If you’re looking to build a highly successful technology services company in the cloud’s third wave, here’s a piece of advice — prioritize your people function. Because you’re going to need HR leadership more than ever in the coming decade.
The TLWR Snapshot
- The workforce looks and operates very differently in the third wave
- Current recruiting, retention and employment strategies must evolve
- Companies without out strategic HR or people function are going to get left behind
Consider just a few of the talent trends taking place right now:
- Workers are resigning in record numbers. In a recent survey, nearly 40% of all workers and 54% of Gen Z workers said they plan to switch jobs or resign within the next year. This spring “quit rates” in the U.S. were the highest they’ve been since the Bureau of Labor Statistics started tracking this data.
- People are staying at jobs for less time, and this downward trend on tenure will continue as the workforce skews younger.
- Burnout is at an all time high, while employee engagement continues to be disturbingly low. According to Gallup, only a third of the workforce considers themselves to be highly involved in, enthusiastic about or committed to their work. No wonder quit rates are high.
- Work preferences are shifting dramatically. This is partly due to the pandemic and the near overnight acceptance of remote work, but it’s also due to changing demographics. In the next decade, 75M baby boomers are expected to leave the workforce, while millennials take over management, and Gen Z becomes almost a third of the workforce.
It doesn’t take an MBA to see that companies — especially people-based services firms — have to make some serious changes in how they recruit, manage, motivate and retain their workforce if they want to succeed in the coming years.
Yet, of the 300+ growth stage services firms we’ve spoken with in the last year, only 1 in 3 had an HR or people leader represented on their executive team. More than half of those that did have that position in place, it was too junior a role to drive change and meaningful strategic impact.
Yet, of the 300+ growth stage services firms we’ve spoken with in the last year, only 1 in 3 had an HR or people leader represented on their executive team.
Part of this is due to size and stage. When you’re just getting started founders tend to be the people function. They do the recruiting, know each employee personally, and outsource as much of the day-to-day work as possible. That works for a while.
Here are some of the patterns I see when organizations don’t think strategically enough about talent:
They recruit only from their network. There is nothing wrong with recruiting known people who you trust, but it can’t be the only strategy. Eventually that well will run dry, and often you end up with a homogenous workforce with similar backgrounds and experiences. Diversity matters in today’s business environment, and having a diverse workforce will be table stakes if you want to appeal to those coming of age in the era of equality.
They recruit from the same pool as everyone else. Looking for people with a specific major and a certain GPA from a particular college is short-sighted. It not only hurts diversity, it’s hard and won’t get you the talent you need. College enrollment is down since the pandemic, and more students are opting for online academies like Lambda or Udacity. There’s a reason EdTech startups received $10B+ in funding in the 1H of 2021.
They rely on outside recruiters to poach experienced talent from competitors rather than putting in place the processes and programs to build the talent they need internally. The poaching method might be needed for some roles or to fill short-term needs, but it’s much more expensive, and once you hit a certain scale, it will kill your margins.
They throw new employees onto projects without proper onboarding or training. This not only gives the employee, their co-workers and customers a terrible first impression, it has a significant impact on engagement and turnover. According to Gallup, employees who had an exceptional onboarding experience are 2.6x more likely to be extremely satisfied with the workplace, which means they’re more likely to stay.
They create a hero culture, celebrating people who work all weekend on a big deliverable or setting expectations for an always-on culture because that’s how they work. It’s important to recognize hard work, but rewarding output over outcomes sets the wrong expectation and will eventually lead to burnout. When this happens, leaders spend more of their time and money trying to “save” employees rather than creating an environment where employees want to stay.
They cut off employees who leave. This is short-term thinking at its best (actually, worst). Employees will leave, no matter how amazing a culture is. Unfortunately, many leaders take it personally and get hurt or angry. Losing great talent is always disappointing, but leaders who take the long-view understand ex-employees may be future customers or partners.
Losing great talent is always disappointing, but leaders who take the long-view understand ex-employees may be future customers or partners.
These old school, unsophisticated tactics simply won’t work with the next generation workforce, and they’ll eventually hurt a company’s reputation and growth prospects.
4 things you can do now to prepare for your future talent needs
1. Hire a people leader…earlier than you think
Early stage companies don’t necessarily need a CHRO out of the gate, but they do need someone with experience at the table who is dedicated to thinking about the people in the organization. Not just from a recruiting perspective, but across the entire employee experience. As the company grows and expands internationally, the people leaders should be on equal footing with other executives in the company.
Early stage companies…need someone with experience at the table who is dedicated to thinking about the people in the organization. Not just from a recruiting perspective, but across the entire employee experience.
2. Expand your recruiting pool
Go beyond the traditional universities everyone is targeting for entry-level talent. Instead, tap into smaller liberal arts colleges that train students on the communication and critical thinking skills that consultants need, and supplement them with specialized certifications. There’s a reason why major firms like McKinsey, Deloitte and PwC recruit from top liberal arts colleges.
College recruiting isn’t your only option. There is a growing number of workforce development or digital upskilling programs dedicated to helping people get into technology. Partner with organizations like PepUpTech, The Mom Project, ManTech or TalentPath to reach a more diverse set of employees who are eager to work at a company (and perhaps more likely to stay).
ISVs are also getting into the game. Large vendors like Salesforce and ServiceNow have created workforce training programs to ensure there is enough talent to meet customer demands. Working with your ISVs to place program graduates will not only help with your recruiting needs, it can create a deeper relationship with a key partner.
Working with your ISVs to place program graduates will not only help with your recruiting needs, it can create a deeper relationship with a key partner.
3. Create a culture of learning
The next generation workforce seeks out knowledge. They know that technology and automation will continue to transform the job market and their role in it. Creating a culture that caters to this desire for continuous learning will not only appeal to your employees, it will keep your organization ahead of the curve.
Don’t focus only on technical skills and certifications. The World Economic Forum named the top ten skills for 2025, and half center around problem solving. Creativity, resilience and social influence are also on the list. Focus learning and development programs on the softer skills as well, and explore mentorship and apprenticeship programs to fill in the gaps.
Focus learning and development programs on the softer skills as well, and explore mentorship and apprenticeship programs to fill in the gaps.
When you reach a certain size, consider bringing on a Chief Learning Officer. A CLO can work hand in hand with the broader leadership team to understand what talent and skills are needed now and in the future, and form L&D programs to meet those needs.
4. Rethink the employee contract
The traditional 9-to-5 workday is already a thing of the past, but boundaries will continue to blur as the workforce skews younger. In fact, fractionalization may become the norm, where an employee has multiple gigs, and the 4 day work week is fully embraced and actually drives incremental productivity. In the YouTube generation, everyone has a brand and a side hustle. Why shouldn’t that carry over into careers?
When it comes to hiring full time employees, it’s important to realize “full time” might have a different connotation for this next generation. With the rise of gig work, companies may also need to rely less on FTEs. New research from Upwork reports that nearly two-thirds of hiring managers plan to increase their use of tech freelancers in the next 12 months. Global talent marketplaces, and specialized platforms catering to specific technologies have made it a lot easier for freelancers and clients to find each other.
Find a partner who can help you prepare your organization for these talent trends and become a sought-after destination for the next generation workforce.
As a founder, all this might seem a little overwhelming, which brings me to my original point – prioritize your people function. Find a partner who can help you prepare your organization for these talent trends and become a sought-after destination for the next generation workforce. Preferably someone in-house who is as bought into the company’s mission and success as the rest of the leadership team.
If you’re looking for help in this area, Tercera’s advisor community includes a number of experts who specialize in recruiting, culture, DEI, employee engagement and other talent functions specifically for services firms. Contact us if you think we can help.