Jobs and the Future of Work

How to attract and retain digital talent

This article is published in collaboration with McKinsey & Company
Companies are focusing more and more on attracting digital talent, but what strategies do they need to put in place to do this – and to retain staff?

Companies are focusing more and more on attracting digital talent, but what strategies do they need to put in place to do this – and to retain staff? Image: Pexels/Kampus Production

Todd Horst
McKinsey Partner, McKinsey & Company
Kathryn Kuhn
Associate partner, McKinsey & Company
Stephanie Madner
Associate Partner and Leader, People & Organizational Performance Practice, McKinsey & Company
Charlotte Seiler
Associate partner, McKinsey & Company
Paul Roche
Senior Partner, McKinsey & Company
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  • Companies are focusing more and more on attracting digital talent, but what strategies do they need to put in place to do this – and to retain staff?
  • It’s essential for firms to understand the nuances of what these workers value and prioritize, says McKinsey, adding that they see career development as being just as important as compensation.
  • Other factors that are important to digital talent are meaningful work, support for employee health and well-being, and workplace flexibility.

As the economic landscape continues to shift in the wake of the pandemic, the urgency of harnessing technology to drive change has endured. Digital-talent cultivation has become a top organization-wide priority across industries, and the competition for top talent remains fierce.

The recent wave of high-profile tech layoffs has not made much of an impact on the supply–demand disconnect in the digital-talent market. As of March 2023, the tech unemployment rate was 2.2 percent, compared with the national average of 3.5 percent. Open tech positions increased by almost 77,000 month-over-month, representing the highest level of employer hiring in seven months. In aggregate there were nearly 316,000 unfilled tech jobs across the economy in March.

A ZipRecruiter survey conducted in October 2022 found that 79 percent of recently laid off tech workers found a job within three months. And conversations with employers indicate that recruiting top digital talent remains a struggle, with even the highest-performing companies having difficulty hiring workers skilled in high-growth areas like AI.

To attract this coveted segment of the workforce—and hold onto them—it’s essential to understand the nuances of what they value and prioritize. As a follow-up to our recently published work on the Great Attrition (or “Great Renegotiation”), which discusses the evolving employee value proposition across roles and industries, this article delves into the specific and unique needs of digital talent. Leading companies are already starting to use this information to narrow the digital-talent gap in creative new ways.

Career development takes center stage

After many years of compensation being considered the paramount factor in attracting digital talent, our research reveals that career development and advancement potential are now on par with compensation as top factors influencing job-related decisions for workers in the digital space. This holds true at all four critical decision-making junctures—deciding to stay in a job, leaving a job, planning to leave a job, and accepting a new job (Exhibit 1)—as well as also across all five job families we surveyed: cloud engineers, data scientists, product managers, SaaS administrators, and software engineers (see sidebar, “About the research”).

Factors driving retention of digital talent
Investing in career development opportunities can stem staff attrition and retain digital talent. Image: McKinsey & Company.

According to recent McKinsey Global Institute research, change is a constant in the tech labor market. Tech workers change roles every 2.7 years, while workers in other professions, by comparison, do so every 3.2 years.

Often, companies are reluctant to invest in career development for digital talent precisely because attrition is so high. However, we believe that by investing in the right kind of career development opportunities, it is possible to stem attrition in a way that is sustainable over the long term (in contrast to merely increasing compensation, which may only temporarily buy employers more time).

This is especially important for keeping younger workers, who are particularly willing to change jobs and, as expected, care even more about career development than their older colleagues (who are already further along in their careers). As LinkedIn’s chief economist recently noted, “The recent surge in Gen Z job transitions (up 80 percent from 2020 and 125 percent from 2019) far exceeds that of millennials, boomers, and Gen X.” Our own data shows that 54 percent of those aged 18 to 34 rank career development and advancement potential as a top reason for staying in their current job, compared with 40 percent of those aged 45 and above.

When it comes to career development and advancement potential, digital talent has a unique view of what “good” looks like. And if employers’ promises to this group are not backed up by meaningful opportunities that speak to their needs, goals, and priorities, they are especially likely to leave disgruntled, communicating their disappointment and possibly deterring others from applying for roles.

For today’s digital talent, career development is not simply about securing tickets to buzzworthy conferences a few times a year. Our findings suggest that digital talent heavily values working at organizations that fully embed learning into every aspect of their culture and encourage employees to invest in their own development and advancement. By creating compelling opportunities for this group, leading organizations are not just satisfying employees’ demands but also enabling them to be successful in ways that substantially improve individual and organization-wide performance.

Reinforcing a nontraditional career trajectory for advancement

Traditionally, employees advance along a linear career trajectory in which each promotion is accompanied by a new title and more people to manage. A staff member may be promoted to manager, followed by senior manager, director, senior director, and so on.

Leading organizations are breaking this traditional link between career progression and management responsibilities for digital talent in particular, recognizing that not all high-performing employees aspire to manage people or have the skills to excel at doing so. In addition to maintaining traditional “people leadership” career paths, these organizations have developed parallel expert paths for digital talent in particular.

This dual-path approach is table stakes for attracting and retaining high-caliber digital talent. This is not about playing into the stereotype of brilliant tech talent toiling away in solitude; rather, it is about allowing top digital talent to influence and collaborate with larger numbers of colleagues without having to supervise or manage them. Ascending to the highest ranks of the expert ladder requires people skills and coaching acumen, as well as entrepreneurialism and the ability to influence people who don’t report to you (including those who lack a technical background).

Even when organizations recognize the importance of establishing alternative career paths, many fail to create the infrastructure needed to make these new paths successful. Organizations often neglect to embed the job architecture with the flexibility allowing for easy transitions between tracks, or they don’t develop clear performance expectations that allow progression and development along each track.

Compensation for career pathways should also be aligned to reflect the value that employees in each path offer. Employees will look for examples of top talent in each path being elevated to (and successful in) senior roles.

It’s critical that digital talent be able to move seamlessly from one track to another. Senior “people leaders” may temporarily switch to the expert track to delve into an emerging technology or digital trend that could have vast implications for the business.

Mike Eason, senior vice president and chief information officer of enterprise data and machine learning engineering at Capital One, has held “15 different roles at Capital One over the last 20-some-odd years.” Of Capital One’s expansive approach to digital talent, he said: “We really want to invest in the whole person versus getting them pigeonholed in doing the same thing.”

Many companies, including Capital One, have created or expanded the role of “distinguished engineers” to allow digital talent to thrive unburdened from excessive managerial responsibilities. Distinguished engineers help drive innovation, developing patentable software insights. They can hold the title of vice president and above, sometimes becoming parallel to C-suite leaders.

Capital One describes those on its distinguished engineer career track as “subject-matter experts who dive deep on a topic, bringing business, product, and tech goals together.” Far from coding in solitude, they “mentor engineers, teach tech teams new tools, share knowledge, and elevate engineering practices across the organization.”

The distinguished engineer track is part of Capital One’s broader effort to invest in developing and nurturing digital talent. The Capital One Developer Academy (CODA), a six-month software engineering program, offers full-time Capital One employees the opportunity to learn full-stack development principles. And Tech College, an online learning platform, offers all Capital One associates—including those in nontechnical roles—thousands of free courses designed to increase tech fluency and skills. Live and prerecorded courses span seven areas: agile, cloud, cybersecurity, data, machine learning and AI, mobile, and software engineering.

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Building opportunities to grow within each role

Many organizations understand the importance of career development but misunderstand how to create opportunities that speak to digital talent.

Technology is in a state of constant flux. Tech workers must constantly adapt and learn new skills to rise to the top, and as a group they tend to prize being able to work on the newest, most innovative technology. Because of this, leading talent development design models enhance internal reskilling and upskilling capabilities by offering continuous and tailored training. They shift the focus from simply providing certifications to building foundational capabilities and designing experiences that allow talent to flourish in any role in which such skills are needed.

One of the most common pitfalls is focusing solely on formal trainings rather than investing in a portfolio of innovative programs and experiences. When looking to learn a new skill, past studies have shown that more workers turn first to their peers rather than to formal corporate training programs (55 percent versus 28 percent). Yet our own prior research has shown that less than half of organizations have implemented peer and self-directed learning opportunities.

JPMorgan Chase offers employees a hands-on opportunity to deepen their AI and machine learning skills by sponsoring them to participate in the AWS DeepRacer competition—a virtual, cloud-based autonomous-vehicle racing league. In 2021, more than 3,200 JPMorgan Chase employees participated in the competition, with three employees placing first, second, and seventh in the global finals. The company describes the program as “critical to our culture of learning” and “a fun, innovative, and collaborative way for colleagues to learn new skills or upskill in a gamified way.”

Moderna has partnered with Carnegie Mellon University to create an Artificial Intelligence Academy designed to “educate and empower employees at all levels to identify and integrate AI and machine learning solutions into every Moderna system and process.” The academy features online and in-person skill building in areas including data quality, data visualization, statistical models, machine learning algorithms, and AI ethics.

Other companies are creating rotational programs that allow employees to broaden their skills in different areas. Such programs offer employees the chance to try out different roles on their team, change departments within their function, or change functions altogether, among other opportunities. Spotify, Amazon, and Salesforce have all used lateral career moves to promote career growth and create new career options.

A large fast-food chain developed a two-year rotational program to help new software talent network, build foundational tech skills, and develop expertise in areas including cybersecurity, cloud architecture, and vendor management. Those who successfully complete the program are placed on one of the company’s global technology teams. In addition to satisfying workers’ desire for continued growth and learning, the exercise has served the business’s larger purpose by identifying top-notch talent worthy of additional investment.

Google is one of a select group of companies that have substantially grown their continuous, learning and development offerings with peer-based teaching networks. The Googler-to-Googler (g2g) network, a volunteer teaching network of more than 6,000 Google employees from every department, has grown to become the company’s primary resource for on-the-job learning. Through the g2g network, Googlers train their peers in areas ranging from Python coding to negotiation skills. This has also freed up financial resources for more specialized training programs.

To ensure that career development programs are genuine opportunities rather than empty gestures, it’s important to give digital talent the time to take advantage of them and the chance to apply their newly acquired skills. If developers are required to take a class in a new programming language or cloud certification, for example, they need a chance to apply that knowledge.

While there is value in providing a breadth of opportunities, there is a risk of overwhelming people and leaving them unclear on where to start. Effective organizations are therefore also creating curated selections of recommended opportunities, tailored to each role.

Meaningful work, employee well-being, flexibility, and demographics

Other factors that are important to digital talent for at least one of the four decision moments are meaningful work, support for employee health and well-being, and workplace flexibility.

More than a third of our survey respondents (37 percent) cited meaningful work as a key factor in their decision to take a new job. But how do digital workers define meaningful work?

Our research shows that workers are propelled not only by a company’s broad mission and impact but also by their understanding of how the specific tasks that fill their own days make a direct, decisive contribution to the overall business (Exhibit 2).

Meaningful work can make employees stay in their jobs. digital talent
More than a third of survey respondents cited meaningful work as a key factor in their decision to take a new job. Image: McKinsey & Company.

Overhauling an organization’s mission and purpose is a gargantuan task. But clarifying how the work performed by digital talent fits into the company’s broader mission is a far more manageable lift.

Too often, for example, digital talent receive specs that obscures the company’s end goal. They may be directed to, say, create a screen that incorporates red and blue and has four buttons but are given no insight into why. The business, in essence, is saying, “This is what we think the answer is. Go code it.”

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What is the Forum doing about keeping workers well?

Agile ways of working can change this dynamic by fostering close collaboration between business and technical workers, keeping the focus on the customer, and developing a culture of shared experimentation. Agile teams work in short, fast iterations; digital workers receive timely feedback on how their work contributes to the broader mission. This process alone can make work meaningful.

While not a top factor in attracting new talent, support for employee health and well-being was among the top reasons software talent left a prior job. More than a third of digital talent who left their jobs (35 percent) cited a lack of support for employee health and well-being as a key reason driving their departure; this was even greater than the share attributing their departure to compensation (29 percent).

Digging deeper, our research revealed the top two subreasons job switchers cited for leaving their jobs: first, organizational leaders were poor role models for balancing work and personal responsibilities, and second, employees were expected to give too much time, energy, and attention to their work.

Companies’ acceleration of their digital ambitions throughout the COVID-19 pandemic placed enormous strain on internal IT organizations. That pace is not sustainable, and our data points to the value of correcting it.

As organizations seek to diversify their digital-talent pools, it’s particularly important to note the distinctions in how different demographic groups value the attributes cited above. In one example, our research found that while career development and compensation are top concerns for women, they care more than men about workplace flexibility. Fifty-three percent of women, and 44 percent of men, cited workplace flexibility as a major factor behind their resolve to stay in their jobs.

These findings reinforce McKinsey’s 2022 Women in the Workplace research, which found that women leaders are significantly more likely than men leaders to leave their jobs because they want more flexibility or seek to work for a company that is more committed to employee well-being and diversity, equity, and inclusion.

Employee value propositions that inspire digital talent

The strongest career development and advancement program, the deepest commitment to employee well-being, and the most authentic determination to make work meaningful for team members will fail to achieve results if they are not effectively communicated to potential candidates and current employees.

Mindful of this, companies are crafting employee value propositions (EVPs) for their careers websites that speak directly to digital talent, emphasizing the opportunity to learn and grow alongside world-class experts, as well as being part of a mission-critical team that is breaking new ground.

For instance, McDonald’s Global Technology organization has crafted its talent value proposition around “intrapreneurs who get to build really cool tech with scary smart people using the latest innovations like AI, IoT, and edge computing” and who are “always hungry for a challenge.” Netflix proclaims that its “engineers ship thousands of lines of code every day,” their work translating into “new product features, delivery of content, and algorithms for our service.”

NASA describes itself as a place where “your work can make a real impact,” as it is “using big data for everything from predicting weather on Earth to monitoring ice caps on Mars to determining the size and shape of NASA’s workforce.” And Kraft Heinz describes a “digital factory” that is “powered by a group of tech-savvy builders who empower every aspect of our global business.”

Organizations can signal their priorities by embedding the career development and well-being aspects of their EVP into recruitment pitches and prescreens, sharing stories from current employees, and building online communities via forums and blogs so that candidates can connect with employees directly. From a retention perspective, it’s crucial that employers continue showcasing opportunities to their existing talent as they progress within the organization.

As the acceleration of digital transformation continues, it is virtually impossible to imagine a business reaching its full potential without a robust and resilient base of digital talent. Even as more tech talent becomes available, demand for this mission-critical segment of the workforce is likely to remain intense. The organizations that will succeed at attracting, retaining, and amplifying the overall impact of digital talent are those that develop a refined understanding of what this group really wants—and find innovative ways to deliver it.

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