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Tech companies must adapt quickly to deal with new workforce risks

By BJ Firmacion , Shankar Raman , Norman Ramion and Miguel Suarez | October 26, 2023

Success hinges on understanding employee preferences, redesigning jobs and career frameworks, creating an environment where employees thrive and aligning total rewards with evolving employee needs.
Future of Work|Risk Management Consulting|Employee Experience|Ukupne nagrade
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The tech industry continues to be a bellwether of workforce transformation, according to WTW’s Dynamics of Work Survey. However, many are not prepared for new risks coming their way. The survey sheds light on the current state of business and dives into how tech companies can keep pace with changing work conditions, new talent sources and the increasing use of automation.

Dynamics of Work Survey snapshot

WTW’s Dynamics of Work Survey looks at the strategies, plans and actions organizations are pursuing this year and beyond.

  • Changing work conditions: 65% of tech industry employees, as compared to 55% of employees in other industries, will work on a hybrid or fully remote basis in the next three years.
  • New talent sources: Over half (54%) of tech firm leaders are optimistic about leveraging alternative talent sources such as freelancers, contractors, and other types of gig workers.
  • Automation: Among the tech companies planning to increase the use of automation technologies, including robotics and artificial intelligence, 41% of work will be automated to some degree. This is higher than the 35% indicated by companies across other industries.

Capitalizing on the changing work landscape

Tech companies, by design innovative, agile, and driven by rapid technological advancements, are naturally positioned to be leaders in workplace transformation. New ways of working present opportunities for companies to create new business models and unlock value by leveraging new and unconventional sources of talent, developing new products and services and increasing operating efficiencies.

Despite recent high-profile layoffs, the demand for key talent continues to outpace supply in the tech industry. Generative AI, edge computing and data fabric architecture (and other technology skills) drive competition for top Skills in Demand (SiD), such as software development and data analysis, and emerging Jobs in Demand (JiD), including AI Engineers and Data Protection Officers.

Some of our tech company clients that embrace flexible work arrangements are benefiting from attracting (and retaining) a broader pool of talent, including highly skilled employees who value work-life flexibility or live far from company office locations.

Similarly, companies that leverage alternative talent sources are tapping into diverse skill sets that might not be available or cost-effective to source in-house. The relative on-demand nature of some of these new talent sources also provides scalability benefits, especially for project-based work or other short-term needs.

Efficiency and scalability are also the clear benefits reaped by companies increasing their use of automation. By automating mundane and some knowledge-based tasks, robotics and machine learning, for example, can empower employees to focus on higher-value work and make better decisions informed by data and insights.

Making room for workplace change improvements

Even among tech companies, there is groundwork to be done. Despite being better prepared than other industries, relatively few tech companies are poised to adapt to new ways of working:

  • Just over half (54%) of tech companies report they are gearing up to transition towards flexible work models (vs. 44% across other industries).
  • A third (32%) report that they are prepared to leverage alternative talent sources (vs. 21% across other industries).
  • Fewer than half (44%) report being ready to integrate new automation technologies in the workplace (vs. 33% across other industries).

Readying for the risks

Unprepared companies may find it difficult to manage specific risks associated with the changing work landscape:

  • People risks: fully remote or hybrid work models may lead to lower workforce engagement and deteriorating social and emotional wellbeing because employees are physically detached from their colleagues and managers.
  • Business risks: product and service quality control may lag as the current workforce learns to integrate novel talent sources and technologies into business processes.
  • Operational risks: remote work, alternative talent sources and automation technologies are more susceptible to cybersecurity vulnerabilities that can lead to data breaches or fraudulent transactions.

Only 41% of tech companies report they are effectively managing all three of these risks. This group of “prepared” companies is more likely to perform better than those that are unprepared. Over the past year, companies that are effectively managing all three risks are:

  • Two times more likely to report significantly outperforming their peers financially
  • Nearly two times more likely to report having lower employee turnover and better retention of key talent than their peers
  • Nearly two and a half times more likely to report having higher employee productivity than their peers

Getting, and staying ahead, of the competition

As the world of work evolves ever-increasingly, even tech companies will need to be prepared to deal with these changes or risk being left behind. In fact, in no other industry are the three risks mentioned earlier greater than in technology due to the interconnectedness of the industry and the creative destruction of capital that is the hallmark of technology. We recommend tech (and all other) companies:

  1. Rethink the business operating model to capture value and redesign jobs or roles to reallocate work between employees, non-employees and new technologies.
  2. Place talent at the center of the work transformation journey by understanding employee preferences and perceptions towards changing work, investing in upskilling and reskilling of internal talent to meet the need for hard-to-find skills.
  3. Be intentional about building a culture that allows employees to thrive and be productive in a hybrid world.
  4. Realign total rewards with the new realities by shifting the mix of pay and benefits to support the changing mix of onsite, hybrid and remote workers.
  5. Strengthen communication about work changes to employees, managers, and other stakeholders, including boards and regulators who are increasingly paying attention to this topic.

Workplace transformation in action

We have observed these strategies in action. In one instance, a technology company increased its remote work flexibility options for their employees globally, leading to a simplified global pay structure that facilitates talent mobility by reducing the number of regional pay zones from five to four. In another case, a financial services company has differentiated its total rewards philosophy for its digital hub, where the talent value proposition now has a stronger emphasis on variable pay and agile career development for “hot” skills for shorter work assignments, as compared to its longer career progressions approach for traditional roles.

Looking ahead

The dynamics of work are truly changing, and this will likely mandate greater flexibility, adaptation and innovation in Work and Rewards. In some cases, embracing flexible work, new talent sources and automation technologies are no longer optional but essential. Companies, especially in the tech industry, should act now to unlock opportunities for value creation and mitigate the people, business and operational risks involved with such change. Success hinges on understanding and catering to employee preferences, redesigning jobs and career frameworks, reskilling employees, being intentional about culture, aligning rewards with evolving needs, and facilitating internal and external communication.

Authors

Associate Director, ECBA
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Global Co-Leader Technology Industry
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Senior Director, Employee Experience, WTW
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Analyst, Health, Wealth & Career
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