The importance of talent and culture in tech-enabled transformations

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The professionals with the jobs of carrying out, adopting, and sustaining tech-enabled transformations deserve as much attention as the technological solutions they create and oversee. When an organization manages both its talent and culture effectively, the interplay between them can create a virtuous cycle: attracting talent, sparking innovation, and creating impact. However, transforming organizations’ culture and talent in a tech-enabled transformation is often more challenging than tackling the technical elements.

Creating the right talent and culture for a tech-enabled transformation is not easy. Respondents to a McKinsey survey of global executives said that culture and talent occupy two of the top three slots for the most significant challenges to tech-enabled transformations (Exhibit 1).1Culture for a digital age,” McKinsey Quarterly, July 2017.

Culture is the most significant self-reported barrier to digital effectiveness.

Although leaders may already know that culture and talent are significant challenges to tech-enabled transformations, they are often unsure what to do about them. To overcome common hurdles and pitfalls such as defaulting to creating parallel technology-focused organizations, industrial companies need to take a different approach to digital talent. This will affect where and how they recruit, the career paths and development opportunities they offer, and the workplace experiences they create. While these changes will not be easy, companies that tailor their talent strategies and cultures to what it takes to succeed with digital are up to three times more likely to succeed than those who don’t.2How to beat the transformation odds,” McKinsey Global Survey, April 2015. There were 1,946 executive respondents to the November 2014 online survey.

The challenges of changing digital talent and culture

Industrial companies often approach recruiting in-demand technology talent the same way they have approached nontechnology hiring. Furthermore, they often do not identify the kinds and number of new technology hires they will need in the short and long term (see also sidebar, “Critical technology roles in industrial companies”). Once they have filled their technical roles, companies might struggle to retain the people they hired, who often seek career paths and incentives that are different from their nontechnologist colleagues. For instance, while many nontechnical workers aim to rise through the management ranks, technologists may aspire to spend their entire careers as practitioners advancing their skills.

If industrials’ talent strategies weren’t built for technologists, neither were their cultures. Technologists work best in an agile environment, with cross-functional teams that rapidly form and re-form to build the best solutions for end users. In fact, technologists expect to work in such an environment and may turn away from a company that cannot (or will not) work that way.

Transforming talent and culture

Many industrial companies may assume that top technology talent is out of reach and that their brand and even location might prevent them from attracting the kind of people they need. But technology professionals are less biased against industrial companies than might be expected. Only 7.4 percent of the respondents to a 2018 survey of technology professionals considered their employer’s industry important. Compensation, the work environment, and professional development—all factors within an industrial company’s control—were the factors that matter most to technology talent (Exhibit 2).3

Only 7.4 percent of the developer respondents said their job choices depend on the industry of the employer.

In this light, industrial companies’ prospects for attracting technology talent look much brighter. But to find, hire, and retain these employees, companies must build their technology organizations around the right leaders, explore new ways of hiring, create career paths that fit technology talent, and transform their cultures to facilitate the work. Following is an exploration of several practices that industrial companies can consider to enhance the way they attract, hire, and retain top technology talent.

Anchor hires

Anchor hires—senior leaders with outsized credibility and the ability to attract technology talent—can use their reputation and networks to help organizations staff technology organizations with exceptional talent. Because these leaders make disproportionately large contributions, companies should invest extra time in evaluating and pursuing them. To attract anchor hires, companies should offer them entrepreneurial and creative freedom to shape the organizations they help to build.

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One leading North American industrial company looking to embark on a tech-enabled transformation prioritized bringing in a chief digital officer (CDO) who had credibility among technologists. The company hired a CDO who previously had led businesses at major technology companies and was able to attract three leading product managers and designers from similar organizations. The company used these new hires—who were intimately familiar with rapid, user-centric design—to signal its commitment to world-class digital development. The company then directed its recruitment efforts to people from large technology companies and well-regarded design agencies. Using this approach, the organization built its product and design team from zero to 30 people in less than a year.

Acquiring companies for their talent

Large organizations might decide to acquire a smaller company—usually a start-up—for access to its technology workforce. This approach risks igniting culture clashes between the larger acquiring company and the more nimble start-up. Companies can mitigate this risk by having rotating teams from the acquiring company interact with the start-up team, exposing the new employees to company culture while the acquiring organization learns from the new talent, including absorbing the start-up’s more agile approach to work.

Technology-specific recruiting

Hiring technology talent can be challenging for industrial companies because strong candidates may not have conventional résumés, use mainstream career sites, or even be seeking new employment. To overcome these hurdles, companies should seek out technology talent in the in-person and digital communities where technologists spend time. Companies must either retrain or hire recruiters who have the technical fluency required to speak to candidates to promote the opportunities within the companies and evaluate candidate fit. It can be even more effective to enlist top technical talent already in the organization to recruit other technologists.

Organizations can also partner with technology-services vendors, including agencies, to fill short-term gaps in their ranks. Engaging with a diverse array of vendors for short-term technology talent needs can help companies discover technologists they may want to hire as full-time employees.

Reshaping career paths

After technology talent is on board, companies often find that traditional career paths are not relevant to the new hires. For instance, technologists are often more motivated by work on complex problems or prestigious projects than by the rewards of becoming managers.

To effectively manage technologists in accordance with their motivations, companies must develop clearer criteria to identify high performers and low performers, ensure that managers are equipped to give technical feedback, and prioritize individual development. For instance, performance-management criteria may emphasize the principles of successful technology organizations—customer understanding, knowledge sharing, collaboration, and innovation. Incentives should be a balance of compensation and opportunities to work on challenging problems. To facilitate on-the-the-job learning and productivity, feedback should be delivered as close to real time as possible. Building the capabilities of both technologist and nontechnologist employees is also a critical part of tech-enabled transformations.4Building the right capabilities to support a tech-enabled transformation.”

While many nontechnical workers aim to rise through the management ranks, technologists may aspire to spend their entire careers as practitioners advancing their skills.

Building a culture that works for technology organizations

To maximize the impact of tech-enabled transformations, an organization’s culture also needs to adapt to support it. Our research shows that a healthy culture in any organization starts with several core practices: role and strategic clarity, competitive insights, and personal ownership.5Set your cultural aspiration with these four steps,” July 2019.

Several additional practices become especially important in tech-enabled transformations.6Revisiting the matrix organization,” McKinsey Quarterly, January 2016. Specifically, entire organizations—not just technologists—must have a clear view of their end users’ needs, overcome organizational silos, and embrace risk and experimentation. These may seem like best practices for any organization, but they are crucial to fulfilling the potential of tech-enabled transformations.

To focus on end-user needs, a company must give its entire organization the independence and resources needed to understand and respond to end users’ needs and wants. Fulfilling this mission might involve importing ideas and practices from outside the organization. Before developing its own products, for example, one industrial company looks for examples of solutions to similar problems. The product team learned from a leading agriculture company’s development of a digital marketplace, which was similar to one the team was considering for its products.

Building the right capabilities to support a tech-enabled transformation

Building the right capabilities to support a tech-enabled transformation

Consistent with the spirit of continuous learning, organizations must also defeat silo mentalities so that knowledge is shared throughout the organization and communication is continuous and candid. One industrial company set up “digital factories” of multiple teams whose members came from design, engineering, finance, risk, legal, and every other function required to rapidly design, build, test, and launch a product.

Executives seeking to lead technologically strong industrial companies effectively also need to embrace risk and experimentation, because their organizations likely have never before completed a tech-enabled transformation. Leaders can support such an environment by fostering team harmony, mutual support, and genuine caring about the each other’s welfare. Leaders can also empower employees by communicating that they trust and value their expertise and by consulting with them and delegating projects to employee teams. Finally, leaders and organizations can create a safe place for teams to experiment by identifying and mitigating anticipated risks and responding rapidly—and nonpunitively when possible—to unexpected problems as they arise.

For example, the digital product team at one industrial company was two months into building a new product when it discovered that it lacked a market fit for the product. Instead of pushing the team to proceed along its original path, withdrawing funding, or otherwise acting punitively, leaders promptly began to explore next steps with the team. Team members were assigned to a new solution and were even able to appropriate some of the features they had already developed.

As a partial result of an environment characterized by a focus on problem solving, flexibility, and psychological safety, employees might develop new ideas and business-improvement initiatives of their own. Such intrinsic drive is a boon to organizations, and leaders should recognize and reward employee-led innovation.

Building the talent and culture required to activate the benefits of tech-enabled transformations requires a fundamental change in whom industrials recruit, how they recruit, and how the recruits do the work. In parallel, companies need to shift their cultures to focus on the end user, collaborate across silos, and foster experimentation. These modifications are critical for attracting and retaining the digital talent it takes for an industrial company to launch and sustain a tech-enabled transformation and to thrive.

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