organization’s existing digital needs. They redefined roles based on the new skills required and mapped existing employees’ experiences to those roles. Most important, they rolled out upskilling programs that allowed them to get every employee from the three merging functions situated into the digital unit.
Additionally, HR and technology leaders tailored the company’s employee value proposition to appeal to diverse technology talent, which also had the effect of signaling to existing employees the company’s commitment to professional development. The company’s commitment to a multiyear transformation of the technology function became the spark of growth it was looking for and enabled it to retain its competitive advantage.
Supporting: Use digital tools to empower people and streamline processes
HR and technology leaders are beginning to recognize the degree to which digital tools can improve every aspect of the employee hiring and onboarding experience at an organization. Early on, during the recruiting stage, HR professionals can use digital tools and technologies to, for instance, write job descriptions and target optimal channels to find promising job candidates. They can use psychometrics, gamification, and other technologies to assess candidates and speed up the interview process. And once an offer is made and a candidate is hired, HR leaders can customize the new employee’s training over the first ten, 20, and 90 days based on information gathered in the interview process.
HR and technology leaders are also realizing that, apart from their administrative advantages, digital tools can also help to foster collaboration and innovation among technology workers, promote engagement among this cohort of employees, and enable them to operate at their personal and professional best.
Indeed, HR and technology leaders can use people analytics programs to match the organization’s capability requirements with the learning needs of individual employees. Some are using generative AI and other forms of artificial intelligence to facilitate this matching. Others are using AI to identify alternative locations to hire remote talent based on high supply, low demand, and lower cost for top skills. In fact, more than half of the respondents in a 2022 McKinsey Global Survey on AI said that they had adopted the technology in at least one of their business units, and nearly two-thirds said they expected that their companies’ investment in AI would increase over the next few years.9
What should HR and technology leaders do?
Incorporating digital tools and people analytics into an HR organization’s operations is a lot more complicated than soliciting requests for proposal for an analytics platform, building a data lake, and establishing centralized reporting capabilities, any of which on its own would be hard enough to do. Even if all technologies and processes are in place, HR leaders will still need to attend to the privacy and regulatory requirements around the data they collect. HR and technology leaders must clearly define (with other senior leaders and representatives from legal and risk) the rules of the road when it comes to data—how they will be captured, accessed, and stored, how they will be used, for how long, and so on. Compliance here is critical—not just as a matter of regulation, but as a matter of trust with potential and existing employees. As much as they are willing to share data outside their organizations, most employees are reluctant to do so through organizational channels for fear of misuse and the high stakes of something going wrong.
Faster hiring at a consumer goods company
At a multinational consumer-goods company, hiring processes were rooted in paper, telephone screenings, and manual assessments. It could take HR professionals between four to six months to sift through more than 250,000 applications—just to hire 800 individuals. The outdated process thwarted the company’s attempts to transform its operations; many of the top tech experts it would need to digitize its operations were being hired more often (and more quickly) by rivals.
To accelerate the hiring process, HR leaders adopted video technology and natural-language processing software built on top of an AI platform that would allow for online interviews rather than in-person ones and that would help filter up to 80 percent of the candidate pool (based on the identified talent profiles). The proprietary algorithm surfaced those candidates most likely to be successful based on interview attributes—such as facial expressions, body language, and word choice—that proved predictive of job success.
The company’s investments in the digital-hiring technology and the months spent establishing associated “rules of engagement” all paid off in the longer term: the company realized a more than $1 million in annual cost savings, a 90 percent reduction in time to hire, and a 16 percent increase in the number of women in the talent pipeline.
Scaling: Continually reskill and upskill your workforce
Customer needs will inevitably change. New technologies (and business models) will emerge. Technology professionals will be looking for their next S-curve. For these and a number of other reasons, HR leaders (supported by senior business leaders) must ensure that they have the learning and development infrastructure in place to sustain the technology talent pipeline and build a deep bench of experts who can react quickly to internal and external disruptions.10 That means committing to continual upskilling and reskilling.
McKinsey research shows, however, that even though a majority of large companies in the United States and Europe consider it a top ten priority to fill skill gaps, most don’t feel adequately prepared to address those gaps.11 When it comes to technology talent in particular, organizations often don’t know how to anticipate the next technology breakthrough and, therefore, which capability-building programs may be required to build a deep bench of technology talent. Most default to looking outside the organization rather than offering existing employees stretch opportunities—and often end up falling behind trends or alienating the current workforce.
What should HR and technology leaders do?
HR and technology leaders may want to establish formal internal programs—dedicated trainings, connectivity events, apprenticeships, and functional rotations—that allow trusted technology employees to add new technical and business skills. Some companies, for instance, have established cross-functional mentorship programs so technology professionals can gain business-unit experience while business-unit professionals learn more about 1’s and 0’s. Organizations can also send people to external classes at local universities or through partnerships with technology associations and standards-setting bodies. In those geographies where tech talent is less than rare, such collaborations are likely inevitable, as is the idea of companies standing up their own training programs.
Critically, HR and technology leaders should ensure that career paths for technology professionals are clearly delineated, defined by the skills and experiences that they will need to be considered for advancement. One large organization has created an internal talent platform where employees can access learning modules, connect with others, and find their next internal role.
Building capabilities at a South American bank
In the case of the large South American bank cited earlier, upskilling became a core component of its digital transformation. When HR leaders realized that 62 percent of the company’s technology workforce needed to be upskilled to meet the bank’s transformation goals, they launched a large training initiative, based on the development methodologies that fintech leaders use. It involved separating employees into chapters and, for each chapter, building a tailored capability matrix that included more than 820 technology skills. Each matrix was matched with specific learning journeys and evaluations, and within just a few months, a large portion of employees had jumped on the technology-training wagon. They participated in more than 1,500 courses, 60 bootcamps, and countless individual on-the-job coaching sessions.
HR and technology leaders didn’t stop there; because the bank would need to launch and then grow into its new operating model over time, the HR organization embedded this focus on technology coaching and capability building into all performance management discussions.
The bank’s considerable investments in technology talent proved worthwhile: about 60 percent of the total technology workforce is engaged in upskilling, attrition is low, and what started as a “special program” is now considered business as usual and a cornerstone of the bank’s learning and development efforts.
Taking a holistic approach to HR can expedite digital transformation and help organizations move faster in those periods where top technology talent is most acutely needed. It’s an offensive-minded strategy—but it’s also a defensive one. If HR and technology leaders are systematic about reviewing their business processes and creating a flexible structure for attracting, developing, and retaining tech talent, they can build a resilient and engaged technology workforce, with a healthy (voluntary) attrition rate.
Indeed, HR professionals have an opportunity to lead by example. If they commit to testing and using the latest and greatest technologies to power their own processes, they can better understand technological concepts, better support new business models and requirements, and avoid being caught short on critical tech talent in the future.