Digital transformation: no longer just a "plan", now a critical business need

Prior to the pandemic, the need for digital transformation was on the radar of most companies; but for many, it existed somewhere on the horizon as more of a long-term (3-5 years) goal than near-term business need. The first few months of 2020 changed all that. Today, 39% of C-suite executives say that the pandemic helped them to realize that in order to compete, they have to be more digital than they are today. Simply put, they saw how quickly it could be done when it had to be done.

As Microsoft’s CEO Satya Nadella said in April 2020: “We’ve seen two years’ worth of digital transformation in two months.”

Executives recognize that technology is no longer a “nice-to-have” solution for communication and efficiency, it’s a must-have. Leaders understand that their competition will come primarily from other companies that are further ahead in their digital transformation journeys.

Companies are leveraging technology like never before, and they have no plans to pull back. In fact, when asked in Mercer’s 2022 Global Talent Trends study how the events of 2020/2021 have shaped views on where to invest/retreat if faced with another economic downturn, only 22% indicated that they would pull back on digital transformation. Instead, 38% said they would reduce operational risk and freeze expenses. Clearly organizations understand the value technology holds and the importance of maintaining investments in this area.

But not all companies are ready to move forward with confidence. Some are on the journey, but they’re struggling to achieve scale and impact. While about one-third of organizations feel they’ve made great inroads, others are still learning, lagging or disillusioned. An even a smaller segment haven’t even identified digital transformation as a priority yet.

Even for the organizations ready to make the digital leap, there remains some hesitation as going digital has the potential to bump up against another high-priority organizational imperative—the employee experience.

In an employment environment where jobs outnumber available talent, and employees are changing jobs or fully exiting the workforce entirely in record numbers, organizations are rightfully concerned about their employees’ impressions of any digital changes.

If employees aren’t engaged, if they feel their contributions aren’t recognized or if they fear losing their jobs to technology or “robots” (however ill-informed and unreasonable those fears may be), they’re at risk of looking for jobs elsewhere—or leaving the workforce entirely.

Employees are concerned about the potential personal implications of technology on their jobs, their career opportunities and their futures — 71% say they expect AI or automation to significantly change the way their jobs are done in the next three years. That’s up from 44% who said the same in 2020, before the pandemic made it very clear how technology could help to get work done in new ways.

Employers are concerned about the need to rapidly upskill or reskill employees to adapt to and adopt the skills required to excel in a digital environment. They’re also concerned about the impact these efforts may have on engagement, satisfaction, productivity and retention.

To effectively engage employees as companies embark on their digital transformation journeys, it’s critical that ongoing communication focuses on building trust and a sense of collaboration and partnership in the process.

Employers recognize that they are faced with significant skills gaps to ensure their workforce is prepared to efficiently and effectively leverage technology.

But, while many organizations have implemented Agile methodologies and ways of working, the results have been mixed: Two in five companies admit they still struggle with scale and impact in areas such as adapting to changing skill requirements, building a digital employee experience, DEI and ESG. Business transformation and taking advantage of shifting labor markets also remain stubbornly difficult to unlock.

Employees feel energized when they feel they can bring their authentic selves to work and when they feel financially secure. Their energy is diminished when they’re concerned about being replaced by “AI”—or, since their experiences during the pandemic, when they can’t take advantage of hybrid or remote work opportunities.

Mercer’s 2022 Global Talent Trends report offers more detail on executive and employee views on digital HR transformation and the employee experience.

To learn more about the insights we uncovered in our findings,  download the report or speak with a Mercer expert to determine how you can find the right balance between driving performance through digital transformation and employee engagement.