Based on the 2021 research conducted with Wharton’s Mack Institute for Innovation Management, and further confirmed by additional WTW in-house expertise in 2022, we believe it is unlikely any types of business will escape digital transformation in the coming years. Having said that, surprisingly few will get it entirely right. One explanation is a global talent shortage, with nine out of 10 employers struggling to attract suitable digital know-how.
The acceleration of digital transformation since the onset of COVID-19 has increased the demand for digital talent and skills to new heights. Together with the ‘Great Resignation’ phenomenon, organizations are finding themselves in an increasingly desperate search for digital talent and skills.
The market for tech talent is ‘HOT’
Source: CompTIA Tech Jobs Report & Press Release
Positions for software developers and engineers accounted for nearly 30% of all employer tech job postings in April. Demand was also strong for IT project managers, IT support specialists, systems engineers and architects and network engineers and architects. Three in 10 postings were for positions in emerging technologies or jobs requiring emerging tech skills.
“We are in a seller’s market for digital talent. And finding talent is one challenge. Keeping it is another,” according to Michiel Klompen, WTW Global Digital Product Lead. Citing WTW’s 2021 AI and Digital Talent Compensation Survey, Klompen said 95% of employers are struggling to retain their digital talent, an increase from 88% in 2020.
WTW has looked closely at digital transformation efforts among a variety of industry groups, including TMT companies. We examined transformation drivers and related risks in our TMT Risks on the Horizon 2021 report and in this follow-up, we take a deeper dive into cultural and workforce-related issues, focusing on:
The need for a digital-first business culture in order to effectively harness to delivery of strategic and operational objectives
Effectively delivering a transformative EX
Recruiting, retaining, and continuously reskilling the workforce to win the talent race.
Managing people and culture was also at the top of mind among industry stakeholders interviewed at a Mack Institute stakeholder conference. People and culture were deemed a greater challenge by far than business strategy, technology and innovation, or sustainability and corporate social responsibility.
From a broader digital culture perspective, WTW finds companies tend to fall into four categories of digital maturity based on culture and digital ‘enablement levers,’ including leadership, digital strategy, human capital management, internal processes, structure, and technology:
Emerging organizations have a basic, reactive digital strategy without the benefit of a formal road map, not to mention adequate employee engagement.
Advancing organizations are developing a formal digital strategy. They pull more levers, for example, more advanced technology, but digitalization efforts remain fragmented and poorly aligned with their business strategy.
Leading organizations have a more fully developed digital strategy aligned or integrated with their business strategy or by implementing many of the levers.
Transformative organizations have an aligned or fully integrated digital and business strategy within a culture that drives new sources of value. They view digital as more than technology, and they embed their digital capabilities throughout the value chain.
Transformative organizations are more likely to hold leadership accountable for meeting digital benchmarks, and they often have a chief digital officer (CDO) to lead change and engage employees within a new work ecosystem. They typically use AI, alliances and outsourcing to effectively complement conventional employee relationships, and depend on a high degree of collaboration among business leaders and their teams.
McKinsey Digital has described a CDO as “transformer in chief.” Although many new CDO positions may have been spawned by the pandemic, the consultancy sees lasting potential around four dimensions, namely: resilient leadership, recrafting digital strategy, engaging with customers, and updating agile practices and tools.
WTW’s John Bremen has written how COVID-19 variant Omicron points to the persistence of high-impact risks, including economic, geopolitical, social and climate-related threats, as well as severe talent shortages. “This situation demonstrates that business leaders will continue to face unanticipated risks for the foreseeable future, despite substantial advances in mitigating them,” Bremen wrote. “To thrive amid such risks for an extended period, future-seeking leaders continue to be flexible, adaptive and creative, challenge assumptions and work to fulfil their complex responsibility to protect their people, customers, suppliers, and communities – all while continuing to grow and be profitable.”
The roles of a digital-first culture, collaboration and engaged human capital were cited in WEF’s 2021 Digital Culture Guidebook: “Organizations with a strong digital culture use digital tools and data-powered insights to drive decisions and customer-centricity while innovating and collaborating across the organization.”
WEF sees a collaborative culture as a ‘pillar’ supporting a broader digital culture. Collaborative culture is defined to include an inclusive workplace resting on diverse talent, the use of technology to understand EX and engagement levels, with digital tools to improve accessibility.
Infineon Technologies AG, a German semiconductor manufacturer, ranks among the top three diversity leaders in Europe, according to Financial Times-sponsored research. The company points to its inclusive culture as the basis for its success and a source of vital employee engagement. It uses such innovations as a virtual diversity and inclusion learning journey and curated virtual training among its efforts to promote wellbeing and engagement.
In a culture that prizes collaboration, employees know their ideas are encouraged and valued, and the organization expects and depends on relationships that promote and share knowledge. Our research finds collaboration fosters new products, more agile ways of working, faster problem solving and a more effective EX.
As we have alluded to previously in this report, WTW’s own research suggests that the last two years have been tough on many employers and workers, with a global health crisis adding to disruptive business pressures. Based on our 2022 Global Benefits Attitudes Survey, employees feel disconnected from their teams – which is no surprise considering COVID-19. Employees allude to anxiety or depression, and many feel overworked. A significant number just feel exhausted or, one might say, experiencing burnout.
To the last point, WTW finds that burnout is rising within many companies as employees facing unrelenting productivity pressures and a sense that work routinely intrudes into personal lives. Employees often point to team leaders who seem not to recognize boundaries or fail to inspire and effectively manage their colleagues with clear priorities.
“We’re also see a persistent problem with what has been called ‘digital transformation fatigue,’” says Julie Ann Merkel, director, WTW Talent and Rewards. “Employees are simply worn out by constant change imposed by digital transformation. They feel especially beleaguered when senior business leaders and line managers seem to put production and process over people and their wellbeing.”
EX is a crucial ingredient in a broader corporate culture and a major concern for employers, with more than nine in 10 saying that EX is a top priority. They see EX as the foundation of engagement and wellbeing as well as productivity and overall business performance.
The importance of EX also surfaced in recent WTW/Mack Institute discussions with business leaders. Companies as diverse as IBM and Zapier see a direct link between EX and business success. Indeed, EX is at the heart of Zapier’s intelliHR, the company’s people management system with configurable HR automation and analytics.
“Our research is telling us that some employers were slow to grasp how EX has suffered with remote working and other blows to the workforce, such as restructuring,” said Richard Veal, Global Practice Leader, Communication and Change Management. “Few employers were prepared to deliver a positive experience in unsettled times.”
Employers have taken any number of actions to preserve their business – by hastily adjusting supply chains, for example, or accelerating digital transformation. Some have found a growth opportunity in better, faster, and cheaper ways to serve home-bound consumers. But regardless of the business objective, the extent of these actions over such a short period of time exerted a significant toll on employees and organizations, according to our EX Survey 2021.
More than half of our EX survey respondents (52%) said the pandemic hurt financial performance with a damaging effect on productivity. Half said it had a negative impact on wellbeing, 43% on the EX, and 37% on organizational culture.
Our research identified different stages of EX development:
Source for chart: 2021 WTW EX Survey
Only 1 in 10 organizations have a “Transformative EX,” which is required to deliver a high-performance EX (HPEX) — and to achieve better business and people outcomes.
What do transformative EX organizations do differently? These organizations have an EX-strategy integrated into their business strategy and use technology to fundamentally transform their employees’ experience and the business.
Human capital management technology has grown significantly from being a simple HR and benefits tool to providing a robust framework for such things as identifying talent gaps, potential in-house sources of talent, and contributing to EXs by helping to fully exploit company benefits and internal job opportunities.
Companies also are deploying AI and other advanced technology through such offerings as, for example, WTW’s SkillsVue and Embark for Total Rewards to tackle various aspects of workforce and benefits management, reporting and analytics.
By Michiel Klompen, WTW Global Digital Product Lead
In the midst of what many are calling ‘The Great Resignation’, organizations are faced with a lot of talent pressure in the market.
Where leading organizations are able to transform this momentum into ‘The Great Hire’, many others are confronted with higher attrition rates now that we are moving into a post-pandemic normal.
Especially for digital roles, organizations are confronted with non-traditional talent competitors and are increasingly examining how a focus on skills can help them to become more successful in winning world-class digital talent.
Inform your reward programs with our market-leading insights Attract and retain the talent your business needs by applying a focus on skills
How organizations use skill insights to differentiate for hot skills
Source: WTW Research
Skills may impact how competitive pay looks like
To understand the impact of skills on pay, WTW launched SkillsVue, an interactive analytics platform that is designed to help organizations overcome their challenges in attracting and retaining digital talent.
Organizations across all industries have been utilizing the insights from SkillsVue to inform their reward strategy. The focus on skills can be considered as an additional layer on top of the existing reward strategy, that provides agility and flexibility. This enables them to be more successful in winning the critical talent the business needs.
Learn more about SkillsVue:
Beyond technology, almost three-quarters of organizations (73%) in our EX-Survey identified flexible work as a priority to improve EX over the next three years. Many employers are not ready for this shift: Only 56% say they’re flexible regarding where and how work gets done, and only 50% are reimagining careers in light of the new workplace.
The effort is worthwhile. We find transformative EX organizations are much more likely to redesign compensation programs and policies to align with high-demand skills and to promote workplace flexibility with, say, backup day care or reimbursing the costs of working from home. Additionally, transformative EX organizations are more than twice as likely to shape strategies that address job reinvention, reskilling and talent redeployment.
And companies have an opportunity to evolving their wellbeing strategies
Satisfactory employee experience depends upon transparency, personalization and easy, digital access to relevant information, platforms and processes that contribute to job satisfaction and career development. Organizations that take such an approach are more likely to deliver a high-performance EX, which our research links to positive financial outcomes.
“This is a huge opportunity to renegotiate the employment contract,” says Hazel Rees, WTW Head of Work and Rewards, Europe. “Companies that get it right will gain real competitive advantage. It is a chance to reset and engage people in a new and meaningful way.”
Long before COVID-19’s spread in early 2020, TMT companies were scrambling to find, train and retain the best possible digital talent. The pandemic accelerated the race for digital talent. Competition within the TMT industry was worsened by the rush of brick-and-mortar companies into the digital fray.
Over the next 12 months our Digital Transformation Practice report found 84% of organizations surveyed expect their total headcount of digital talent to significantly increase, while only 16% expect little to no change compared to their current situation. Ninety percent of financial services organizations expect to increase digital headcount with 10% expecting little to no change compared to their current situation. Note: We secured 1246 responses by 512 unique companies globally. Data collected as part of the AI and Digital Talent Compensation Survey between February - August 2021
Extend in attracting/retaining digital talent changes over the last year
Source: WTW 2021 AI and Digital Talent Compensation Survey (global)
As noted in the WTW/Mack Institute 2021 TMT Report, TMT executives say inadequate or badly trained and managed talent can contribute to what WTW has identified as risk ‘megatrends,’ including operational vulnerabilities, regulatory and legal exposures, and even business model and strategy shortcomings. This view is widely shared. Consultancy KPMG has described people, mental health, and wellbeing as systemic risks that should figure prominently on 2022 audit committee agendas.
A 2021 WTW survey of more than 500 companies found nine of 10 organizations globally are finding it tough to attract and retain digital talent. More than half of the respondents said they offer differentiated reward programs for digital talent, the most common of which were higher base pay and dedicated career progression models.
About half of organizations are also having difficulties with salaried or sales positions
To what extent is your organization currently experiencing problems attracting or retaining employees in the following groups?
Source: https://www.wtwco.com/en-GB/Insights/2022/01/far-reaching-workplace-changes-prompt-employers-to-rethink-work-total-rewards-and-careers
Some companies have begun recruiting or reskilling employees without a digital background, such as Disney’s CODE: Rosie program aimed at bringing female employees with non-technical roles into new jobs within the company’s technical operations, according to the Mack Institute research conducted for WTW. Disney is not an outlier. Talent-hungry Amazon and other leading TMT companies are also investing heavily into broad efforts to reskill staff. It is sometimes enough for the employee to show curiosity, creativity, and a willingness to innovate.
As previously mentioned, Hitch Works provides a talent mobility platform for the enterprise. Its SaaS solution leverages AI to connect the right talent with the right tasks based on skills, experiences and career aspirations. This in turn enables upskilling and reskilling, dynamic teaming, democratized career development, and fosters a culture of learning and growth while accelerating productivity and performance.
WTW’s 2021 AI and Digital Talent compensation survey found interesting, challenging, and varied work was the primary factor for attracting digital talent, followed by a company’s reputation as a place to work and only then by cash compensation. This view was backed up by WTW and Mack Institute research: Globally, cash compensation is ranked fourth for employee attraction after interesting work opportunities, reputation, and an innovative and tech-minded culture.
Top 10 attraction and retention tools for digital talent
Source: https://www.wtwco.com/en-US/Insights/2021/11/stand-out-as-a-digital-talent-employer-of-choice
Other WTW research confirms while employees value compensation and benefits, it doesn’t always boil down to money. Many talented employees might be lured to another company where they will feel they are making an impact on the business or find more opportunity for movement and growth.
Compensation was even less of a retention factor. The primary retention factor was interesting, challenging, and varied work, followed by the ability to have a real impact on the organization’s performance. The top three factors were rounded out not by compensation but by a company’s reputation as a great place to work.
Global disruptions have emphasized the importance of digital transformation across all organizations. As organizations realize the need to boost their efforts in digitalization, HR has a crucial role in building the workforce of the future with data-driven and forward-thinking approaches. WTW research indicates it will be key to equip HR professionals with the information needed to get their organizations prepared for the digital economy.
At the same time recruiting for tech talent has increases substantially in the last six months
Recruiting over the last six months
Source: WTW analysis of data set collected for the WTW 2021 Talent Attraction and Retention Survey
WTW’s Benefits Survey 2021 also indicates many companies the world over have made good progress with DEI programs which open the workplace to a wide new universe of underutilized talent and experiences. The payoff shows up in various ways, including better financial performance and higher employee satisfaction. WTW equitable total rewards model and insights from 2020 also allude to these facts.
“Our research is telling us the pandemic has had different impacts and driven different experiences among different employee groups – women, people in caregiving roles, people of colour, working parents, lower income groups, etcetera,” says Shankar Raman, WTW Future of Work and Human Capital and Benefits Leader. “Profound questions of DEI have come to the forefront. And as employers start planning for new ways of working, they could unwittingly create inequities on multiple dimensions: pay, benefits and career. As organizations plan for a return to work, they should monitor the impact of their policies on groups that could be at risk of being treated in an inequitable manner or be impacted by unconscious bias in the workplace. They will also need to prepare managers to be aware of these issues, ensure they lead in an inclusive way and be proactive in addressing flexible working policies that result in inadvertent bias. Employers should be reviewing their rewards offering and understanding the preferences and impacts of current benefit provisions and outcomes by worker cohorts to identify areas for improvement.”
By Rhonda Elcock, WTW Senior Director, Talent and Rewards and Shekar Nalle Pilli Venkateswara, WTW Senior Director, Talent Analytics
A gender-wage gap linked to the hybrid home/office workplace is another HR risk, this one identified by technology consultant Gartner. Its research shows men are more likely than women to return to an office, while women are more likely to work remotely. If companies tend to favour employees, more likely male, who return to the office, Gartner expects questions of equal opportunity around wages and promotions to come into play.
McKinsey Global Institute’s updated Power of Parity study estimates that, with stronger female participation in the economy, global GDP could see a $13 trillion-boost by 2030. Taking actions now to implement gender-responsive policies and empower female talent can lead to huge wins for everyone.
If HR is taking the right actions as came out of the WTW Reimagining Work and Rewards Survey then it would mitigate this risk. High-performing organizations are about 80% more likely to say concerns over gender pay equity or fairness for diverse employee populations drive individual pay increases. This would suggest some sort of equal pay audit is being conducted as part of the salary increase calibration process.
Willis Towers Watson's annual surveys on workforce analytics have found the pay gap is heavily driven by low female representation at higher levels in organizations and in jobs with higher earning potential (and subsequently, higher representation in lower income levels). Under-representation at higher levels also leads to a higher tendency to experience lower outcomes in different areas such as access to healthcare, financial savings, job security and wellbeing. The disparity is further exacerbated for women who are also part of other under-represented workforce groups (e.g., race/ethnicity, LGBTQ+ and those with disabilities).
2022 is seeing a new record of female CEOs at Fortune 500 companies. As of March, there were 74 female CEOs employed at America's 500 highest-grossing companies, up from 41 in June of 2021 and only 7 in 2002. Yet, the new high still only translates to around 15 percent female representation at the top of the country's biggest public businesses. These numbers are better than they were three years ago, but the male voices still far outnumber female voices in areas of influence. It remains tough for women in general to break the glass ceiling and access career boosts that are usually tied to higher-paying jobs, such as incentive eligibility and skills development. But things may be improving for women as options for the way we work have changed and expanded dramatically.
The increased prevalence of flexible work options resulting from the pandemic has sparked rethinking of how, when and where work gets done across the range of jobs and skills within an organization. This has also inspired rethinking of long-term career equity objectives, particularly the long-overdue focus on supporting opportunities for women.
Organizations can start strong on their journey toward female gender equity in the workplace by:
Achieving gender equity in the workplace is not just about base salary, but more importantly about enabling equitable access to opportunities. Flexible work can improve gender equity in pay and career. Organizations need not go far to figure out impactful actions that could increase equity for women at work. Build your roadmap using a data-based approach to find gaps in accessibility, mitigating disparity in outcomes and inviting female employees to share their experiences.
Having a well-established DEI program is now common in most companies, and technology companies are at the forefront, according to Daivergent, a data labelling and annotation service with a talent pool of neurodivergent data specialists. The long list of companies with established I&D programs include many leading as well as emerging technology companies and also WTW.
In a 2020 commentary, Fredrik Motzfeldt, WTW’s Global Technology, Media and Telecoms Group, UK Leader, lists three important reasons for investing in a vigorous DEI program:
In 2022, when asked about his current view, Motzfeldt confirmed that companies still too often pursue DEI efforts independently, failing to realize the full potential compared to if these efforts were better coordinated and integrated with operations. By not linking talent scarcity and DEI with the need to improve business performance, he suggests companies may miss out on important revenue opportunities.
The Saïd Business School at the University of Oxford, https://www.sbs.ox.ac.uk/oxford-answers/why-inclusion-and-diversity-are-key-business-growthin a 2021 article, forms a similar conclusion: “Of all the trends in motion, it is arguably diversity that will have the biggest impact on the future of business – marking out who survives, who thrives and who doesn’t.”
Employee satisfaction must be part of the equation. It’s important to recognise if TMT companies want to effectively expand their tech talent pipeline. TMT companies must recognize that employees want more interesting work, better opportunities, and have little patience if they feel badly managed or unchallenged.
“If companies want to access the broadest possible pool of talent, including people with digital skills who are also disabled, they need to analyse their recruitment materials and processes, onboarding activities, performance management and talent retention strategies,” Motzfeldt says.
“Vital to all of this is the need to create a culture in which people with disabilities feel listened to, included, valued and respected.”
There are more opportunities for previously untapped or excluded talent — retirees, employees with disabilities and talent located far from headquarters — as automation helps companies expand their reach for skilled workers by taking jobs to people instead of bringing people to jobs. On the other hand, flexible work also creates a risk of eroding inclusion and diversity if managers’ biases lead to remote workers being “out of sight, out of mind.
