Why leaders need to focus on a culture of experimentation to accelerate upskilling and results

Christopher Hannegan, Partner PwC US and Michelle Kam , Partner PwC Australia

When PwC launched the 26th Annual Global CEO Survey at the World Economic Forum in Davos, the findings revealed the highest level of pessimism for over a decade – with nearly three quarters (73%) of respondents expecting global economic growth to decline over the coming year.?

This translates to some rising concerns about the workforce. While mass departures from workforces may have leveled off (37% of the business leaders surveyed don’t expect to see any change in the rates of employee resignation, including retirement), they’re still worried about talent.?

Very worried. In fact, 52% think that labor and skills shortages will impact their organization’s profitability to a large or very large extent over the coming 10 years – a concern that ranks among their top three issues.

Mixed Signals

So, what’s behind these findings? Against a background of continuing geopolitical friction, economic volatility and intense cost pressures, mixed signals can be seen in the talent market. Take the US: the jobs report revealed a surge in hiring in January 2023, while the mass layoffs by tech firms continued unabated. Given the nervousness that these conflicting indicators are creating among employees, many will seek a “safe harbor” and stay put in their jobs.

But for employers, the effect of this slowdown in attrition is double-edged. While it means fewer people are leaving their roles voluntarily, it also risks creating stagnation of skills, inertia of behaviors, and an ingrained resistance to change.

These dangers are growing because the people who stay may not have the right skills needed going forward – and may also not be working in an environment that encourages risk-taking or experimentation. But with fewer employees now on the move, any transformational program must be delivered mostly by the people organizations already have. So investing in those who’ve stayed on is vital.

No wonder then that CEOs plan to commit resources to improving their employees’ skills. When asked about what investments they were intending to make over the next 12 months, 72% said they would invest in upskilling – the second most popular answer behind 'Automating processes and systems' on 76%. Of those planning to invest in upskilling, 59% were doing so to reinvent their business for the future, and 41% to preserve their current business.

When culture inhibits change

So the ultimate goal of upskilling for most CEOs is to enable reinvention of their organization. But will simply investing in new skills be enough to generate the behavioral changes required to achieve this? It’s an age-old problem, and many Learning & Development Officers concede that much of the money spent on training is wasted; the training event is good, but it does not translate to actual behavior change afterward.?

These questions are increasingly pressing for CEOs. Why? Because they know that organization-wide change on the scale needed won’t happen without a change in culture. So the complex challenge they face is to simultaneously create a culture that encourages speaking up and risk-taking, investing in people in strategic ways – and ensuring that employees can take advantage of what's being offered, while being open to learning new skills and ways of working.

Achieving all of this isn’t easy. Many companies say they want new behaviors, but then don’t invest the necessary time and resources in aligning their organization to truly support people in adopting those behaviors. But this alignment is pivotal to successful change. Evidence? In PwC’s latest Global Culture Survey, 72% of the leaders and employees surveyed reported that culture helps successful change initiatives happen. By the same token, cultural incoherence with strategy is a key source of transformation failure.?

Tackling the fear factor

So, how to ensure cultural alignment trumps incoherence? Let’s start by taking a fresh look at the issues at play. Our own experience with clients across industries shows consistently that true behavioral change can only be achieved if people are given the space to experiment and sometimes fail. If employees don’t feel safe -- if failures are not tolerated --? they won’t try out new ways of working, they will simply maintain the status quo and stick with their learned behaviors.?

The implication is clear. If leaders want their people to learn new skills and work in different ways, then they must provide a working environment that tolerates mistakes. But according to the research, there are many organizations where this isn’t happening: 43% of the CEOs in PwC’s survey admit that leaders in their organization don’t often encourage debate and dissent, while 53% say they don’t often tolerate small-scale failures.?

What’s more, change programs often stoke fear and disruption, making experimentation?feel even more risky for people at many different levels. Concern over doing this is especially acute for employees within the long neglected ‘middle management’ layers: 76% of CEOs say the leaders in their organization don’t often make independent strategic decisions for their function or division.?

In combination, these findings point the way to a better approach. Fear of failure starts at the top and can become systemic as part of the organizational culture. Once that happens it’s not easy to unravel. But there are steps that organizations can take to replace fear of failure with the confidence to speak up and take risks.?

Steps to take

With this in mind, here are four ‘no regrets’ actions that leaders can implement NOW to make sure their investments in transformation and upskilling are aligned to their strategy and set up to succeed:

1. Assess your organization’s culture to pinpoint the potential gaps between strategic aspirations and the current-state culture and behaviors. How deeply felt are the fears and risk aversion??
2. Be aware that the success of the reskilling mission will depend critically on understanding the behaviors associated with embedding new skills. What do you want to see more people do more often and more of the time? This process involves “peeling the onion” to uncover the behaviors that will most likely trigger the new skill and catalyze new habits.
3. Tap into informal leaders across the business to determine what most needs to change on the ground for people to feel more comfortable trying out the desired behaviors. What factors are deterring them from experimenting at the moment?
4. Start signalling – and visibly demonstrating? – your commitment to new ways of working, both individually as a leader and collectively as an organization. How well does the example set by the executive team model the behaviors you want to see more of? What obstacles or negative influences can be removed?

To hear more, or discuss anything we’ve said, please get in touch. We’d love to hear from you.