Alan Guarino is vice chairman of Korn Ferry's CEO and Board Services practice, Melissa Swift is global leader of the firm's Digital Solutions practice, and Gabriella Kilby is a Korn Ferry senior partner.
If you are the CHRO in a company where you have a strategic role, then you must understand what the CIO is facing in the digital world. When it comes to evolving the IT organization, it is likely the CIO either "gets it" or doesn't. If they get it, you can be a valuable partner. If they don't get it, you could play a role in potentially saving the company. So what is the evolution that is needed? Why does this matter to a CHRO?
We aren't going to tell you the specifics. We're going to help you figure it out on your own.
First, let's look at the type of technology organization that existed prior to 2007, when the digital/mobile revolution truly took hold. This of course coincided with the launch of Apple's iPhone. The most vivid example of how the world changed is easily seen when comparing brick-and-mortar traditional retailers to purely digital competitors such as Amazon. The enterprise technology that drove, and very often still drives, traditional brick- and-mortar businesses is not technology designed for rapid modification. The technology connections were built around the concept of a Bus(1) running on hardware sitting in data centers, while their purely Internet-based competitors had much more flexible connection infrastructure and were based in the cloud. While there are many other significant differences, at their core purely digital companies think differently about their technology and have the benefit of running and working on technology that has been nimble from the start.
The result of this new commercial paradigm is truly coming to a head. Traditional brick-and-mortar retailers are cutting back and failing at an alarming rate. Online commerce is exploding exponentially. If traditional retailers had adopted nimble, cloud-based, modular systems architecture more rapidly, they may have actually had an advantage: the ability to deliver to customers in both the digital and physical worlds. Instead, they often lagged on the digital side and eventually suffered from disintermediation and the slow demise of the physical marketplace.
Hopefully you are not asking what this has to do with the CHRO. Hopefully you concluded that a strategic CHRO, playing an active role on the company's executive committee, would have been looking at technology from an organizational perspective while the CIO was looking at it from a technological perspective. According to Phil Fasano, former CIO of AIG and Kaiser Permanante, "these perspectives are complementary, with a natural opportunity for partnership on the digital agenda between the CHRO and the CIO." This strategic CHRO would have been at the front of this revolution by keeping a finger on the pulse of change in the organizational designs and operating models of digital competitors. Doesn't the CHRO own the people strategy? The CHRO should not simply be an order taker, but should instead be aware of new trends and business strategies because these things ultimately determine the organizational design and the people strategy. By reading this, perhaps you have concluded that if you are a CHRO and your colleagues are not staying ahead of the curve, you are in a terrific position to play a big role in waking the company up to the potential need to evolve. That's why this is important to CHROs and why they must be prepared to meddle if necessary.
Thinking like a CIO, and understanding the needs and challenges related to evolving a legacy platform into something new and nimble, would have led a CHRO to suggest changes in organizational design and individual competencies. Since the CHRO is responsible for ensuring that the company has the right people in the right place at the right time with the right competencies, then they must continually be out front looking at the competitive landscape and collaborating with their colleagues who run businesses and critical functions like IT. In terms of human capital analytics support, Krishna Nathan, CIO at S&P Global, offers advice: "With the advent of AI and Big Data, a CHRO in today’s world should insist on collecting and analyzing vast amounts of data. How can you analytically predict attrition? Identify those employees most at risk? The CHRO needs to ensure that he or she collects the appropriate data so that the CIO’s teams can derive meaningful predictions from it."
So what are some key HR differences between legacy company technology organizations and their digital competitors? From an organizational design perspective, the digital competitors are more likely to have operations and application development working in unison. This creates a closely tied app DevOps workflow that enables the rapid change. These companies locate technology personnel as close to the coalface as possible often enabling them to co-create with an actively involved customer base. From a workforce competencies perspective, the differences are significant and meaningful as well. While there is an old saying that you "go to war with the army you have," that should not be a long-term approach. Over time, but as quickly as possible, the people strategy must evolve so that the organization has the new critical competencies necessary to succeed. Companies today are facing thought-provoking build-vs-buy decisions around this new breed of talent. They hunger for a “shot in the arm” from people with new skills and, often, new mentalities – but then often struggle to integrate two disparate workforces. “Reverse onboarding” can be required - in what ways will the existing organization’s culture change to better include and enable new (and badly needed) talent? In this regard, to include reskilling in talent strategy can be powerful, especially when the workers who are chosen to be reskilled have been thoughtfully selected for having a robust ability to learn.
Taking the big-picture view, there is in fact a competency set that is common to successful digital companies and is measurable.
Our research lays out five measurable competencies for digital sustainability, which correlate strongly to growth in gross profit margins.
1. Discipline and focus
Tech organizations must be clear on what digital means to their specific organization, and be prepared to execute effectively and single-mindedly toward that vision. Prioritization of the right initiatives is critical, as is repeatability and scalability.
For a tech organization, the key to connectivity is setting up vibrant ecoystems to let both internal and external collaboration flourish. Joint learning and co-creation is the order of the day.
3. Openness and transparency
For the sort of collaboration that enables connectivity to flourish, open and transparent communications are a must. Tech organizations that demonstrate this capability empower their people; all voices are heard in a fully inclusive environment where decision-making occurs on a public stage.
4. Empowerment and alignment
Digitally sustainable organizations empower the parts of the organization that sit close to three key sources of value: customers, talent, and data. For a tech organization, then, putting as much authority as possible in the hands of those who touch data is critical. Such organizations then align the entire tech organization around the shared digital journey to further drive the ability for the frontline to make decisions in the moment without fear of missteps.
Agile technology organizations plan and execute in parallel, make decisions quickly, and don’tshy away from risks. Our research shows such organizations are populated with highly learning-agile executives – who are 18 times more likely to be high- potential than their peers.
Why are these competencies important, and how do they translate to concrete business activities?
Let’s take the example of agility. Korn Ferry research demonstrates that agile organizations have 25% higher profit margins. Why? We’ve identified three components that drive the kind of agility needed for a digital world: first, the aforementioned learning agility among executives; second, rapid decision speed; and third, lean management. Think about an organization that truly displays these three traits. It can explore new areas easily and pivot quickly to anticipate disruption. Without an abundance of layers in between the frontlines and top management, the right customer information constantly flows in and enables better strategic decision-making. Agility may sound abstract, but it in fact fuels very palpable outcomes.
Accordingly, as the CHRO, you should drive a heat-map exercise to determine the abundance or lack of these competencies within your organization, more broadly as well as in the IT organization itself. After all, what good is a strategy if you don't have the capability to execute? Like it or not, organizational capabilities are derived from the aggregate competencies that reside in the workforce. If the competencies are not there, your organization does not have the capabilities it needs. It is as simple and as complex as that.
So, as a CHRO, we encourage you to think like a CIO and, yes, meddle if necessary. After all, it isn't meddling; it's really your job.