The Four Ways to Manage Digital Talent and Why Two of Them Don’t Work

Digital has not only forced us to reimagine where and when work is done, but also who is going to do it. Digital leaders are experiencing new challenges as they compete for digital talent that is in high demand. They are dealing with three key shifts: (1) a shortage of talent with the requisite digital and social skills, (2) the need for flexibility to scale according to project requirements, and (3) skilled digital workers often choosing to work as freelancers. Digital marketplaces for freelance IT talent, such as Topcoder, Upwork, Kaggle, are rapidly growing as more people are choosing alternatives to full-time employment. Forbes estimates that 35% of people are choosing freelance work and this is rapidly growing, particularly among millennials. Companies that design workplaces for flexible approaches to both work and workers are more likely to succeed in the world of digital.

We have been studying what it takes to design and manage workplaces that enable our people to be the best they can possibly be in the digital era (see our recent piece in the MIS Quarterly Executive). This study found that two design levers really matter in the implementation and management of digital workplaces: (1) enabling employee connectivity and (2) facilitating a responsive, evidence-based leadership. High-performing companies focus on the digital capabilities to connect people with each other, with ideas, and with the broader world. At the same time, these companies are deploying very different leadership capabilities — actively building test-and-learn environments.

Actively deploying digital workplaces is challenging for more traditional companies built on command-and-control principles. It is even more challenging when the key digital talent demands to work in new ways. We wanted to know more about how this shift in talent needs and demands was affecting the way companies design their workplaces to attract and retain the best people. We conducted interviews with 40 senior executives from IT, HR, and talent management in 28 companies across a range of industries at the end of 2016. While all interviewees faced significant challenges, they were approaching digital talent management in very different ways.

We have been able to identify four distinct approaches to managing talent in this challenging environment (see Figure 1): Aligning, Orchestrating, Architecting, and Curating. These approaches differ based on both the mix of full-time employees (FTEs) and freelancers, and the capabilities in the organization to manage the relationship with digital talent. More relational talent management capabilities focus on flexible, individualized approaches to building mutual value, while more transactional approaches rely on business rules and standardized processes.

Aligning: Companies in this quadrant typically defined jobs and talent according to measurements of fit with the skills required for a specific role. Compliance and risk minimization dominated both the IT systems and management capabilities supporting talent management in these companies. The dominant approach to talent favored investments in people employed full time and likely to have a long-term career commitment to the organization.

Orchestrating: Some companies in the Aligning quadrant had started to feel the effects of talent shortages, and they were moving, often not by choice, into more hybrid approaches to attract the talent they needed to meet increasingly urgent and less predictable delivery schedules for digital offerings. HR approaches and workplaces designed for the full-time workforce were being challenged. To avoid using slow recruitment and selection processes (designed for Aligning approaches), digital leaders were finding their own solutions with practices such as shadow HR and IT-dedicated HR teams.

Architecting: These are companies focused on creating interesting work environments to meet the needs of digital talent to have a variety of work experiences, build broad networks, and learn new skills in personalized ways. Architecting companies had developed talent management capabilities around creating flexible internal talent pools to enable people to move around projects and business units, self-directed skill development programs, and personalized, multifaceted career paths. Digital capabilities (such as talent platforms, social networks, and good systems for search) and responsive leadership capabilities (such as talent analytics, empowering self-directed learning, and flexible approaches to staffing) were critical in this workplace design to continuously build mutual value. Companies with Architecting models were either digitally born or advanced in their digital transformation, making them naturally very attractive places for digital talent.

Curating: Very few companies had transitioned to a Curating model, although many aspired to develop it at least for top talent who they were struggling to retain. In our study, companies with Curating models tended to operate in business environments where the skills of their core talent were in high demand, and many were freelancers already. It was critical for these companies to maintain working relationships with these highly valued people, so they were designing new ways to engage people — via embedded startup labs where employees could work on their own projects while maintaining their employment with the primary employer, sabbatical terms, or co-working spaces, for example. Distinct from Orchestrators, these companies had developed outstanding digital capabilities and highly connected workplaces (for example, systems, social networks, physical space) to enable people across multiple working arrangements to add value to teams as seamlessly as possible.

Sixty-four percent of the companies we studied were in the lower quadrants of our framework, and often straining to manage a hybrid workforce with IT systems and HR capabilities designed around a more traditional full-time employment approach. In the upper quadrants of our model, we found companies that were either digitally born or well along their digital transformation journey. These companies were experimenting with new talent management approaches, and introducing digital and leadership capabilities to engage in a wide range of employment models.

We question whether the two approaches to talent management in the lower quadrants, which are still pervasive today, are viable for the future. Adapting to the expectations of the digital marketplace is critical to attracting and building a relationship with the value-adding talent.

Digital capabilities that enable new practices, connect people, ideas, and projects more readily, and build collaboration across a wide range of employees are critical. But just as important are the leadership practices that are responsive to the changing demands of work, enabling new and differing working relationships with key people, and delivering the agility needed for work demands that are less predictable. Test-and-learn environments are not just about new ways to approach how work is done, but also who is doing the work.