How to close the digital leadership gap

A new report by Deloitte identifies what it says is a serious shortfall of digital leadership in organizations and offers a range of solutions to address the issue.

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The 2017 New Rules for the Digital Age report from Deloitte found that only 5 percent of the companies surveyed said they have strong digital leadership development programs and a clear majority (65 percent) said they have no significant program to drive digital leadership skills.

Josh Bersin, a principal at the Bersin by Deloitte research group, says the challenge is that companies don’t realize how much more complicated digital transformation is than simply acquiring new technology.

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“Digital technology is easy to buy, but once you turn it on it changes the way you work and how you deliver products and services,” Bersin told CIO.com. “From the CIO’s perspective, it may seem relatively easy to implement artificial intelligence (AI), social media and other new technology, but these things have a disruptive impact on the workplace.”

Some of the trend lines aren’t encouraging. For example, the study found that companies feel 31 percent “less ready” to redesign their organization around digital business models than they did last year.

Bersin says that even high-flying internet companies have problems adapting. One big internet client he wouldn’t name asked for help because it was being out-innovated by smaller startups.

“What had happened is they had become very hierarchical and weren’t incentivizing digital behavior,” he said. “We say don’t just go digital, be digital.”

Part of that change is to embrace failure or at least the idea of experimenting with what he calls “minimal viable products” and other boundary-pushing exercises such as hackathons. “Companies used to hate to do these kinds of things that require failure, but look at Amazon where CEO Jeff Bezos says they’re the best company in the world at failing, or put another way, they know how to iterate.”

New performance management techniques

Deloitte also asserts that companies in the digital era need to change how they evaluate performance. In the past fiveyears many firms have already set out to experiment with new performance management approaches that emphasize continuous feedback and coaching, and less on annual reviews. Bersin says in 2017 companies are moving beyond experimentation to deploy these new models on a wider scale to increase productivity.

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He points to the growing use of organizational network analysis (ONA) as a tool to monitor and quickly identify performance issues in the company. ONA monitors the metadata of email and other systems and identifies, for example, how often people email, who they communicate with and how quickly they respond.

“It shows you how work gets done that is different than what an org chart shows you,” said Bersin. “ONA doesn’t read the emails for content but, when it was sent and to who, what calendar meetings were sent, that kind of stuff. It might show you for example that the highest performing salespeople do less meetings, or get more work done via email.”

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Skills are becoming obsolete faster

Another key digital trend in the report is the concept of “always on” lifetime learning.

“The concept of a ‘career’ is being shaken to its core, driving companies toward ‘always-on’ learning experiences that allow employees to build skills quickly, easily and on their own terms,” the report states. Of the executives surveyed, 83 percent rated careers and learning “important” or “very important” to their organization.

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“Skills are becoming obsolete faster than ever,” says Bersin. “Companies know they have to build skills internally faster or risk employees changing jobs if they are not challenged.”

Rather than traditional classrooms and set times for instructions, Bersin says the digital era has enabled many more options for short video instruction and “micro-learning” that’s accessible on demand.

The jump in learning as a priority among those surveyed was one of several surprises in this year’s report. “Another surprise was the use of automation and AI. We’re starting to see companies actively implementing these new cognitive technologies,” said Bersin. “But only about a quarter of those doing it have the HR department involved, it’s all tech people.” Going forward he says it’s important companies bring HR into the loop to help monitor and manage the impact of new technologies.

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The report also found a change in understanding of diversity in the workplace. A solid majority (78 percent) of respondents said they now believe diversity and inclusion is a competitive advantage (39 percent say it is a “significant” competitive advantage).

Still, leveraging that advantage remains a challenge as only six percent of companies tie compensation to diversity outcomes. Deloitte calls the diversity issue is “dauntingly difficult,” but notes that companies are experimenting with new approaches such as eliminating names on resumes because candidates with ethnic-sounding names may experience lower hiring rates. It says Australia has been a leader in this area.

While companies have typically considered diversity a reporting goal driven by compliance and brand priorities Deloitte sees a trend of diversity and inclusion now becoming a CEO-level priority that’s considered important throughout all levels of management.

In preparing this year’s report Deloitte surveyed over 10,000 HR and business leaders across 140 countries.

NEW! Download the State of the CIO 2017 report