As companies of every shape and size adapt to an increasingly digital business environment, they need new approaches to leadership development and employee learning. That was a key finding from the fourth annual global survey of digital business practices, conducted by MIT Sloan Management Review and Deloitte.
This year, for the first time, our survey results show a marked increase in the percentage of companies that are becoming digitally mature. Specifically, the number of survey respondents placing their companies in the developing or maturing stages of digital transformation went up by approximately 3 percent and 5 percent, respectively, over the past year, while the number placing their companies in the early stage of digital transformation fell by nearly 9 percentage points.
Today’s digital business environment is fundamentally different from the business environment of the past. It is faster, more distributed and more collaborative–differences that are forcing organizations to rethink how they develop leaders and improve their workforce capabilities.
Such a shift is especially challenging for market leaders and other established companies, which often find themselves limited by their past successes as they struggle to move away from strategies, business models, cultures, and behaviors that served them well in the past. HR leaders can play an important role in helping their companies overcome these obstacles by focusing on new ways to learn and lead in the digital age.
Employees want to learn and adapt but may lack sufficient opportunities
In today’s fast-paced digital environment, keeping up with skill development can be a challenge. HR executives know this all too well as they try to keep training programs relevant in an environment where technology is changing daily. Employees also understand the need to keep their skills up to date and want to continually learn. According to the survey results, 44 percent of respondents believe they need to continuously update their skills to do their jobs effectively in a digital environment, while 90 percent recognize the need to update their skills at least annually.
However, most employees we surveyed are not satisfied with the development opportunities they are receiving from their organizations. Overall, only 34 percent are satisfied with how their organization is helping them prepare for the changes associated with a digital business environment, and that number is even lower (25 percent) for respondents from older companies that have been in business for more than 50 years.
What types of learning are most effective? Respondents from digitally maturing companies tend to view on-the-job learning–rather than classroom training–as the most valuable way to develop new skills for a digital environment. In addition, 90 percent of all respondents expressed interest in using data analytics (e.g., sociometric tools, artificial intelligence) to help them improve their performance.
Organizations need to create environments that foster continuous learning
It is not just individual employees who need continuous learning in a digital business environment. In an increasingly digital world, organizations should also learn and adapt more quickly. This requires greater focus on experimentation and innovation.
Enabling an organization to be more experimental is difficult. Getting people to take risks and act in a more agile way is the biggest challenge impacting the company’s ability to compete in a digital environment according to our respondents. We observe in our survey that getting people to take on more risk can best be achieved by creating an environment that supports experimentation and learning. Digitally maturing companies create that environment by:
- Encouraging new ideas to be shared and tested at all levels of the organization;
- Promoting feedback and iteration to develop new ways of working; and
- Sharing feedback of experiments–both successes and failures–to increase organizational learning.
Leadership is becoming everyone’s job
As companies digitally mature, leadership tends to more distributed and less top-down. More than half of digitally maturing companies (54 percent) say they are increasingly pushing decision-making down to lower levels of the organization in order to execute more effectively. This creates a need for employees at every level to make strategic, real-time decisions that only leaders may have made in the past.
But are employees up to the challenge of taking on added responsibility, particularly if they aren’t receiving the digital skills they believe they need? Taking on greater responsibilities requires comfort with change but somewhat surprisingly, we discovered in our research that employees are more likely to hinder rather than facilitate change compared to company leaders or managers. This is particularly evident for employees at older companies. Only 35 percent of respondents at companies fifty years or older say employees at their company facilitate change more than hinder it.
Developing leaders for a digital world
In a fast-paced, collaborative digital business environment where employees take on greater leadership responsibilities, leaders take on different responsibilities as well. They now become more effective by leading through influence rather than a command and control style. Respondents to our survey were all in agreement that a digitally capable leader needs to provide more of the following:
- Direction: providing a clear and compelling vision and purpose;
- Innovation: creating the conditions for people to experiment; and
- Execution: empowering people to think differently.
While these capabilities appear to be straightforward, few companies have the leaders they need to succeed in a digital environment according to our respondents. Nearly 70 percent (68 percent) of respondents say their organization needs to find new leaders in order for the organization to succeed in the digital age. This even includes 55 percent of respondents from digitally maturing companies.
While the need for new leader capabilities appears high, few companies are tackling the problem today. Only a little more than a third of respondents say their companies are developing the types of leaders who have the capabilities necessary to lead their organization in a digital environment.
The new and important role for HR executives
Digital transformation is a significant challenge and opportunity for all companies. According to this year’s survey, a growing number of companies are coming to terms with the new digital reality and are starting to climb the digital maturity curve. However, success will likely require deep-rooted changes to the organization and culture–starting with new approaches to employee learning and leadership development. To get there, HR executives will need to play an active role in making digital transformation happen.
The following are just some of the ways they can help drive the necessary change:
- Shift your perspective on developing employees. Explore the possible reasons why your employees may be resistant to change. Consider talent development opportunities as an important way to not only support your employees but create a culture that promotes experimentation and learning.
- Place less emphasis on classroom training and more on experiential learning. When it comes to determining how to develop your employees, recognize that traditional classroom training programs may not suffice in a rapidly changing digital world.
- Develop digital leadership skills throughout the organization. Assess existing leadership development programs and identify new ways to help leaders in your organization develop the specific capabilities necessary to succeed in a digital business environment.
- Establish new performance measures. For HR leaders working in older legacy companies that may be resistant to change and limited by past successes, it may be necessary to fundamentally rethink the organization’s performance management systems €“ aligning those systems with the organization’s overall need to be more collaborative, risk tolerant and experimental.
These practical steps should not obscure but instead support an overall need for organizations to change their mindset around learning and leading in a digital environment. Given their position within the organization, HR executives can help company leaders and employees adopt this mindset. Once that change occurs, organizations can take further steps forward toward meaningful digital transformation.