Our global report “Organizational Agility: The Roadmap to Digital Acceleration” looked at the impact of rapid digital transformation on company culture and best hiring practices. With the advancement of digital technologies, it is imperative that CHROs remain agile and adaptable.
We based our report on a survey of 1,024 business leaders and senior executives (C-suite and their direct reports), as well as 15 qualitative interviews. Respondents were based in 14 countries and worked across 12 sectors, with most from the financial services (18%), professional services (15%), and technology (10%) sectors.
“We find that an iterative process based on trust is a much healthier way of working.”Roelof Kistemaker Chapter Lead, People Rewards and Recognition, People Insights and Technology Roche
In this survey, four key findings emerged that highlight growth in digital revenue and what enables it:
Digital revenues dominate (and are accelerating). More than one-third of firms now expect that 75% or more of their revenue will come from digital within three years—more than three times as many firms as 2019.
Smart technology is driving digital growth. Organizations that have made progress deploying artificial intelligence (AI), machine learning (ML), or robotic process automation (RPA) are more than twice as likely to report high levels of digital revenue as those that have made little or no progress.
Changing tools is easier than changing minds and habits. While more than half of organizations (56%) said their technology is compatible with digital transformation goals, just 16% said the same about their company’s culture. Organizations that put additional emphasis on helping employees adopt and adapt to new technologies are likely to achieve higher digital return on investment (ROI).
Agility builds resilience. Organizations that responded fastest to the pandemic are more likely than others to have embedded agile capabilities such as data accessibility and cross-functional collaboration. When asked what change would make their organization most resilient in the face of future crises, one-third of organizational leaders pointed to accelerated rates of digital growth.
The survey found that CHROs see culture and skills development as key challenges in making digital transformation a reality. HR leaders play a crucial role in facilitating this. Removing bureaucratic red tape throughout an organization is now a priority for a more agile work environment. Skill sets will focus on smart technologies, with one-third of all respondents declaring smart tech their most sought-after skill.
As we have seen from the last year, a rapid response to an unprecedented series of events can make or break an organization. Companies with strong digital revenue streams weathered business changes more effectively than their peers.
A key factor in organizational success during these times is structural agility. Department heads have differing opinions on what can increase structural agility. Our survey showed that the HR department is most likely to point to a lack of clear communication where structural changes—such as leadership changes or updates to common business processes—are concerned. Perhaps as a result, HR heads are more likely than other leaders in the study to value communication skills (24%) and empathy (15%).
Roelof Kistemaker, chapter lead of both people rewards and recognition and people insights and technology at Roche, a Workday customer, put it this way: “We want to avoid having a group of leaders sitting in a room deciding on a process, then announcing the change to the organization. Rather, we get team members to work on design sprints, empowering the people who are closer to the work to design what the organization should look like. Sometimes it's a bit uncomfortable for people because they like to be given the answer, but we find that an iterative process based on trust is a much healthier way of working.”
By focusing on cross-organizational conversations, CHROs can increase internal alignment around the means of digital transformation. By adopting and socializing tools for agile planning, they can help accelerate and simplify organizational change.
Firms that have enjoyed significant progress in deploying AI, ML, and RPA are more than twice as likely to derive high levels of revenue from digital than those that have made little or no progress. Achieving these results requires a workforce with knowledge of smart technologies.
More than one-third of all respondents ranked the ability to work with AI, ML, and RPA as their most sought-after skill over the next five years. It’s also the skill their employees are most likely to lack. Training existing employees on how best to use this type of technology positions the organization to adapt while accelerating digital growth.
The CHRO can break through the skills barrier using effective hiring. HR is the only department that views difficulty hiring and retaining employees as a bigger barrier to skills development than the global uncertainty caused by COVID-19. Thirty-nine percent of HR leaders, a higher percentage than other types of leaders, said difficulty hiring and retaining employees is the primary barrier to upskilling for digital revenue attainment. HR leaders were also more likely to mention lack of skills in the marketplace as a barrier (31%). Their perspectives are clearly shaped by different and more challenging experiences with new employees than those outside of the HR field.
When asked whether there is a high level of cultural and structural alignment between CEOs and the wider business, only 69% of HR leaders said yes, compared to 86% of CEOs. The disconnect indicates a need for honest conversations among both types of leaders. The results can be significant: Fast responders (those who were able to more quickly respond to unexpected demands brought about by the pandemic) reported higher levels of alignment between the CEO and the business and a greater propensity for employees to self-organize in collaborative teams.
Most concerningly, only 16% of business leaders said their organizational culture aligns with its digital transformation goals. This disconnect between employee engagement and organizational vision can lead to more challenges for organizations in times of rapid change.
CHROs bring a unique perspective to internal cultural alignment. Among CEOs, 81% believed that incentives and key performance indicators (KPIs) align with desired cultural outcomes, while only 62% of HR heads believed this to be true. Creating a culture of cross-functional collaboration aligns teams and empowers them to work at greater speed and scale. Their deeper understanding of employee needs and goals can help ensure that metrics and incentives align with the drive toward digital revenue.
An organization’s employees are its most valuable assets. That said, digital transformation in any organization will never succeed if employees aren’t on board. Of the companies surveyed, 60% said their organization has removed bureaucratic obstacles that slow decision making. That’s 7 percentage points higher than in 2019. Organizations are realizing that the traditional red tape is blocking entry into a smooth digital transformation throughout all departments.
Due to the pandemic, 42% of fast responders stated their KPIs are now rendered useless (this rose to 52% among slow responders). KPIs play a significant role in optimizing recruitment procedures, employee engagement, and turnover rates, making updated metrics essential to success in these areas. CHROs should be focusing on building KPIs that align with cultural outcomes to increase organizational agility and resilience.
More broadly, accelerating digital growth was the change most often cited by all respondents as necessary to resilience in future crises. They also highlighted the need for increased investment in workforce and cloud technology. The CHRO can help improve ROI by ensuring the workforce is prepared for faster growth and the acquisition of new skills.
CHROs and CEOs alike pointed to culture as a key barrier to agility. However, CHROs are uniquely situated to overcome these barriers through company culture, KPIs that align with cultural outcomes, and better communication. In the age of rapid digital acceleration, CHROs can empower people to thrive in a world of change.
Read the rest of the report here to learn more about how internal cultural alignment leads to acceleration and growth in an ever-changing world.