Quality Trumps Quantity of Hires — and It Doesn’t Come Cheap

One European CEO, a big football (soccer) fan, pointed out that if you gave him a large enough budget, he’d be confident he could put together a winning football team. But a cricket team? He wouldn’t know where to start since he knows nothing about the game. 

He used the analogy to point out how hard it can be for company leaders to build an ace digital team today. Getting digital talent on board is difficult enough, given the shortage of supply in a white-hot market. But it can be harder still to identify the right talent in the first place. If you don’t know what “good” looks like, where do you begin?

McKinsey research suggests getting the right people matters a lot. In highly complex occupations (the information- and interaction-intensive work of managers, software developers, and the like) high-performers are an astounding 800% more productive.

So it’s not surprising that the talent issue causes anxiety in the C-suite. A McKinsey study of more than 300 senior leaders in the industrial sector identified “capability and talent management” as the area where the gap between expected impact and business readiness was largest.

That concern plays across numerous types of digital talent, from agile coaches to data scientists. Only 27% of respondents to a separate McKinsey survey, for example, said that they had access to talent with the right skill sets to support AI work. Addressing the talent question is particularly hard for big companies, many of which are accustomed to outsourcing large swaths of key capabilities, from IT to marketing. 

Focus on Getting the Best First

To move forward, focus on quality rather than quantity initially. It’s true that large companies will need hundreds if not thousands of people with digital skills over time. However, a handful of recognized star performers with the right skills and experience can have an immediate and disproportionate impact on the transformation. 

(We’ve seen teams of 10 or fewer high-quality people make remarkable changes. A three-person team that carried out a micro-segmentation of the customer base at a U.S. telecom company lifted the efficiency of the company’s targeting by more than 40%.)

You will need to pay a hefty premium for these rock stars. But the very best people will be well worth the price. In transformations, a core of exceptional talent acts as a nucleus that will ignite change. The stars know what good looks like (and what bad does too) when it comes to hiring more people. They have networks. And they can be magnets for successive waves of high-quality talent. 

As Red Adair, the famed engineer who built a career around capping oil well blowouts, said, “If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur.”

Bear in mind, too, that the premium you pay for this initial set of people can temper the salaries of other recruits who are eager to work with top talent. One large retailer determined it needed 11 people to get a signature initiative off the ground, and identified the people it wanted at a leading tech firm. It paid a 100% premium to lure them away — but the next 50 recruits, eager to work with the first big-name hires, came for a more modest 20% premium. In less than nine months, the team had generated $1.4 billion in additional annual revenue online, a massive payoff.

Besides hiring the best, make sure hiring decisions take into account the problems you need to solve not only now but in the future. In a McKinsey survey, companies that set hiring goals based on specific needs were twice as likely to report successful transformations as those companies that didn’t adopt that practice.

The best organizations measure and track skills development and identify future skills gaps based on a clear view of how the business is evolving, then build a plan to find the people they need ahead of time. Too often, transformation programs grind to a halt as the company struggles to find the talent needed to take the next step.

Rethink HR

The HR function in many companies isn’t set up for the job of hiring the numbers needed, or the types of people needed. Miguel Peña, the vice chairman of Argentine financial institution Naranja, told us that many potential recruits don’t even want to talk to HR personnel because they’re viewed as lacking an understanding of what digital really means. They want to talk to the people they will be working with.

The new HR function must be rebuilt from the ground up. Creating a “digital talent war room” is a useful way to make the shift. The war room has an executive sponsor to give it the clout required to bust convention, and a

recruiting team immersed in digital culture and dedicated solely to digital hiring. The war room works closely with experts across the business to understand needs and involves them in the hiring process. Its work includes mining new sources of talent, radically shortening the hiring process, and helping craft a value proposition fit for the digital age.

One large U.S. agricultural company established a digital talent war room that completely reinvented the hiring process. Candidates were whisked through screening and interviews, reducing the time it took to make a hiring decision from months to days. Hiring managers consciously cultivated priority candidates during evaluations, walking them through the floor to meet teams and leaders, including the CEO, who made a point of sharing his vision with high-priority hires.

The result? In less than six months it staffed an entire skunkworks unit and rolled out a new product after four of those months.

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Some HR teams are also using advanced analytics to better learn how to find and retain people, such as identifying which employees are most at risk of leaving the company or assessing the effectiveness of talent pipelines. Those companies that use innovative recruiting tactics — such as having recruits play games or find messages in code, or hosting hackathons — are twice as successful as their peers in recruiting talent.

Avoiding a Compensation Arms Race

While pay is always going to be an important element in hiring and retaining talent, to avoid a compensation arms race, Melissa Swift, global leader of workforce transformation at Korn Ferry, recommends that you:  

Widen pay bands for skills. Wider pay bands mean a flatter organization — music to digital talent’s ears. It also facilitates a greater number of potential lateral moves, which is tremendously helpful to retaining curious lifetime learners.

Adjust the payout mix. Putting more weight on bonuses than base pay keeps fixed costs down. But it also suits many of today’s workers, who eschew a steady income in favor of something altogether more exciting.

Get comfortable with bigger pay gaps. If you’re paying for value, the pay gap will widen. It’s not unrealistic for a rock-star developer to be earning twice as much as the developer sitting next to her.

Set long-term incentives for your most valuable employees. The average tenure of digital workers today is barely 36 months, and shrinking. Tenure for the best is shorter still. For the most important contributors, establish longer-term incentives that will help keep them.

Rethink performance metrics. Find ways to reward the kinds of behaviors that will help your company succeed in a digital world and inspire your people. Project completion rates won’t cut it.

Get personal. The more you show you are thinking about the employee as an individual, the more he or she will feel valued, whatever the salary. So be creative with personalized rewards. Some companies help with mortgages or school fees. Others offer to pay training costs for anything, anywhere — an appealing prospect for today’s lifelong learners. Others simply offer employees a predefined cash pool to spend on whatever benefits they wish. 

Markets evolve, so evolve with them. Eighteen months ago, app developers were hard to find. Today, it’s agile coaches who are in high demand. So make sure you are on top of trends and plan accordingly to secure the “next big thing.” And make sure you don’t get locked into unnecessary pay promises. You need “agile rewards”  that retain employees for as long as you need them, and not necessarily any longer. Thoughtful organizations are working to discern which roles will last for 18 months and which for five years — and structure rewards to match.

Adapted with permission from Amazon Publishing from Fast Times: How Digital Winners Set Direction, Learn, and Adapt by Arun Arora, Klemens Hjartar, Peter Dahlstrom, and Florian Wunderlich four partners at McKinsey & Company.