Listen: Next in Tech | Episode 83: (Re)Building the Digital Workplace

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Eric Hanselman

Welcome to Next in Tech, an S&P Global Market Intelligence podcast where the world of emerging tech lives. I'm your host, Eric Hanselman, Chief Analyst for the 451 Research arm of S&P Global Market Intelligence. And today, we're going to be discussing the building or in some cases, rebuilding of the digital workplace with our returning guest, Senior Research Analyst, Conner Forrest. Conner, welcome back to the podcast.

Conner Forrest

Eric, thanks so much for having me.

Eric Hanselman

Well, thanks for being here. And we've been talking a lot in previous episodes about a lot of the infrastructure aspects of organizations from a compute perspective. But we haven't really gotten into looking at really what the workplace itself is all about. And of course, going through all of the machinations of the pandemic and everything going through, we've been doing a lot of remote work.

And I think though that sometimes we kind of lose track of what really is the shift that's happening in the workplace today. And I wanted to dig into really sort of what the driving force is or really the pressure, I guess, behind the need to really rebuild, retool the digital workplace more broadly.

Conner Forrest

Absolutely. You touched on it a little bit at the beginning there, those kind of changing way, the changing manners through which we work, right? The changing modalities in which we approach what the workplace is, how work is executed, how teams are collaborating, how managers are managing.

And that was really how we saw work start to shift in the early days of the pandemic. As we start to head into the later stages of the pandemic or endemic as it is and starting to understand how that's permanently reshaping work, we're also seeing macroeconomic pressures that have emerged.

And those, in combination with kind of the technological and digital pressures we saw at the early stages of the pandemic, are really working together to reshape not only how we think about the employee experience and workforce productivity but also what role IT plays in that, how IT and business leadership must work together to really rethink, reimagine and support this kind of newly reshaped digital workplace.

 

Question and Answer

Eric Hanselman

Now you said macroeconomic, what are the macroeconomic forces at play?

Conner Forrest

Absolutely. So essentially, what we've noticed, this is some data we actually collected in 451 Research is Voice of the Enterprise -- or excuse me, Voice of the Customer macroeconomic outlook. It's a business trends report. This one was actually collected in early 2022.

And we found 2 key trends that are really in our view, in our mind, reshaping and putting pressure on workforce design. And those are the employee attrition, so employees leaving their job is not only a threat to sales. So the bottom line being able to drive revenue, but also to business expansion.

In this report, we asked individuals what were the greatest threats to overall sales of their organization. And the top 3 were actually supply chain disruptions was #1 at around 33%. But right under that was labor and skill shortage at 32%. So if you think about statistical significance, those are a lot closer than they seem. They're only off by 1 percentage point, but they're nearly equal.

And when you think about that sales threat, we asked those individuals that saw that labor and skill shortage as the greatest threat, how long they expected that to continue. And 61% actually thought it would be more of a threat -- a bigger threat over the next year. So it's pretty crazy that not only to sales, but -- we can dig in this a little bit more, but also to business expansion as well.

But yes, we found that as the biggest pressure is not only the supply chain issues of not being able to get the parts or the pieces we need to build products or to deliver services, but we also -- we don't have enough people and that's keeping us from growing our revenue streams.

Eric Hanselman

And whether or not that's the great resignation or is simply a fact that we've had, in some areas, chronic skills gaps for a long time, but interesting that gets seen as impacting sales potential, though.

Conner Forrest

Definitely. To back up a second, we often think that businesses build products or businesses build services, but what it really boils down to is that people build products, right? People deliver services. People build applications or build boats or build automobiles.

And so I think what this labor and skill shortage is showing us is that you need people and you need an environment that supports them to continue driving sales, to continue impacting the bottom line. But our question next became what about the businesses that are making money, right? So are they as impacted by how they think about attrition as those who were struggling with sales?

And we found that when we asked about that same kind of cohort, that same sample about kind of their business priorities in 2022. Overall, employee retention and engagement kind of driving a play retention engagement was actually considered a greater priority than business expansion, which we had kind of defined as entering new markets or building a new product.

But when we began to cut that data, we looked at larger companies, right, 1,000-plus employees, kind of upper mid-market enterprise firms and found that, that disparity as in how much they prioritize supporting employees over growing the business, was actually more pronounced. And as we looked at kind of the highest revenue companies, the $10 billion-plus revenue companies, it was actually the most pronounced among those companies.

There was a 2x difference in how much they prioritized employee retention and engagement over business expansion. And that's the $10 billion revenue companies. So what we found is that retention and engagement are things that must be adequately addressed not only to support labor and skill shortages and drive sales, but also if we're having an okay time with our sales, they need to be addressed to clear a path for business expansion.

So not only can it prevent us from new sales and prevent us even if we have a successful business from maybe entering a new market or growing a new product line or expanding into another revenue stream. So it really is this bifurcated problem that we've seen kind of from the outside looking in from the macroeconomic perspective.

Eric Hanselman

It's interesting to see that trend towards larger enterprises, though. I guess I wonder whether or not that's something where they've got that larger workforce, they've got that greater initiatives, they've got that bigger concern, but maybe that's an aspect of what that overall focus wins of looking like.

Conner Forrest

Absolutely. It could be that they're just so large or there are so many gears in motion that it takes even more of the workforce, even more investment from a people perspective or even a financial perspective to get the ball rolling in the new market or to spin up a new product line. So it could -- there could be a few factors at play here. But it is just interesting to note, as you mentioned that the larger we get, the more of a focus it is on keeping those people around.

Eric Hanselman

Well, I guess, as we look at these transitions, so what is it that actually changes in terms of IT's role, in terms of really how they help to drive outcomes and in terms of what the focus is on the aspect of the digital workplace itself?

Conner Forrest

Absolutely. This really all boils down to, Eric, is this concept that we believe is that the employee experience, which is kind of the sum total of every touch point an employee would have with their organization, how they get their work done, how they're managed, how they develop, almost all of that in many instances, is digital.

The employee experience is now a digital experience. In our voice of the enterprise workforce productivity and collaboration channel, we did a technology ecosystem survey that found that nearly half of businesses anticipated permanent remote or hybrid work. And we know the number is even larger for those that anticipate partial or semi-permanent remote and hybrid work.

And what's interesting is how IT supports it in managing this transition to a new work modality. We ask employees what they really wanted or what were the most positive changes they saw in 2020 and 2021 as they shifted their work mentality and their work modality and remote work was the greatest positive change they said they'd experienced over those 2 years.

We also know that employees are really willing to leave their job over remote work options. Better work-life balance, the ability to work remotely as little or as much as possible. These things come up in our employee engagement survey as reasons employees are leaving -- are willing to leave their job.

So we see the shift toward a remote or hybrid work model as one that is increasingly important to the employee. So it's something that drives engagement, it drives the experience. But it's something that is also increasingly or must be increasingly supported by IT, things like workforce productivity, software investment priorities, digital transformation, maintaining compliance, these are things IT have to own in the organization, and they're all changing.

So IT's role is changing. And as we found, IT is becoming kind of a bigger part of that employee experience. That employee engagement survey I mentioned earlier, actually, we did what we call a regression analysis, where we asked individuals that they had a positive sense of employee engagement or negative.

And then we try to tie a few other elements to that engagement. We found 7 that were statistically significant out of the 40 or so that we looked at. And of course, when you think about what drives positive employee engagement, number one, there are opportunities for me to grow at work, right?

No one wants to work. We don't want to get on the ladder with no rums. People want to be able to grow. We also saw 3, 4, 5 and 6 were since it's a belonging and purpose, enjoying working for their organization. But really, Eric, the second biggest driver of positive employee experience was this, my organization provides me the tools and technologies I need to succeed. And the seventh most was my work tools to help me accomplish my priorities faster, so I can think creatively and stay ahead of projects.

Eric Hanselman

Well, this is something that we've talked about in previous episodes, which is the importance of that workplace tooling.

Conner Forrest

Absolutely.

Eric Hanselman

And here it is borne out yet again.

Conner Forrest

Absolutely. And I think that what we found over these past 2 years, as organization shift from a minimally viable remote work option, right, just get people back to stages in productivity.

Eric Hanselman

Oh, come on. VPN was working so well.

Conner Forrest

These early days, we learned...

Eric Hanselman

Hey, I was just going to say, I mean, clearly, as we've been talking in a bunch of different fronts, that February, March of 2020, this was really a do whatever it takes to make it happen. But you're absolutely right. We've been through this period of minimally viable working environments. And that, I think, it sounds like a lot of the study results are identifying that okay, people's patience with that limited kind of just good enough is wearing thin.

Conner Forrest

Definitely. And I think -- we think of it in terms of this isn't written down anywhere. It's not some mantra, but I think of it as you have the initial reactionary period, which is establish the VPN, getting the network taken care of, get the security and compliance standards out there and get people back to work.

Then you have the response where we start to elicit feedback, we start to learn, we start to grow. And then you have where I think we're heading in a lot of the more progressive organizations, which is reimagining the workplace, which is where you're starting to take those learnings, take the growth periods, take what we have elicited from that feedback and use that to rebuild our work environment, which, in essence, is rebuilding the employee experience.

Hopefully, in an optimal way, hopefully, in a way that drives engagement. But folks are starting to make some of those investments in establishing permanent hybrid remote work, which is a renewal of the work environment. But like you said, so many maybe the folks that are laggards or maybe haven't prioritized that digital transformation or that digital environment renewal are falling behind and employees are getting fed up with that. They're getting frustrated.

One example we had was in our employee engagement survey, we have asked individuals how likely or how willing would you be to lead your job just for better tools. And I think it was well over 20%. So maybe even close to 30%, so may be somewhat or very willing to leave their job. Not for more money, not for a better title just for better work tools.

I think employees, as you mentioned, they're well aware of the friction they face in their daily work lives and they're kind of over it. I think people want a frictionless work experience, right? We've always been promised, give me digital transformation.

Eric Hanselman

It should. It's got to be there somewhere. If only I could find it. Well -- and I guess that's one of those things that we've thought about the urgency and a lot of that first order approach that I think most organizations went through.

But you pointed out something that I think we keep hearing over and over again in a number of different areas in terms of technology investment, in digitization, in moving organizations forward in terms of flexible infrastructure which is that we seem to be getting these gaps of those that invested are now more efficient, more effective, or feel like better places to work.

And those that haven't invested are falling behind and that we're starting to see that leader and laggard sort of gap expanding fairly significantly. And again, the conversation that we keep having around this is, boy, doesn't it seem like something where that gap is going to now start to become insurmountable if it becomes too large in your particular market.

Conner Forrest

That's definitely a threat or a risk that I believe all organizations should be looking at or maybe considering asking themselves the question of, are we taking the right steps. Are our outcomes evolving in a way that prioritize what we need?

Which, if we go back to the retention issue, the labor and skills challenges and attrition problems, is that in our mind, it's really all about who is not necessarily leading the employee experience, but who's participating in it or who's taking ownership.

And I think if we boil this down to the base level, the foundation of those that have taken those early steps to prioritize productivity, removing friction and digital experience, whether they know it or not, they're taking an IT-centric approach to thinking about employee experience.

We asked individuals, who leads your employee experience strategy, who's architecting it? And of course, HR sticks out ahead like 61% or something. But right under that at like 52%, not even -- it's not even a 10% difference was IT. And of course, the next few operations, finance, et cetera, are way further down the list.

But that just goes to show that how organizations are thinking about this or how employees and HR thinking about this is that IT is kind of second in command here. And in some organizations, it's likely first in command, depending on how digital the workflow is, how digitally experienced is.

But I think what we found in that disparity of those who jumped into positions of leadership versus those who didn't, was how they were orienting or contextualizing their IT investments. Was it to make the best dollar purchase? Was it to kind of keep up with our peers?

Or was it to provide our employees with the best experience they need to get their work done? And I think that, that's kind of maybe in some instances, one of the reasons that some were successful and some weren't. It's how we're thinking about our people when we invest in our technology.

Eric Hanselman

Well, it's an interesting shift. And when you think about a move from IT teams being implementers to actually starting to lead that conversation, it sounds like that maybe they become the voice of the art of the possible.

But I guess with all these new possibilities, how do you think IT conversations with leadership change in that? Are they the educator? Are they the owner of the possibilities? How does that change and evolve?

Conner Forrest

Well, I think for starters, what IT has already been prioritizing is part of the employee experience. We -- in a lot of our surveys, we asked what are the kind of the primary drivers or goals for IT-led digital transformation.

And what's interesting is for years, it's been to improve the employee productivity and collaboration experience, right, which is part of the digital experience. So in our mind, whether or not they know it, IT has been looking to support the digital work experience through previous efforts in digital transformation, now efforts in what we call future of work.

So I don't think it's going to be that huge of a shift in, say, the tactical outcomes of IT or how IT executes against its work goals, I think it's a shift in mindset. IT has to think or consider or look at its investments and its work through the lens of what employees want.

And one of the ways we see IT doing that is in being a support system for understanding and implementing digital tools. We know that roughly about 1/4 of employees have visibility into how their organization invests in like the tool systems and processes that invest or improve their kind of productivity.

And IT can help them understand that. IT can provide that clarity. These new outcomes change leadership conversations, though, in that the employee experience and kind of the digital work experience is not only the effort of IT, it's not also only the effort of HR. It's a collaborative issue.

And so I think that for starters, when we think about how the conversations changed, we have to pursue a collaborative approach to decision-making. We've seen this show up in our strategic planning, questions in surveys we've asked in the past with nearly a 40% preference for -- on the employee side for leadership to work collaboratively across the org to make decisions.

So I think that's where it starts is that IT has to collaborate with other function leaders, other department heads and executive leadership itself, sharing the data it has, sharing its expertise to design and optimize the digital experience.

And then I think also, as IT goes to leadership to help them evaluate a software vendor, some of the criteria in that is going to change. Of course, you value for the money. We always got to protect the bottom line. But we have to think about future sustained business viability there.

We have to think about deployment times, how do we meet user requirements. Does this help our individual users be more autonomous? Is there self-serve support? All these things that could help remove friction in the Workday or the workflow processes become criteria and become part of the checklist, I think, IT brings to those leadership conversations when evaluating vendors or thinking about a refresh.

And then also, I think it really boils down to alignment. In our team, we talk a lot about this kind of connection between strategy and execution, organizational vision and really what's being done on the ground for individual end users and kind of functionary leaders who are kind of executing or working against these patients. And we believe that there is an alignment challenge that has been shown in our data between organizational goals and technology strategy.

And so as we start to collaborate more, as we start to renew our thinking about how we believe in criteria on how we make software investments, I think we also need to see IT speaking up, but also listening to these strategic visions and goals as to help increase that alignment so that IT in the business, IT and HR, IT and the employees are on the same page and how we're supporting with technology and how we're driving the employee experience.

Eric Hanselman

And to your point, that's requiring a mind shift change -- or mindset change to be able to get from -- beyond the minimum viable experience idea to really integrating more because it is so critical to the function of the business to ensure that you really are delivering a workplace that really is going to be suitable, enabling, empowering and able to drive work in what is this new world we find ourselves in.

Conner Forrest

Definitely. And that's where it comes to this challenge of how do we change that mindset? And we think that from the top down, I like the word you said, empowering, right? It's about empowering. We hire these people for a reason. Let's lean on the experts we have in HR for the people perspective, in IT for technology perspective.

And really do what we can as leaders to improve their ownership of the process, improve their strategic value and how they view themselves as a consultant to the business. And I think as we seek to empower them, as we support and put our confidence in them, that will help shift that mindset. Give them the ownership, give them the participation opportunities, and let them have a voice in how things are moving forward.

Eric Hanselman

Well, it's sounds like wise words to help guide IT teams and great perspectives. And again, interesting to get those -- to see that continuity from earlier study results and a lot of that correlation that exists. So this is great stuff. Well, this has been wonderful. Thank you, Conner.

Conner Forrest

Thanks, Eric.

Eric Hanselman

And I am sure there is a much longer conversation as we continue moving through this because there are so many other different aspects of the workplace technology pieces. So I will point our audience towards the research, a bunch of different aspects. Of course, we never have enough time to be able to get into everything. But that sounds like maybe an opportunity to get you back on as we keep digging through this research.

Conner Forrest

Hey, I look forward to it.

Eric Hanselman

And I will as well. And that is it for this episode of Next in Tech. Thanks to our audience for staying with us. And thanks to our production team, including Caroline Wright; Caterina Iacoviello; Ethan Zimman; and our intern, Michael [indiscernible] on the Marketing and Events Team; and our studio lead, Kyle Cangialosi.

I hope you'll join us for our next episode where we're going to be revisiting some of the merger and acquisition activity that's taking place and some of the things that we've identified in this very choppy market that we're seeing out there. And Brenon Daly is going to be back on to talk about some of that as we sort of look towards the close of the year, and we'll see how some of those earlier predictions have turned out. I hope you'll join me then because there is always something Next in Tech.