Article

Executing the digital deal – Retaining and engaging digital talent

June 4, 2018

By Ken Kuk, Director, Talent and Reward

In December 2017, Kristen Wnuck wrote an article about the lessons learned from the high-tech sector about acquiring digital talent in M&A. The three main lessons were: (1) be smart about retention agreements, (2) understand the ways of working, and (3) engage, engage, and engage some more. This article dives deeper into the connection between engagement and talent retention, and attempts to provide additional insights into one of the key success factors when executing digital deals.

An increasing number of companies use corporate transactions as a means to acquire the talent they need for digital transformation, in hopes of leveraging assets (e.g., data) to create new sources of value for customers and shareholders. They’re seeking new ways of engaging with customers, more customized products and solutions, and the use of automation and machine learning to increase operating efficiency.

It is important to note that digital talent is not simply a synonym for technology talent. The definition of digital talent is broader, encompassing all talent segments that collectively enable a business to transform digitally. It is true that some segments of digital talent would have a technology, engineering, and creative background. But companies that have been successful in their digitalization efforts would tell us that success also requires a greater emphasis of transferrable skills across all functions, and the ability for all functions to “be more digital.” This may mean a more agile way of decision making and managing talent, a more customer-centric operating model, and investments in process innovation.

As Kristen Wnuck pointed out on the article, high engagement leads to better retention outcomes. Research backs up this assertion, as the Corporate Leadership Council found that highly engaged employees are half as less likely to leave their organization than the average employee1. More recent studies done by IBM and Gallup also confirm that highly engaged employees are much less likely to resign than those less engaged2,3.

When partnering with our clients in refining our thinking on talent retention for digital deals, we quickly realized that there is a need to think beyond retention and focus on productivity. While it is inevitable to see productivity decline immediately after a transaction, the key to successful deal execution is to keep these productivity dips as shallow and brief as possible through proactive employee engagement (see Figure 1). Talent-based deals are much more likely to succeed when leaders focus on managing change and keeping people engaged, as this also naturally solves for the talent retention challenge. And talent is often the essence of digital deals.

Figure 1: Impact of Change on Productivity

Chart showing the impact of change on productivity in 4 stages. 1. Awareness - realizing change is imminent. 2. Uncertainty - recognizing things are different and questioning place for one self. 3. Discovery - learning to navigate new situation and finding new purpose. 4. Engagement - new attitudes and behaviors acquired; fully engaged. 

What about the age-old question of the effectiveness of retention awards? Surely receiving a selective monetary award would lead to better retention and engagement outcomes, right? A recent study we conducted suggests that while extra cash matters, people care more about what defines their work environment, such as organization culture, role, and their trust in leadership4. In fact, it is much more likely for retention award recipients to leave for reasons related to their work environment than pay and benefits during the retention period (see Figure 2). Similar research focusing on digital talent also found that culture, nature of work, and strong leadership are much more appealing employer attributes than pay5. Retention awards are effective, but only to buy time and get everything else right.

Figure 2: Reasons for Departure for Retention Plan Participants during Retention Period

Chart showing reasons departure for retention plan participants during retention period. Top reasons are, they were uncomfortable with the new or changing organizational culture, more aggressively recruited by competitors, or didn't like their new role. 

While workforce disruption is inevitable during digital transformation and corporate transactions, the conventional wisdom that happy employees build a good business still holds true. And it is even more important to keep employees engaged in digital deals because prolonged productivity dips can be devastating to the deals’ strategic value, and ultimately cost companies the opportunity to reinvent their business when the stakes are so high.


Endnote

1. Corporate Leadership Council (2004). Driving Performance and Retention through Employee Engagement.

2. Zhang, Haiyan and Feinzig, Sheri (2017). Should I Stay or Go? Global Insights into Employees’ Decision to Leave Their Jobs. IBM Smarter Workforce Institute.

3. Harter, Jim and Adkins (2017). Are Your Star Employees Slipping Away? Gallup’s State of the Workplace Initiative.

4. Willis Towers Watson (2017). Global M&A Retention Study.

5. McKinsey Global Institute (2015). Cracking the Digital Code: McKinsey Global Survey Results.