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Research Briefing

Employee Experience: Enabling Your Future Workforce Strategy

We share ways that companies typically approach the challenges of attracting, enabling, and retaining digital talent.
By Kristine Dery, Nick van der Meulen, and Ina Sebastian
ABSTRACT

Large, traditional companies are facing a perfect storm: People with the skills and capabilities required to develop and execute a digital strategy—whom we refer to as digital talent—are urgently needed, yet in short supply. In this briefing, we share ways that companies typically approach the challenges of attracting, enabling, and retaining digital talent. MIT CISR research has found that companies that invest in building a great employee experience[foot]We define employee experience as the extent to which employees of an organization are enabled or constrained by its adaptive work environment and collective work habits to do their jobs today and reimagine their jobs of tomorrow.[/foot] are able to attract more digital talent as full-time equivalents (FTE)[foot]Full-time equivalent, or FTE, is used here to describe anyone within the organization who is considered an internal employee, as opposed to those in more contingent work arrangements such as a freelancer, con- tractor, or gig worker.[/foot] and better enable these people to do their best work, thereby realizing significantly enhanced business value.

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FINDING THE RIGHT TALENT SOURCING MIX 

In response to the shortage in digital talent, companies typically attract and develop internal (FTE) talent while also drawing on the external talent marketplace (consisting of freelancers, contractors, and gig workers) to fill skill gaps, build project teams quickly, and access new ideas.

Companies that invest in designing an employee experience are able to attract more digital talent as FTE and better enable these people to do their best work, thereby realizing significantly enhanced business value.

In an MIT CISR study of approximately 300 companies,[foot]This briefing is based on interviews with senior executives in twenty-eight large companies and on a subset of respondents to the MIT CISR 2017 Pathways to Digital Business Transformation survey (N=413)—specifically, those 279 respondents who provided data on their digital talent and employee experience.[/foot] 94 percent of respondents indicated drawing on both sources to varying degrees. In the IT unit—where respondents indicated that the challenges in attracting and retaining digital talent are acute—we found that the majority of digital talent (60% on average) is sourced externally. Yet while primarily drawing on the marketplace may help to plug temporary skills gaps and provide rapid access to talent, we found that business outcomes generally suffer as a result: Companies with an external talent focus—those that fill at least 50% of their IT workforce needs with talent from the marketplace—have lower net profit margins, are slower to bring new products and services to market, are restricted in their ability to change, and are less innovative (see figure 1). The alternative—recruiting and developing more digital talent on an FTE basis—is very hard for companies to pull off in a highly competitive labor market.

BUILDING A GREAT EMPLOYEE EXPERIENCE TO ENABLE DIGITAL TALENT TO THRIVE 

Our research revealed that companies investing in a great employee experience[foot]For more information on how to create a great employee experience, see K. Dery and I. M. Sebastian, “Building Business Value with Employee Experience,” MIT Sloan CISR Research Briefing, Vol. XVII, No. 6, June 2017.[/foot] become more attractive to digital talent. As a result, these companies not only have more choice in the talent with which they can engage, but also in how to do so (as FTE or via the marketplace). Figure 2 depicts our measure of employee experience (EX), which consists of two components: (1) how well the workplace adapts to the needs of workers (i.e., the adaptive work environment), and (2) how natural it is for employees to leverage the collective intelligence of the company (i.e., the collective work habits). Companies with a great EX enable their employees to do their best work, resulting in better business outcomes. Ultimately, creating a workplace where digital employees are able to thrive is critical to building competitive advantage in the digital world.

Figure 1: Four Approaches to Engaging with Digital Talent

Source: MIT CISR 2017 Path-ways to Digital Business Trans-formation survey (N=279). Companies in the top 25% on the Employee Experience (EX) measure classify as High, with an average EX score of 70/100; companies in the bottom 75% classify as Low, with an aver-age EX score of 38/100. Talent focus is classified as External for those companies with less than 50% of talent employed on an FTE basis, and Internal for those with greater than 50% of talent employed on an FTE basis. The percentage in parentheses in each quadrant indicates the percentage of our study participants in that quadrant.

  • Employee experience is calculated based on a mean score for six adaptive work environment and five collective work habits questions that were measured on a 5-point scale and converted to a 0–100 score. The adaptive work environment questions cover the extent to which the work environment (1) connects people and ideas, (2) integrates activities and systems, and (3) governs with clarity and transparency. The collective work habits questions assess the extent to which employees are naturally (1) collaborative across siloes and hierarchies, (2) innovative concerning work and customer initiatives, and (3) empowered to make choices about work.
  • Net Margin is industry-adjusted; values are percentage points above or below industry averages.
  • Time to Market (for new product or service offerings) and Ability to Change are relative to competitors in the industry and reported as scores ranging from -100 to +100, where -100 indicates “significantly worse than competitors,” 0 indicates “about the same as competitors,” and 100 indicates “significantly better than competitors.”
  • Innovation represents the percentage of revenues from new products and services introduced in the last three years.

RETHINKING TALENT APPROACHES FOR BUSINESS VALUE

In figure 1, we illustrate four approaches to engaging with digital talent, based on choices across two dimensions. The first dimension differentiates companies with an external (i.e., marketplace) focus from those with an internal focus, depending on the percentage of digital talent within the IT unit that the company employs as FTE. The second dimension depicts the employee experience delivered by the company, distinguishing those companies in our study scoring in the top 25% on our measure of EX from the remaining participants. The four approaches direct how digital talent contributes to a company’s digital strategy, which has significant impact on business outcomes.

Separated

The separated approach entails relying heavily on the marketplace to plug talent gaps (such as supplementing capabilities, or developing workforce flexibility to respond to unpredictable work needs) without building a great employee experience. Companies taking the separated approach discover that extracting longer-term business value from a transient workforce is hard if the employee experience does not support people in working effectively together, sharing knowledge, and working across organizational silos. Additionally, our research interviews revealed that external talent in these companies typically faces a very different employee experience than internal talent, as evidenced through differences in systems and training access, procedures, the ability to contribute to social networks, search capabilities, knowledge sharing, and other capabilities that are critical for employees to do their best work. Freelancers and contractors are often bound to verticals and/or restricted to project-specific information and experiences. This, in effect, creates two separate workforces with different motivations and levels of commitment to the company, harming business outcomes.

Figure 2: Two Components of Employee Experience

MIT CISR's measure of employee experience (EX) consists of two components:
(1) the adaptive work environment or how well the workplace adapts
to the needs of workers; and (2) the collective work habits, or how natural it
is for employees to leverage the collective intelligence of the company.

Constrained 

Companies taking the constrained approach typically capitalize on a less competitive market for digital talent. Talent has fewer options for employment based on the geographic location of the company, government regulations restrict employment options, and market conditions are less competitive, all allowing these companies to maintain a primarily FTE workforce. But these conditions do not incentivize a focus on great employee experience, and allow constrained companies to maintain an employee experience based on an outdated work environment and habits—those designed to be effective in a command and control organization and not supportive of new ways of working. While they realize slightly better business outcomes than companies that follow a separated approach, constrained companies limit their digital talent in delivering business value, and the impact is evident across all dimensions. 

Integrated 

Companies succeeding with the integrated approach typically describe themselves as having a workforce where it is hard to tell which talent is FTE and which externally sourced. While they maintain a core of FTE (in our study typically employing 21% of digital talent as FTE), these companies also develop partnerships with vendors, foster relationships with talent networks, and invest in talent recruitment platforms to enhance their workforce. Integrated companies are constantly iterating to design workplaces that deliver value for their entire workforce—regardless of workers’ relationship to the organization. Digital capabilities that truly span organizational boundaries, however, remain a challenge for many such companies. While integrated companies in our research were doing markedly better than those following the separated approach—especially in terms of time to market and the company’s ability to change—it should be noted that an integrated approach can still be quite costly, with negative average net margins when compared to direct competitors. 

Enabled 

Companies following an enabled approach generate the best business outcomes—on all four of our performance measures. These companies have built an employee experience that enables them to compete effectively with digitally born companies, and choose to employ the majority of their digital talent as FTE. Enabled companies are committed to investing in their digital talent, and clearly articulate the need for their people to be FTE. By building a great experience for their employees, these companies are also able to make very deliberate decisions about the use of external talent. Such decisions tend to be less about supplementing existing teams with the same capabilities and much more about adding new skills and perspectives to enhance creativity for specified projects. 

FOCUSING ON EMPLOYEE EXPERIENCE TO BUILD VALUE FROM DIGITAL TALENT 

Despite the opportunities enabled by digital platforms to increase the use of external talent, our research shows that a greater focus on sourcing digital talent as FTE yields significant improvements on all measures of performance. This is particularly evident when we examine attributes among the most critical in the digital world: ability to change (a measure of organizational agility) and innovation. If difficulty in competing for digital talent is forcing your company to engage increasingly with the external talent marketplace, we suggest that you invest in building a great employee experience. Ultimately, this will not only enable your workforce of today, but it will also help you to attract top talent as FTE and serve as the key to a long-term workforce strategy for digital.

© 2018 MIT Sloan Center for Information Systems Research, Dery, Van der Meulen, and Sebastian. MIT CISR Research Briefings are published monthly to update the center's patrons and sponsors on current research projects.

About the Authors

MIT SLOAN CENTER FOR INFORMATION SYSTEMS RESEARCH 

Founded in 1974 and grounded in the MIT tradition of rigorous field-based research, MIT CISR helps executives meet the challenge of leading dynamic, global, and information-intensive organizations. Through research, teaching, and events, the center stimulates interaction among scholars, students, and practitioners. More than ninety firms sponsor our work and participate in our consortium. 

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