Our modeling shows 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. Amazon recently pledged $700 million to retrain 100,000 employees for higher-skilled jobs in technology (for example, training warehouse employees to become basic data analysts). JPMorgan Chase made a five-year, $350 million commitment to develop technical skills in high demand—in part targeting its own workers. And Walmart has already invested more than $2 billion in wages and training programs, including Walmart Pathways, which educates entry-level employees about the company’s business model and helps workers develop valuable soft skills. 1 1. For more, see Julia Hanna, “Walmart’s workforce of the future,” Harvard Business School, July 7, 2019, hbs.edu.
Any company that doesn’t join the early adopters and address its underlying talent needs may fall short of its digital aspirations. Equally important, senior managers may miss opportunities to work collaboratively with employees to create a prosperous and fulfilling future for all stakeholders—the communities where the company operates, its workforce, and the wider society that ultimately sanctions its activities.
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.
We already know from our executive surveys that most leaders see talent as the largest barrier to the successful implementation of new strategies—notably, those driven by digitization and automation. Furthermore, 64 percent of executives in the United States, and more than 50 percent in the United States and Europe combined, agree that companies should take the lead in closing the global skill gap and preparing employees for the future of work.
The good news, as we will explain, is that 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.
Our work with some of the early movers has taught us that a successful transformation involves three broad phases (Exhibit 1). At first blush, they appear to be commonsensical, but each of them involves steps that are new to most organizations.
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 what we call 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.
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, localized, 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.
Many companies make the mistake of focusing too much on just the costs and ignore the potential of new technologies to generate new revenues.
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.
One global telco we know used an outside–in competitive analysis to assess its skills gap. This showed that if the company was going to deliver on its strategy and match the number of advanced-analytics specialists and software developers that leading competitors employed, it would have to hire or retrain more data-science and digital talent than it had originally expected. The exercise prompted the creation of new recruiting tactics to target data-science talent, as well as an effort to train existing staff on cloud platforms, among other skill-building initiatives.
The outside–in study also highlighted deficiencies in the global telco’s employee value proposition. The company realized, for example, that it was lacking in growth opportunities for digital talent. This realization was the signal to start work on some of the weaker elements of the company’s employee experience, including work–life balance, job-advancement opportunities, and the development of a tighter community of digital talent. As this example suggests, understanding the full value at stake and identifying the most important skill gaps are invaluable first steps—which in turn make possible the detailed work-redesign and talent investments that come next.
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 behavior saved valuable employee time at its call centers. 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.
Research has shown that “job crafting”—involving individuals in the design of their own jobs—creates stronger skill matches and smoother transitions.
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. 2 2. For more about the use of talent markets in organizations, see Aaron De Smet, Sarah Kleinman, and Kirsten Weerda, “The helix organization,” McKinsey Quarterly, October 2019. 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 (Exhibit 2).
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.
One financial-services firm created a user-friendly platform that takes advantage of analytics to help employees and HR leaders deal with work transitions. A key element was to create an up-to-date individual skill profile for every employee—first by trawling HR data and LinkedIn and then by getting employees to review and correct their own entries. These surprisingly rare databases are a vital tool to ensure that redeploying human capital not only addresses the organization’s strategic needs but also helps provide employees with a vibrant skill-development journey.
At the financial-services company, employees ultimately took a favorable view of the accelerator and, through it, of the whole transformation. They felt that their company was investing in their professional future and helping them to influence the direction of their careers.
The design of upskilling and reskilling. Within or alongside the platform, companies will need to create or modernize their organizational-learning function so that it is rooted in the principle of employee self-direction and based on adult-learning concepts. Adult learning has become cheaper and more effective thanks to exciting new technologies (such as microlearning, simulations, gamification, and virtual coaching) and to new techniques (for instance, those for managing stress).
Adult learning has become cheaper and more effective thanks to exciting new technologies (such as microlearning, simulations, gamification, and virtual coaching) and to new techniques (for instance, those for managing stress).
One European bank made a huge investment in digital learning as an alternative to laying off thousands of staff in the wake of the digitization of its core business. It has not only introduced a learning team with video-production specialists, graphic designers, and illustrators but also developed a highly sophisticated mobile app. The quality is so good that the learning-and-development unit has turned itself into a revenue center by selling the app to other companies. That money comes in addition to savings from the elimination of some in-person learning sessions, which generated travel expenses and required time away from work. Many employees report that they spend up to half of their time on the app outside working hours, on top of learning modules during the day. Over several years, the bank has involved more than 10,000 employees in the program, and subsequently has placed many in new lines of business.
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. One Europe-based technology company we know is well advanced in its journey through the third phase. 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.
This content was originally published here.