In the digital age, tech talent is indispensable for driving business valuations. Cody Crook, managing director at Hunt Scanlon Ventures, unpacks how to on board this sector-specific talent, and why it’s a necessity.
A recent article in The Harvard Business review denoted that while there is massive value to be found in digital transformation, much of it has yet to be uncovered. Eighty-nine percent of large companies globally have a digital and AI transformation underway, but they’ve only captured 31% of the expected revenue lift and 25% of anticipated cost savings from the effort.
McKinsey & Company data shows that digital leaders are creating much more shareholder value than laggards. Between 2018 and 2022, digital leaders achieved average annual total shareholder returns of 8.1% vs. 4.9% for stragglers in certain sectors.
Such a significant boost in returns will undoubtedly lead to higher valuations for firms that have properly incorporated novel aspects of digital transformation. But capturing this valuation lift necessitates having the right people on board to execute the technological metamorphosis.
Identifying and onboarding this talent can pose a significant challenge for those that don’t understand the ever-evolving landscape of tech talent and hiring. A recent study conducted by BCG reveals fascinating insights. The race for tech talent remains as fierce as ever, the consultancy said, and the traditional lines separating the tech industry from other sectors are becoming increasingly blurred.
BCG’s research, based on surveys of 815 tech workers in the U.S. and Germany, provides a comprehensive view of current tech talent trends. While most tech workers are content with their positions, there is an intriguing revelation: many are open to fresh opportunities. Talent with a tech background – the same talent that is a necessity to reap the valuation boost of the digital transformation – is widely seeking a change of pace. This presents a unique chance for companies outside the tech realm to tap into this diverse pool of tech workers.
To make the most of this situation, companies are going beyond competitive compensation packages to lure workers from this talent pool. While attractive salaries are essential, hiring leaders are addressing the elements of work that tech talent values highly but often find lacking in their current roles, including work-life balance, flexibility, and engaging assignments. Organizations that modernize their recruitment practices are winning.
Contrary to many assumptions, tech industry layoffs have not flooded the job market with the tech talent necessary to light the digital transformation that many companies seek to ignite. Among those affected by these layoffs, only a fraction were software engineers, with the majority working in areas such as human resources, marketing, customer service, and public relations.
Following are excerpts from a recent discussion with Cody Crook, managing director of Hunt Scanlon Ventures. Cody unpacks how tech talent contributes in unique ways as innovation drivers and dynamic decision makers, and why they have a direct correlation to value.
Cody, why is tech talent an absolute necessity in driving valuations?
This isn’t about having a strong IT department. The days of tech workers representing a simple cog in the wheel are over. Tech workers bring a deep understanding of technology trends and emerging opportunities, and increasingly they are seen as innovation drivers and dynamic decision makers. They contribute to strategic decision-making, providing insights on how to leverage new technologies and adapt to shifting market trends. In the new economy, digital trends move faster than almost anyone can keep pace with. Tech talent is often the exception. They can maximize the yield of new technologies and that has a direct correlation to value.
How can operators ensure they’re doing everything in their power to attract this talent?
It can’t be repeated enough that tech talent places great importance on benefits outside of competitive compensation packages. Placing an emphasis on work-life balance, job flexibility, and the opportunity to work on interesting projects will go far when it comes to recruiting tech talent. The opportunity BCG has uncovered in its research should not be passed up. As many tech workers seek a change of pace, hiring organizations should strike while they can. This might mean making certain concessions in the employee value proposition to onboard this highly sought after talent, but the rewards for companies that step up are vast.
How does this connect with broader trends you’ve seen in the human capital sector?
In the past five years there has been explosive growth in executive search and in the human capital sector more broadly as private equity firms, among many other organizations, have concluded that talent is the real lever for unlocking value. No longer can PE firms merely do some financial reworking to add value; now, they must partner with CEOs and other C-suite executives who can help carry out transformational changes and core to that is finding the key talent who understands how to unlock institutional value. This trend isn’t just related to tech talent; it is a broader change around the strategic importance of talent. In my view, this understanding that talent unlocks value is here to stay.
Is this valuation argument seen only in executive positions?
While having key leaders in place is crucial to unlocking the value of an organization, equally important is unlocking the value of all the talent throughout the organization to successfully carry out the strategic initiatives put in place by the top leaders. In fact, more and more, private equity firms are fighting for younger talent who can retain and bring up the funnel towards eventual management positions. But make no mistake, unlocking value through talent is a concept here to stay.
Cody Crook is managing director and head of investment strategy at Hunt Scanlon Ventures - an M&A advisory firm that specializes in the human capital space. Cody is responsible for co-managing the firm's investment portfolio, which includes executive search, talent acquisition, private equity, and investment firms. Leading the investment team, he spearheads all fund transactions and maintains portfolio developments. He is also responsible for sourcing, managing and monitoring investments and working with external portfolio managers, analysts and investors on active and prospective transactions. Connect with Cody.