One of the most profound changes brought about by the coronavirus pandemic is how it has accelerated digital transformation within companies. It’s a process that most businesses are only beginning to fully understand.
By October 2020, just a few months into the pandemic and long before vaccines became widely available, McKinsey & Company was already reporting that companies had “accelerated the digitization of their customer and supply-chain interacts and of their internal operations by three to four years” and “the share of digital or digitally enabled products in their portfolios” had “accelerated by a shocking seven years.” And the shifts have hardly stopped.
If anything, a constant state of digital change has become baked into operations. While CHROs and human resources departments entered the pandemic under pressure to devise and implement ad hoc tech solutions, they now find themselves not only deeply involved in strategic decision-making for their companies, but in the position of leading the charge for ongoing digital evolution.
“Over the past year, we’ve seen a transformation in the existing workplace, shifts in employee mindsets and a move to hybrid working, with a record number of our employees working from anywhere,” notes Mastercard Chief People Officer Michael Fraccaro. “Our goal is to have seamless collaboration when working in a hybrid format so that all team members can contribute easily and equally—working to ensure our teams can be productive anywhere, with any tool or service.”
In a world in which companies are required to be nimbler and capable of leveraging the skills of high-demand employees across any number of remote and hybrid arrangements, CHROs cannot afford to let the rate of digital transformation slow. Nor can they simply trust IT to understand what the company needs and how it should be implemented. Mastercard, for instance, uses an array of collaboration and communication tools, as well as “tech hubs” for employees and customers, which are equipped with enhanced video and teleconferencing capabilities.
The CHROs who understand digital transformation and are able to foster technological know-how and solutions within their companies have a profound edge on the competition. “People need to focus on the digital and they need to focus on transformation,” says George Westerman, Senior Lecturer at the MIT Sloan School of Management and a Principal Research Scientist, J-WEL Workforce Learning. “What that means is leadership is as important as the technology part.” Research shows that companies that are masters in terms of their digital capabilities excel at two things, Westerman says. “One is the digital capability, which is using the technology to change the customer experience and their operations, but the other is leadership capability, which is the ability to envision and drive change over and over again.”
Understanding what digital tools are capable of, and how to leverage those that already exist, is as much a component of successful digital transformation and keeping up with the latest trends. Often there’s an assumption that tech companies are better at this, or that incumbents in other industries may be laggards, but neither is necessarily the case.
“A lot of the time, companies have a lot of tools, but it doesn’t mean they’re super deliberate about how they leverage those and how they make sure that they’re working in the effective ways,” says Jennifer Longnion, Chief Impact Officer at Flexport and former Chief People Officer at Dollar Shave Club. Successful digital transformation depends as much on understanding and serving the real needs of employees as it does on the actual technology being used.
The ongoing nature of digital transformation is key. It’s not a one and done activity, but rather an entire way of operating. The companies that are best at it embed digital transformation within their cultures, rather than focusing on tech solutions to discrete problems. “The idea is that technology is a tool, a partner and a guide, and is something that is not just outside of the system but an integral part of the system,” says Catherine Hartmann, Managing Director, Global Work, Rewards and Careers Practice Leader at Willis Towers Watson. For HR departments, success with digital transformation requires understanding “what the business is trying to accomplish, rather than just thinking about what HR needs to get done.” For some organizations, this may be a radical change, Hartmann cautions. “In the past, HR was focused around building awareness of plans and protocols, and now there’s this huge idea around HR as change management and influencers.”
The Digital Ecosystem
It’s relatively straightforward to develop a digital tool, so long as one has access to a budget and a capable IT department or partners. Much more challenging is understanding what the actual problems and pain points are that need to be solved and whether those problems are fundamentally tech problems (or are best solved by a digital solution) or are primarily people problems. IT may be able to build or deploy an application, but without leadership from HR, the tool may fail to solve the problem it was intended to, or it may not be adopted in the way that it needs to be to succeed. “Technology changes quickly, exponentially,” says Westerman. “Organizations change much more slowly.”
CHROs consequently are faced with two tasks simultaneously. The first is helping their employees, at all levels, to become comfortable with digital change and experimentation, and the second is engaging them to help identify problems. “Employees are the best signals of the health and opportunities in a company’s processes,” says Westerman, and CHROs are uniquely positioned “to find better linkages between IT and digital and businesspeople, so that it becomes easier to co-identify, co-lead and co-create value in the world.”
The most important thing for CHROs to do is to think about what the company needs from its digital tools and how it can ensure those tools are used. “I work with an IT or tech team to say, ‘what solutions best meet that need and are able to meet all of our standards and requirements,’” says Longnion, noting that IT plays an important role in helping to understand whether the capabilities of a particular tool live up to the sales pitch. Then it’s important to understand “if there’s any sort of plug-in integration that has to happen…so we can do really great analytics. Otherwise, it’s just like I’ve got 50 different tools, and I don’t have one dashboard or place where I can get insights about our employees.”
Fraccaro notes that it’s not enough to make tools available. CHROs must find ways to change the behavior of employees so that they actually use the tools. To drive behavioral change, Mastercard has “rolled out manager training for leading hybrid teams, resource guides and a hybrid working intranet site with tips and best practices.” If people don’t know that a tool exists, don’t know how to use it or cannot access it conveniently, the problems it was intended to solve will persist.
Vulnerabilities and Opportunities
Westerman argues that “the real value from technology does not come from the technology,” but “from changing the way you do business.”
A great example of this is how Unlocked, an AI-driven internal talent marketplace at Mastercard has become an unlikely solution for a myriad of problems. Unlocked allows employs to post and look for opportunities, everything from short-term projects to mentorship and volunteer activities, within the company. And while Fraccaro says it “it began as a way to explore a new approach to work for our worldwide and growing 23,000+ Mastercard colleagues,” it has “evolved to take on many of the challenges we face in the workforce,” such as “needing to collaborate in hybrid workspaces, supporting our team’s well-being, and recruiting and retaining top talent.” The tool uses AI to match employees with proposed opportunities based on the info they provide in their profiles, their areas of expertise and what they are most passionate about or want to explore more. In effect, the digital tool helps Mastercard unlock latent capabilities, and put together teams to solve problems, faster and more efficiently than it could otherwise. “It helps our employees, and it also helps our business, allowing us to deploy skills and talent where and when we need them,” says Fraccaro.
While Unlocked is a great example of the opportunities and benefits of digital transformation within a company, CHROs must be careful about when and how they deploy technology. “We’ve seen our industry impacted by ransomware and cyberattacks and things like that,” says Longnion. The more companies rely on digital tools, the more vulnerable they become. At the same time, digital can help companies protect themselves. “One of the things on our front that I have to do is digitize all of our training and make it online,” Longnion explains, and cybersecurity “is a big part of our training. Every employee has to go through security training.” That training covers ethics and how to handle data on behalf of the company, but also the ways data and tools can be compromised and risks that poses to the business. “If your customer data leaks or if your systems are infiltrated or your people’s data leaks, it can shut you down if you’re not careful.”
Creating value from digital transformation and avoiding the dangers in it is only possible when a company has a truly digital culture. Westerman identifies several key values in companies that succeed at this. Leaders at those companies move quickly, and “even if they make mistakes, they just correct those mistakes.” They also understand that “it’s about impact or mission and not profits. People come to work because they feel like they’re doing something good for the world.” And finally, leaders must also promote autonomy—giving employees a lot of room to experiment—and “real openness, working with anybody, anywhere, whether they’re inside or outside their unit or their company,” a trait which he refers to as “talent over title.”
In the end, digital transformation is a process, not a journey with a definitive end. The CHROs who will succeed at it are those who are able to experiment and iterate, seek to understand whether both the human and technological aspects of the problems their companies are facing, and build a digital culture that is able to fully leverage the benefits of technology. It’s not an easy task, but the benefits are real.
The Four Elements of Digital Transformation
Hartmann identifies four key elements CHROs need to focus on to foster digital leadership and transformation within their company.
Cost flexibility and optimization. Digital transformation requires experimentation, so whatever tools are used need to be adaptable. CHROs need to think carefully about the ROI for programs and “understand that what worked six months ago may not work at the moment or may need to change.”
Develop an agile workforce. Digital leadership is not just about the skills your employees have right now, it’s about their ability to learn and adapt to changing circumstances, as well was the ability to adjust digital tools and programs to suit new conditions. HR programs need to be able to flex if they’re going to be sustainable for the long-term.
Prototype and iterate solutions. Design tailored, flexible employee experience solutions. Define the problem that’s being solved for and then iterate solutions for it. Plan to experiment and test things out, and be willing to say, “this may work, this may not work” and then circle back around and change the things that aren’t working.
Focus on how technology can augment your operations. Previously, HR was often siloed into various teams such as compensation or talent acquisition. “More evolved HR teams are really looking at those components not as separate silos that are solving different issues, but as pieces that fit together,” Hartmann says, and they are embedding technology to create a unified ecosystem. “You don’t want a tech ecosystem where people have to go to five different places to get information. You want a consumer-based experience similar to what they would get from any type of service they would use.”