A new study by Egon Zehnder and KPMG found that while the auto industry recognizes the technical challenges of digital transformation, the industry as a whole fails to appreciate the human/cultural challenges. The result: digital transformation is viewed as a siloed experience, important in some departments and less so in others.
The study surveyed 527 high-level auto executives around the world. All ranked digital transformation as a top priority. But most considered it a largely technical process. The greatest impact, respondents said, would be felt by the IT function, while all other departments trailed. Only 8% of leaders expected HR to be affected by the digital change and that attitude was shared within the HR function: Only 18% of HR personnel surveyed expected HR to be affected by digitalization. Indeed, the study suggested two functions – HR and IT – show fear of the coming digital changes.
These findings highlight a critical gap in the digitalization process of the auto industry. Automotive leadership appears to treat digital transformation as if it were a project or corporate initiative – one that resides in a walled-off section of the business. But digital transformation is only part technical. In fact, though it may sound counter-intuitive, digital transformation is primarily human, as its successful implementation truly requires significant culture change throughout the organization. For that reason, the corporate function most closely charged with the human experience – notably human resources – should be directly and significantly involved in the change process.
There are several ways that HR leaders can help the automotive industry find success with digital transformation:
1. Recruit and hire from new sources.
One of the key success factors in digitalization is the ability to recruit new talent who bring critical skills to the organization. A substantially different culture will not evolve without exposing the organization more closely to cutting edge digital talent and experience. Exposure to other companies within the automotive industry is not enough by any means. Talent must be sourced from outside traditional circles. Creating a blend of cultures – and proactively “hiring” different cultures – is one of the main ingredients for being able to shape digital transformation. Automotive companies can take a page from tech companies known for creating visions for customers and thinking in terms of ecosystems, networks, and collaborations.
2. Communicate the culture change message across the entire company.
What is Digital Transformation? Is it all IT? New apps? The digitizing of old processes? The truth is that the answer is different for every company. Understanding what transformation will mean is a conversation that should include HR. HR must work closely with Communications to develop and roll out the transformation message to employees. While change must come from the top, news and messaging regarding change must spread throughout the company. Crafting and coordinating that messaging requires skills in interpersonal communication and a clear understanding of the larger corporate audience. When queried on the topic of communication, automotive execs often conceded that the communication process was fraught. “It hasn’t all sunk in yet in our organization,” admitted one interviewee. “A lot still isn’t understood. Communication just wasn’t good enough. We’ve learned that transparency and communication are crucial.” HR can be a portal for creating and distributing the digital transformation message to the various audiences throughout the organization. Therefore, the function must partner with Comms to ensure the message is consistent and relevant.
3. Create new metrics for excellence.
Perhaps the most critical contribution of HR is the creation of new evaluative tools and guidelines. What does “good” look like in the new culture being created by transformation? This process should look hard at the incentive and compensation system, creating new KPIs that lead to new leadership styles throughout the organization. Rewards may go more towards impact rather than numbers. Behaviors such as collaboration, agility and the ability to build and change teams should become more prominent. Developing new metrics and rolling them out is challenging, but it’s an important signal to the organization that something different is truly happening.
While not all companies recognize HR as a key player in digitalization, the study suggested the department may be more ready to help than management realizes. The vast majority of HR leaders – 87% – are mentally prepared for further disruption from digitalization ahead. That compares with 79% of leaders in the overall study. HR leaders are more open to cooperation with tech companies than auto leadership in general – 83% compared with 76%. And when it comes to the need for culture change, the overall study showed leaders rank this as priority no. 5, while HR leaders have it in the no. 2 slots.
That readiness is an open door for a new kind of HR leader – one who is actively engaged in the change process and approaches the human element from new angles. The HR leader can lead the charge on breaking up old, rigid structures, facilitating new workstyles, and defining the new meaning of excellence in a transformed culture.
While Digital Gravity pulls companies into technological change, they will still need their human workforce to achieve success. Thus, the corporate function charged with managing the human experience must be integral to the transformation.