A global survey of more than 600 executive recruiters and leadership advisors from executive search firms, by the Association of Executive Search and Leadership Consultants (AESC) has revealed that HR departments are significantly behind other functional departments when it comes to digital transformation.
Legal departments were ranked on par with HR, while marketing and technology departments were ranked the most digitally-advanced within organisations, in the survey published in AESC's Leading Transformation: Shaping the C-Suite for Business 4.0 Innovation report.
The global trend followed course in Asia as well, where the least digitally-advanced function was legal, followed closely by HR at a score of 2.1 and 2.5 respectively (where 1 represents least advanced). Just over 13% of the respondents were from Asia.
This functional gap within organisations, across industries and geographies, is creating major barriers to enterprise-wide digital transformation.
The survey also revealed the top five obstacles which prevent organisations from achieving enterprise-wide digital transformation:
#1 Legacy approachesThe conversion from idea to solution, the implementation of ideas, and activation of the right leaders who understand and foster the transformation is found to be difficult. Therefore, many companies continue to follow old success models, even if they increasingly do not work.
#2 A lack of the right talentAs one respondent from India put it: "There is a demand for people who combine different skills. I refer to it as a triangle—a triangle of sought-after skills. It combines the three aspects of data analytics, technological fluency and business acumen. There is a huge mismatch in the demand for this type of talent versus the supply."
#3 Organisations are not investing enoughWhile leaders understand the need to digitally transform, many organisations fail to invest the time and resources into ensuring that there is a sound strategy in place to make it happen.
A respondent from Canada shared that leaders need to be aware of the new technologies transforming the workplace, explaining: "Leaders of those institutions have to start thinking creatively about how the fundamental business of their organisations and their sectors is changing and how do they get ahead of that now, because if they don’t start thinking about those things, they will be challenged."
#4 A resistance to changeToday’s leaders are managing workforces that have different levels of understanding regarding digital. An embrace of change to a digital culture requires proper support and training to ensure a uniform understanding of the process.
It was also highlighted that organisations struggle to achieve digital transformation because they do not have the culture to support it. When respondents were asked to share the top elements required for a healthy culture, they rated: leaders who lead by example, clear communication, and an empowered workforce as the top three characteristics.
One respondent added: "Businesses need to articulate the transformation they need for their company and actively work to change the culture.
"What will they need to do to change the culture? To digitally transform, to innovate, organisations need to change their cultures. They're not going to succeed by just bringing in capable talent and paying high salaries. They have to shift the culture of the organisation. If they don’t have innovation in the blood of their company, they’re not going to succeed."
Transformation is not something that can just be talked about. You have to build the transformation. Transformation happens with the culture of the company.
#5 Organisations lack a clear definition of what it means for their businessMany organisations lack a clear understanding of what digital transformation means. They have not defined it for their businesses. There is a lack of understanding, a lack of training, and often a perception that it is the responsibility of one department.
To tackle this issue, one respondent suggested: "Clear thinking about what they want to accomplish or what problem they are trying to solve is necessary.
"We see many organisations trying to digitally transform and speed up poor processes rather than step back and contemplate how they could use new tools to do things in a better, faster, more cost-effective way."
To build a stronger, future-ready workforce for innovation, talent management is highlighted as a key factor to address. HR leaders need the right strategy in hiring talent:
Be open to talent from other industries"Be open to talent from adjacent industries or other relevant talent pools. If it’s financial services, the perfect candidate may not be someone from financial services. They might come from another heavily regulated industry, they might come from retail. And it wouldn’t need to come from retail financial services, necessarily, it could come from retail telecommunications or broader retail," one respondent advised.
"So, someone who understands the customer and customer propositions—having that focus rather than in the industry sector."
Provide development opportunities to high potentialsOn this, one respondent commented that new development opportunities provided by organisations in an area of interest or mastery will inspire talented people. He added: "High performers tend to be motivated by opportunities that provide sufficient challenge for personal growth. That tends to drive interest and creativity in people."
Talk about the futureAccording to a respondent, "Too many companies are talking to candidates about the first year in the role and not about future plans. If you really want to motivate a candidate who is well established where they are, it’s important to talk more about the future. And not talk just about the year to come."
Lastly, in terms of how significantly C-Suite roles have to change for a better leadership, CHROs fall in the middle with a score of 3.9 (1 being the least change, 5 being the most) in Asia, between CFOs and CMOs. The following chart represents the full change required across regions:
All images / AESC