The past few years have seen seismic shifts in the talent market. The rate of turnover, as well as the cost of attracting new hires, has steadily increased. Many older workers have left the workforce, replaced by a new generation with very different expectations of their employer. Organizations need to be agile and adaptive to cater to these workers, taking measures to deliver a new and differentiated employee value proposition.
In a series of conversations with numerous C-suite executives over more than a year, we heard a range of enlightening insights on their biggest concerns, priorities, and goals related to people and organizational performance issues. Below is a summary of the common themes that emerged.
Evolution of the workforce
Changes in the workplace CULTURE
Underpinning every organization’s fortunes is its ability to attract talent. It’s little surprise that the executives we interviewed listed changing recruiting tactics and incentives to address a tight labor market among their highest priorities. In general, they expressed confidence in how well their companies attract new hires, select the right ones, and engage and retain them.
As these leaders are well aware, the outcome of these efforts hinges in large part on creating a culture that will appeal to people before and after they’re hired. Further, as the makeup of an organization’s workforce changes, so too must many elements of its culture. In our 2024 Performance Transformation report, 70% of executives reported that culture allowed them to unlock their workforce’s full potential or enhance their transformation strategies. That result was echoed in our interviews, where 69% of executives cited “shaping and nurturing culture in a hybrid environment” as a top organizational priority required to ensure future success.
The challenge, they said, is to create a culture focused on belonging to enable employees to reach their potential and deliver better performance. There are several characteristics that indicate a successfully evolved culture. First, there must be true inclusion and diversity. As one executive succinctly put it, “Our population and talent pools are diverse, so the workforce must reflect that.” Relatedly, the culture needs to provide a sense of psychological safety for everyone in the workforce. In “The New Growth Agenda,” a recent report by the Oliver Wyman Forum and the New York Stock Exchange, 43% of CEOs surveyed mentioned that one of their top workforce strategies to drive high performance was “nurturing a culture to support future success including purpose, sense of belonging, diversity and inclusion, trust in the organization, and adaptability.”
In the same vein, the C-suite executives we spoke with overwhelmingly said they are making diversity, equity, and inclusion (DEI) initiatives a priority over the next three to five years. They acknowledge that legal and social headwinds have made the environment for DEI more complicated and challenging, but also perceive a significant business need for DEI given the makeup of their customer and talent pools. Still, fewer than half said they were fairly or very confident their companies have a diverse group that provides a sufficiently wide breadth of perspectives. Those that are unable to implement DEI measures effectively will almost certainly limit their hiring options, so they must treat the challenge of accomplishing culture goals the same way as they do financial performance goals.
Changes in performance management
Interview responses indicated that many organizations are struggling to measure their employees’ productivity — 77% of the executives rated their ability to do so either as “weak” or “neutral.” Similarly, none of the executives interviewed rated their company’s ability to manage performance as “very strong,” with 61% assessing it as weak or neutral. Across the board, they made clear that they either had changed their performance management systems already, have plans to implement new systems, or have identified a need for new systems. The changes mentioned included “getting rid of ratings,” “revamping the performance coaching process,” and better integrating goal cascading into annual review processes.
Looking ahead, these leaders want to refresh performance systems to ensure they are effective for the new workforce and working models, for example by shifting to merit-based talent practices to remove potential bias against hybrid and remote workers. They also expressed a need to think about how to apply artificial intelligence and other technologies to performance management, and to ensure that processes and practices have a tangible, clearly articulated impact on the organization’s bottom line over time.
Workplace leadership expectations and development
The executives we interviewed believe very different leadership skills are required to lead the new, diverse workforce. The shift toward hybrid work, for example, necessitates greater trust and flexibility. In some cases, leaders also will need the skills to overcome a disconnect between senior and junior staff stemming from differing expectations and ways of working.
Interviewees mentioned a host of specific capabilities that leaders require to achieve future success. High on the list was emotional intelligence, which includes the abilities to exhibit empathy, empower others, instill trust, show self-awareness, and be relatable to all generations in the workforce. Critical thinking was another — leaders must be decisive, able to clarify competing priorities, and adept at digesting data. The executives also cited agility (the ability to react and adapt in evolving or unknown conditions), eagerness to change (remaining open-minded and innovative), and strong communication (being intentional and meaningful). They said that they recognize some of these capabilities in leaders today, but others still need to be developed further.
Addressing digital transformation and workforce adaptability
Overall, when it comes to people- and organization-related issues, the priority executives most frequently mentioned was addressing the “implications of digital and tech transformation.” It follows, then, that a full 23% of them expressed a lack of confidence that their company currently has people with the right technical skills and expertise. However, that wasn’t the only area of concern, or even the most common: 41% rated the willingness of their staff to change ways of working as weak or very weak, while 39% rated their organization’s ability to onboard and integrate new talent as weak or very weak.
Overcoming difficulties in today’s workforce
The executives we spoke with spanned disparate industries, geographies, and other characteristics. Yet when it came to describing the workforce issues they were facing, there were many striking commonalities. Among others, interviewees consistently expressed concern over the increased competition for top employees, the best ways to manage their performance, and how to satisfy their ever-evolving needs in the workplace. Given all these challenges, it’s vital to create an inclusive culture to effectively attract and retain talent and enable the interactions and leadership behaviors expected by new generations.
