This article was first published by Oliver Wyman here.
Regardless of size or industry, it is a rare organization that hasn’t set broad and aggressive digitalization goals as part of its strategic plan. Whether those goals are to increase revenue growth or customer satisfaction, reduce costs or risk, or address a strategic goal such as carbon neutrality, achieving them depends on continually refreshing digital tools and techniques.
While organizations typically focus significant effort on building and deploying digital technologies, few apply the same diligence to ensuring their workforce is appropriately organized, sized, and equipped with the digital skills to deliver effectively. Failing to do so poses significant risk to realizing expected returns on transformation investment.
Digital advances almost always translate to impacts on structure, workforce role requirements, and skills and capabilities. What’s more, the structure and skills that advance organizations into the future are rarely the same as what brought them to where they are today.
Actively identifying workforce requirements based on new tools and techniques and defining the skills and capabilities required to deliver is the foundation through which organizations effectively align organizational talent to strategic goals, thereby using people as the driver to transformation. And while many companies deploy performance assessment programs, few regularly look forward to identifying gaps in their workforce that prevent them from achieving strategic goals.
Four areas should be considered when identifying the structure, size, role, and skillset requirements of an organization’s workforce...
Align the organizational operating model to the business and digital strategy
Regularly examining whether the organizational operating model is aligned with the company’s purpose and future needs is an integral part of workforce optimization. Aligning highly skilled and capable people to a structure that fails to drive efficiency or empower people to make decisions is the fastest way to negatively impact progress toward achieving the strategy while encouraging attrition of high performers.
It is also worth considering which parts of the model need to stay static and which parts require a more dynamic approach. For example, the organizational structure that supports a fully optimized business process that rarely changes (for example, creating a regulatory report) should be sustained. On the other hand, a structure that supports functions such as product management that are focused on implementing change likely needs to be adjusted more often. Responsibilities also frequently need to be revised as part of any reconfiguration in addition to the organizational structure and model itself.
Sometimes the right thing is to go back to basics, disconnecting reporting lines (and people) from the current structure to enable focus on the target state. Embarking on a potentially matrixed model, in which people are accountable to one leader for a change initiative that has a defined end date and another for their permanent reporting line, can be daunting if not structured correctly and embedded within the existing culture.
Accurately allocate resource requirements
One of the most difficult elements of active workforce planning is accurately predicting the number of resources that will be required in the future. Most organizations allocate hiring to line managers who are reactive and often not aware of the larger strategic, market, and economic trends that drive the required future capacity. If a few midlevel managers add a small number of full-time employees to their organizations, the economic implications to the company may be marginal. But if hundreds of managers do the same thing, abruptly the size of the organization will exceed what is required to be competitive — and what will be required when digital tools and techniques are fully operational.
Traditionally organizations have anticipated the need to reduce costs or other market-driven changes by instituting across-the-board hiring freezes and dismissing low performers based on simplistic criteria. These approaches are broadly ineffective as they can also slow innovation, impact investments that need to be made, and eliminate junior staff who would become the future leaders of the organization. They are brute force actions that may result in short-term spending reductions at the cost of aligning with the future strategy and creating longer-term competitive strength.
A much better approach is to understand the impact that the digital transformation will have on the organization from a capacity standpoint across businesses and functions, using quantitative metrics and outside-in perspective that considers other organizations’ experiences. Implementing this part of active workforce planning as a core business process is critical to avoiding the negative cultural and business impacts of rapidly adding to or downsizing the workforce.
Adjust the existing job architecture
It is common for the roles defined within a company’s job architecture to evolve over time. Some are added as new needs are identified, and occasionally others are retired. A large, complex organization often has thousands of roles, organized in a nonintuitive hierarchy that attempts to align to seniority. In these situations, it is nearly impossible for anyone within the organization to fully understand the overall job architecture, and more importantly a challenge for employees to understand what they need to do to progress to more senior roles.
As a company embraces digitalization and considers how it needs to change to achieve its business goals, neglecting to adjust or wholesale redefine its job architecture can introduce significant risk. Roles that existed for the past need to be dropped, new roles need to be created to align to future capabilities, and the structure of the architecture needs to be refined so that it can be easily and comprehensively be communicated to the workforce and future recruits.
Evolve corporate capabilities and skills
Organizations also must think about the skills that each role defined in the job architecture needs to have. The skills that companies need to be successful in their industries constantly evolve, but often when they invest in new technology and restructure their job architecture, they simply retitle everyone who is affected without also considering whether they have the necessary skills to perform the job as it is newly defined.
To ensure a workforce can evolve at the same speed as its digital transformation, baking upskilling and continuous learning into job roles is essential. Supporting current employees in exploring the latest skills and technologies they need to perform their jobs well increases the likelihood of a successful digital transformation from a people and culture perspective.
Companies that are successful in evolving their business model to address market changes are also constantly evaluating the skills their workforce needs to be successful in supporting corporate goals. When organizations identify a new technology that is necessary to create competitive advantage, they need to consider what skills they need to gain, who needs to gain them, how best to obtain them, and most importantly, how deep and broad the skills need to be propagated across the organization.
Continuous planning is a must
As we’ve seen from the recent massive layoffs in the technology industry, even companies that are fully digitalized and strongly aligned to a technological future (in theory anyway) can fail to properly align their workforce to meet their future business needs. Their experiences in bulking up their workforce and then rapidly reducing it via layoffs illustrates the need for continuous and active workforce planning. The processes and tools to do so need to be fully integrated into the company’s strategy, and senior leaders need to be full participants in its execution.
