Winning the Digital War for Talent

As companies attempt to compete in an increasingly digital world, they face a wide range of challenges. Somehow, with limited resources and competing priorities, they must develop the capabilities they need so that their activities, people, culture, and structure are well-aligned with their organizational goals in a changing competitive environment. One of the most critical issues is finding the right people — something many companies appear to be struggling with — and designing paths forward that meet their needs. In a 2016 digital business study and research project that MIT Sloan Management Review and consulting firm Deloitte LLP conducted, we found that the ability of companies to attract and retain talent was one of the most serious — and most overlooked — digital threats companies faced. Seventy percent of the more than 3,700 executives, managers, and analysts we surveyed agreed that their organizations needed a new or different talent base to compete effectively in a digital world.

Yet the actual skills that organizations and their employees likely need may come as a surprise. Respondents indicated that technical skills were most important only 18% of the time for leaders and 27% of the time for other employees. Many saw other capacities — being change-oriented, forward thinking, and having a transformative vision — as equally important or even more important for working successfully in a digital environment. Today’s employees are looking for opportunities to work for companies that will allow them to develop and demonstrate the skills and abilities that they need to succeed in the digital world.

Organizations that can provide such opportunities, be it through formal training or hands-on experience, have an advantage in both attracting and holding on to talent. According to our survey, respondents who felt that their employers did not offer opportunities to develop their digital skills were six times more likely to say they expected to leave the company within a year than those who worked for more digitally mature organizations where there were more skill development opportunities. Those who were disposed toward leaving weren’t just the younger, less-experienced employees but also middle and upper managers, who are often seen as critical to an organization’s future. Unless companies act quickly, they are likely to lose talent they currently have and experience difficulty attracting new talent.

Where Will Talent Come From?

In our interviews with digital executives and analysts, we saw two distinct approaches to thinking about talent in an increasingly digital business environment. Some companies expressed great interest in tapping into fluid talent markets made up of skilled contractors and consultants. Companies pursuing this approach seek to develop a more flexible staffing model that uses a digital platform for accessing freelance talent. For example, Work Market Inc., based in New York City, operates a freelance management platform that facilitates hiring specialized talent based on an organization’s current needs. While businesses that act as brokers between companies and freelance workers have been around for many years, digital talent markets are different in that they can be used to coordinate the activities of both specialized employees and contract workers more fluidly, dependably, and in real time. Companies across many industries are using digital talent markets. For example, Olo, a digital ordering company based in New York City, is working on integrating its point-of-sale software with Uber infrastructure to provide on-demand delivery drivers for restaurants.

Talent markets based on digital platforms have been evolving in significant ways in recent years. For example, Topcoder Inc., a San Francisco-based company that connects a global community of software designers, developers, and programmers to customers, is well-known as a talent market platform. However, as the needs of the tech industry have changed, Topcoder’s strategy has changed as well. Rather than just being a platform where software developers can shop for their next project, Topcoder has also begun to work with its members to develop their skills as project managers so that they can learn how to manage the on-demand talent its platform provides.

In contrast, other companies are focused on how to develop and manage existing employees for the long term. Many of these companies invest heavily in new approaches to onboarding and continuous training and development. They provide employees with opportunities to grow digitally, not only through technical training but also by offering carefully curated work experiences, different experiences over time, and career development support. Allied Talent LLC, a Silicon Valley-based consulting firm, advises companies on how to to deepen employee skills while engaging employees in creating their career paths. The firm recommends that employees move to new projects within the organization every two to four years, taking on assignments that support both the corporate mission and the employee’s career goals. This approach is designed to allow employees to develop new skills while having diverse career opportunities within the organization.

Blending Two Models

On the surface, the two approaches to attracting and managing talent in a digital world may appear to clash with each other. The first strategy encourages easy access to on-demand talent through digital platforms that can be expanded or contracted as work flows and skill-set needs change; the second calls for developing and investing in employees. Although most companies tend to emphasize one approach over the other, we suggest that a strategy that combines elements of both could provide a potentially effective way to compete in a digital world.

Such an approach would mean that digital organizations would rely on two types of talent: flexible “on-demand talent” who can be called upon when needed and “core” employees. A division along these lines is by no means new — companies have relied on core staff and contractors to fill their talent needs for years. But digital platforms enable companies to source and organize talent more quickly and easily than ever, providing managers with new flexibility to configure staff and contractors in ways that can work best for a given project. This may require rethinking the future for both on-demand talent and core employees.

Cultivating Talent Markets

Companies may need to consider how to manage specialized, fluid talent differently than traditional employees. It may require cultivating on-demand talent markets so that specialized talent is available as needed and on demand. Talent markets can be maintained via digital platforms that monitor, evaluate, and support the talent pool of on-demand contractors.

Manage on-demand talent markets as a community. In order for companies to ensure access to the types of skill sets they need, they should recognize on-demand talent markets as strategic resources and invest in the long-term health of the talent pool itself. Individuals may come and go, but the on-demand talent market should be nurtured and maintained with an eye toward the future.

Balance full-time and part-time talent. While talent markets have typically been used to manage part-time freelancers, some companies have also begun experimenting with them as platforms for assigning full-time employees to projects as needed. For example, Work Market has set up dedicated talent pools for companies made up of both full-time employees and part-time freelancers. Full-time employees provide a stable base of employees, while part-time contractors provide the flexibility to deal with variations in demand.

For some on-demand contractors, the opportunity to become full-time employees may be a powerful motivator to continue building their skill sets. However, there are many people who are not in the market for full-time employment but still have valuable skills (for example, student workers, parents of young children, and people nearing retirement age). The crowdsourcing site Innocentive Inc., based in Waltham, Massachusetts, has found that retired workers with specialized expertise are among its most valuable and regular contributors.

Create an environment where the best people want to work. Many organizations treat contractors as second-class citizens, but companies that want to attract great talent can’t afford to do that. On-demand talent with valuable skills can choose to work for any project or company. To ensure that they’re able to get the best, organizations should cultivate an environment and incentive structure where on-demand contractors are valued as integral contributors to the company’s strategic objectives. Providing desirable work experiences and environments, opportunities to work on interesting projects, and exposure to different teams can help drive engagement.

Rethinking Core Employees

Companies that increasingly rely on these talent markets may also need to rethink the nature and roles of their full-time employees. Core employees are not just full-time employees. They are the people you plan to invest in to build and guide the long-term strategic direction of the organization. Therefore, you should think about them differently.

Train employees to delegate to on-demand talent. Although core employees will likely be working with other core employees, increasingly they may be delegating work to on-demand talent, which will require specific managerial skills. Effective delegation requires knowing how to source critical skills, how to assemble teams and get them up and running quickly, and how to use digital decision support tools effectively to meet the goals. These skills can provide the organizational agility and the collaborative environment that characterized digitally maturing companies in our survey.

Equip core employees to influence strategic decisions. Core employees, even those who are relatively junior, should have a certain level of strategic autonomy to accomplish or contribute to designated goals. Strategic thinking is one skill that respondents to our survey indicated was essential for both leaders and employees working in a digital environment, and distributed leadership was a key cultural element of digitally maturing companies. Obviously, offering greater independence would require more communication with top leadership and increased awareness of the strategic direction of the company.

Create an environment people will want to be a part of for a long time. It is no accident that a key differentiator of digitally maturing companies is the way they intentionally work to develop, maintain, and strengthen employee engagement. Keeping core employees engaged for the long term involves providing more than a paycheck. For employees to want to stay and contribute, many say they need to feel that the organization is willing to invest in them and will continue to offer opportunities for growth. The 3M Co., for example, invests in new hires to build loyalty. According to 3M CEO Inge Thulin, the company plans to put all of its employees in an expanding employee development program by 2025.

Provide diverse opportunities to gain digital experience continually. Core employees likely require new opportunities to grow their skill sets over time. Companies can create new development programs that — unlike traditional leadership development programs that selected employees take part in at certain points of their tenure — encourage core employees to continuously update their skills to stay abreast of the ever-evolving digital world.

Organizations seeking to compete using a combination of core employees and on-demand talent markets need to address some important questions. For example, how big does the core organization need to be, and what skills should the core employees have? Should companies work with existing on-demand talent markets, or should they cultivate their own to ensure that they have the right skills when they need them? How does a company build a robust on-demand talent market while keeping these skills from competitors? And to what extent is it possible to cooperate with other companies to share talent markets?

With these and other questions in mind, companies are beginning to experiment with new models for managing talent. Such experimentation could be essential for getting the most out of talent in the digital era. Talent management designed for traditional work environments may not enable organizations to compete in the digital world, and it may discourage the very people you most want to attract and retain.