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Insights 21 Mar 2016

Tech Companies and the ‘War for Talent’

By Rebecca O'Neill

techwar

Competition for high performers in the tech sector can drive sustainability practices in companies, but may lead to negative societal impacts elsewhere.

The digital transformation that is underway across all industries, from automakers to journalism to agriculture, is leading to mind boggling growth in the technology sector. New products and services are in high demand, as companies realise that shifting their business models to incorporate more sophisticated technology can often lead to more efficient supply chains, better customer services and, ultimately, higher profits.

The growth of the tech sector in our economy has complex sustainability ramifications, from data privacy, cyber insecurity, e-waste and obsolescence to human rights and labour issues in the supply chain. But on the whole, tech companies have played active roles in the ongoing corporate sustainability movement, often leading in key issues such as shifting to 100% renewable energy.

One key aspect of any tech company’s sustainability is its ability to attract the best employees. In order to remain innovative and competitive, a company must make sure to hire and retain the smartest people. Due to a shortage in the key skills needed by tech companies, there is strong competition for the top candidates and what is often called a ‘war for talent’.

Sustainability Attraction

This contest for the most skilled employees is having both positive and negative impacts on society and our wider environment. Many companies realise that being a sustainability leader can be highly attractive for employees and may help them to have a competitive edge against peers perceived to be less responsible. Although salary, benefits and other traditional factors are still high on most people’s list of importance, studies show that many people, in particular Millennials, want to work somewhere where they can have a positive impact on society. One Deloitte study found that for six in 10 Millennials, a “sense of purpose” is part of the reason they chose to work for their current employer.

Due to a shortage in the key skills needed by tech companies, there is strong competition for the top candidates and what is often called a ‘war for talent’.

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Companies are upping their ante in this space: the music service company Pandora offers 40 hours paid time off for volunteering and Google has given huge amounts of funding and in-kind donations to charity. Others see their business model as inherently driving sustainability, for example, the growing sharing economy potentially reduces the demand for finite resources so companies such as Uber and Airbnb can use that as a selling point to potential employees. However, those same two companies have recently been under fire for questionable ethical practices (for example, Uber has been accused of misleading customers on the level of background checks their drivers undergo) and have taken some reputational hits. This may or may not have deterred some more socially conscious prospective employees, but it demonstrates how potentially positive impacts in one aspect of sustainability can have negative impacts elsewhere.

Casting a Shadow

Though it may be somewhat driving improvements in corporate sustainability, the competition for top recruits means that many companies are paying top dollar for their employees, which is having broader social and economic implications. High incomes in the tech sector have been well documented and are no doubt celebrated by those that benefit. However, most people do not work in the tech sector and we are seeing a growing income divide between the tech workers and the rest of society.

In the San Francisco Bay Area, which is widely considered the hub of the sector (and is where I work from), this income divide is having serious social impacts. According to one measurement – the Gini Coefficient – the wealth gap is on par with Rwanda. The Google buses (and buses from other large companies) have been blamed for evictions and house prices are skyrocketing and making much of the Bay Area unaffordable for most.

Tech companies must recognise their contribution to societal inequality and help to address it if they truly want to be good corporate citizens.

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It is not just about income; diversity and inclusion is a key aspect to consider. We explored the growing trend of disclosure and goals around diversity as part of our top trends for 2015. The tech sector is historically white and male dominated and has struggled to diversify its workforce. Again, here in San Francisco, the income gap between white and black communities has grown: median white household income has increased by 14% since 2011 but median black household income has decreased by 5%. African American leaders have called on the tech community to diversify their workforce as one way to help address this inequality.

Tech companies are by no means the only cause of inequality and it would be simplistic to blame them for it. However, they must recognise their contribution and help to address it if they truly want to be good corporate citizens.

Business Case

As always, it is important to underline the business case for acting, not just that it’s the right thing to do. High performers exist through all groups of society and to miss out on certain groups is just not smart strategy. Disadvantaged communities, whether due to income, race or other factors, present opportunities for tech companies to identify and develop key recruits that may prove hugely beneficial to their business in the future.

I recently interviewed a top IT recruiter and she highlighted how directly diverse employees can drive business value. For example, having diverse developers is important for ensuring the end product meets the needs of all consumers. TheDeloitte Millennial Study showed that, among businesses where Millennials say there is a strong sense of purpose, there is significantly higher reporting of financial success, employee satisfaction, and recruitment.

Tension of Talent

The complexity of sustainability can be daunting and the tech ‘war for talent’ is a case in point. How can companies ensure their own business sustainability if they do not have the best talent, and how can they attract the best talent if they don’t offer competitive wages?

But how can they ensure a future workforce pipeline and a thriving community if parts of society are excluded from the burgeoning economic development? I don’t claim to have the answers but it is this inherent tension that challenges us all to find holistic solutions. The more we take into account the full spectrum of ways that companies create and degrade value, the greater chance we will find paths forward that benefit all.

This article was originally published in Radar 09: Inside the Machine.

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Employees

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