Posted by Josh Bersin on March 02, 2016
The new digital world of work is shaking the foundation of the world’s organizations: one of the biggest challenges companies now have is the need to fundamentally change the way they are structured.
This month we are launching our largest-ever study of talent challenges in business, the Deloitte Global Human Capital Trends 2016. More than 7,000 companies around the world took the time to answer our survey, and the findings were striking. While nearly every talent challenge from last year became more acute, the No. 1 topic on people’s minds is now “how do I organize my company to effectively meet the digital demands of today?”
As you can see from the chart below, 92 percent of respondents cite this as one of their urgent challenges. Surprisingly what the research found was that only 34 percent of large companies surveyed have traditional functional structures (sales, marketing, finance, engineering) and more than half have multiple forms of product, geographic, or market-facing structures. Our conclusion, after nearly a year of research and dozens of interviews, is that companies are rapidly shifting from top-down hierarchies to “networks of teams,” where people work in smaller groups, dedicated to a local mission, tied together through culture, leadership, shared values, and transparent goals and information.
This organizational shift, which we see happening in every industry from retail to health care to technology, is forcing HR and business leaders to rethink how we lead, how we reward people, the careers models we provide, and how we build a cohesive culture that drives communication, alignment, and engagement.
Last month I met with two of the fastest growing companies in the world—one a six-year-old multibillion-dollar “unicorn” and the other a 20-year-old well-established consumer technology company. Both told me that their No. 1 CEO-driven issue is culture: how can we build an exciting, collaborative, and unique culture that helps us tie together the rapidly growing teams we are empowering all over the world.
This issue, organization design, is not a new topic. Companies have been building org. charts and doing spans and layers analysis for years. But the old-style thinking no longer applies: our research found that people do not have the patience to traverse the pyramid any more, decisions are too slow, and digital disruption is too rapid to use the traditional structure to drive change. We as people thrive in small team environments, as long as the company promotes inclusion, shared values, and makes it clear that we are accountable for our goals.
The No. 2 trend this year is leadership, which scored even higher than ever as a priority for business leaders. It’s clear that a new model of leadership is needed—one that rewards leaders who “create followers,” people who can operate across many teams effectively, and leaders who know how to drive innovation, dynamically move people where needed, and can inspire everyone to rally around a common mission. These leaders are often stifled in the old hierarchy, held back by senior people who hold their status because of their job title or position.
As we describe in the report, the way we build leaders, how we develop people, and how we measure and drive culture is going to have to change. The research points out that all these softer people issues have now become hard—and among these 7,000 companies, an amazingly large number believe they are business critical.
The research also shows some other exciting things: the world of people analytics is now on the move. Last year we noted a lot of talk but not much action (we labeled it “stuck in neutral”)—this year the investment and maturity almost doubled. We also point out the radical changes taking place in the world of “always-on” employee-driven learning, and we wrote an entire chapter on the explosion of a new discipline we call “Digital HR.” Finally I must point out the important growth of design thinking, employee feedback and engagement tools, and the exciting new world of behavioral economics—all of which are radically changing how we manage people and the HR function itself.
Today’s employees are more like volunteers than ever before. They want and dream about careers that let them move and develop their own personal aspirations. They can easily shop for jobs outside the company at any time and they monitor your company’s health through external websites. If you manage them well and bring an inclusive, growth-oriented culture to the company, you can move as fast as a start-up. If you don’t, people are likely to disengage, and you feel them leave as they look online for new jobs at the company next door.
I won’t give away all the secrets: we want you to read the report, join us in our webinars, and come to our events. Let me just conclude with one simple thought: the world of HR and leadership is changing once again, and this year I believe the HR function is taking a major step forward in its innovation, focus, and reinvention. We are excited about the findings of this research, and our team all looks forward to helping you understand how to take advantage of these trends in your company.