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HR Trends, Challenges & Priorities for 2023 Part 1

It’s the season to be gathering and reviewing data to make more informed decisions in preparation for the start of a new year. 

Having reviewed all the latest HR research, Jigsaw Cloud finds that the perennial challenges within HR are still, well, perennial. We’ve identified 8 key HR trends for 2023 and beyond.

  • The war for talent will continue for the next few years not months.
  • Staff attrition will increase, so staff retention strategies need to be a priority.
  • Recruiting and onboarding process and timescales should be fine-tuned to remain competitive.
  • Compensation, benefits, and company culture must reflect the changing needs and wants of employees.
  • Huge fluxes in the last couple of years means further change management needs to be collaborative, not prescriptive.
  • Offering a positive employee experience is now a necessity, not a ‘nice to have’.
  • With remote working embraced by many, new skills are needed to manage a disparately located workforce.
  • Diversity, Equity, and Inclusion is front of mind for an increasing number of job seekers.

This is the first of a two-part feature and covers four of the eight key HR trends we have identified for 2023.

Talent Scarcity

Many believe that as the fallout from the global pandemic recedes so will the war for talent but there are many elements that dictate that this is not the case.

Demographic trends show many countries, including the USA, the UK, France, and Germany, will continue to experience a worker shortage due to their aging populations, according to the Indeed & Glassdoor’s Hiring and Workplace Trends Report 2023. In addition, this report identifies that supply dynamics will continue to create a persistent and wide gap between employer demand and candidate availability. These include the absence of sustained immigration, an increase in labour productivity, and a lack of focus on attracting non workers of all ages to join or return to the workforce.

Even as many economies slow or fall into recession and employer hiring decreases, there will be a shortage of candidates to fill long-term demand far beyond 2023. This means workers will continue to have the leverage to request higher pay, increased benefits, scheduling flexibility, and a variety of other elements which could be relevant to their role, industry, or specific employer.

However, according to the Indeed & Glassdoor report, there are 3 clear areas emerging to offset the shortage of candidates:

  1. Attracting workers from abroad is an effective way to promote hiring when talent and skills are in short supply. Several countries are reviewing immigration policies to allow certain worker categories to gain right-to-work status more easily.
  2. Many employers are also tapping into groups of workers often passed over, such as those with criminal records, as well as doing more to accommodate workers with disabilities by adopting more flexible work policies. Offering flexibility in areas such as work scheduling will also attract and retain an older work force and more women as well, who could not previously re-join the workforce due to childcare responsibilities.
  3. Investing in artificial intelligence and other technologies to negate the need for humans to carry out certain types of work may be controversial but data shows that they can boost productivity and can actually help to fill gaps in workforce supply.

But none of these are overnight solutions so in the meantime the continued talent scarcity has a knock-on effect for the workplace as a whole. Recruitment will become more challenging, the importance of managing the candidate journey and then ongoing employee expectations will come to the forefront along with the need to update skills to manage hybrid and remote workers. So, most of the trends we focus on are as a direct result of talent scarcity.

Remote & Hybrid Working

Once seen as an occasional perk or frowned upon because ‘workers can only be productive at work’, remote working became essential for organisations to continue to function during the pandemic. Online meetings are an enduring image of working life during this time but because of this forced ‘work from home’, many employers discovered that remote work was actually a great business model for their business and their people.

A result of the ability to be more flexible with work was that many took the leap to change profession, company, or industry, resulting in what many coined the ‘The Great Resignation’. However, it could be argued that it wasn’t resignation, instead people felt motivated by the wider cultural acceptance of their change in priorities and what they wanted from work. More than avoiding early starts, long commutes, and donning office appropriate attire, mainstream remote working finally allowed people to re-evaluate their lifestyle and, for some, find that elusive work-life balance.

Intuition, a leading global knowledge solutions company, collated data on the growth in popularity of remote working and found that 62% of employees now expect their employers will allow them to work remotely moving forward.
While the necessity to work from home has ended, the ability and option to work from anywhere is now thriving. The number of job postings on Indeed that advertise remote work are well above where they were prior to the pandemic and searches for remote work roles remain extremely popular with job seekers too.

Talent scarcity and workers’ preferences will ensure that remote and hybrid work will become the norm for some jobs and across some industries. But it’s not all about employees as employers also benefit as offering remote work opens the door to more talent pools for whom commuting or working within an office environment may not be feasible.

However, only about a third of occupations are suitable for remote work; Food can’t be prepped, deliveries can’t be made, surgeries cannot be performed, retailers cannot open their doors for business and construction workers can’t build. Which means organisations that cannot offer remote working are seeing their talent pools diminish as workers choose to gravitate toward work that lets them ‘work from home’. One response to this has been to offer signing bonuses to compete with those organisations who are able to accommodate remote working occupations.

The long-term impact of embracing a remote or hybrid working model are yet to become clear, or fully felt but there are a couple of immediate positives as it:

  • Eliminates the commute, which has allowed workers with disabilities to find and maintain employment.
  • Has the potential to create much more diversity in the workforce, although as it is still relatively new territory at scale, so remote working policies must be monitored and adjusted to ensure the inclusivity, equity, and diversity of any workforce.

If managed with the correct framework and technologies, flexible, remote working as a long-term model is a win-win in aligning the health of an organisation’s bottom line while respecting the work-life balance of employees. By supporting the work and life needs of individuals, it could mean a much higher retention rate at a time of increasing staff attrition and scarcity of many skills.

However, there are some caveats. Bill Schaninger, a partner at McKinsey, warned in a recent McKinsey podcast that total isolation of employees may lead to burnout, saying “We’re thirsty for interaction with others. We’re not meant to be isolated.” But he also warned that businesses should consider returning to in-person work as “A dimmer switch, not an on/off switch.

Effective Leadership & Management

There is an emerging skills gap in many organisations between the more traditional leadership and management models and the new ways of working that many have chosen to embrace long term in our post pandemic world. The challenge is to ensure leaders and managers can carry out their roles effectively, no matter where their teams are located or how they deliver their work requirements.

Treating entire teams with a one-size fits all approach is no longer going to engage employees or encourage them not to explore other opportunities should they feel they are not receiving the support, leadership, and encouragement they need to be their most productive.

Authenticity, empathy and adaptivity, three leadership traits that were once listed as ‘nice-to-have’ qualities, are now emerging as must haves from an employee perspective, according to Gartner’s research on the Top Priorities for HR Leaders in 2023. This research has identified that leader and manager effectiveness is a top priority for 60% of respondents. It also states that the environmental shifts of socio and political turbulence, work-life balance and flexible work will redefine the leader/manager and employee dynamic into a much more individual ‘high touchpoint’ experience and human to human relationship.

This brings us onto our next trend.

Managing Change Fatigue

With rapidly rising inflation and interest rates, political instability at home and abroad, the war in Ukraine and still cautious steps into life after the pandemic, certainty is not a luxury many can afford. According to Gartner’s Top 5 Priorities report, 53% of HR leaders see organisational design and change management as one of those five, while 45% say their employees are suffering from change and uncertainty fatigue since the onset of Covid.

Back in 2016, 74% of employees were willing to change their working habits to support organisational change, but by 2022 this dropped to around 38%, according to Gartner. So prioritising change management to best navigate through continued disruption and uncertainty is key as high employee change fatigue and increased work friction correlate with high staff attrition.

Dynamic organisational change can be the crux of what makes a business able to evolve with market changes, so it’s clear that these Gartner stats are a potential cause for concern when the workforce has had enough of constant change. Again, the trend for a more human to human approach comes to the fore; one that is less prescriptive and instead focuses on a more collaborative style where employees are fully consulted and involved in any change process.

The next few years will test the boundaries and measures that businesses put in place to meet challenges and implement change to adapt to them. Planning and a well-equipped arsenal of HR tools and cloud-based systems could make uncertainty less of a vague prospect and instead a clear opportunity for success, management development, business growth and, in turn, keep staff turnover to a minimum, reducing costs and increasing employee engagement.

That’s the first four of the eight HR trends we’ve identified for 2023.

Jigsaw Cloud are a team of HR specialists and consultants who work alongside customers across most sectors both within the UK and internationally. This expertise and access to a wide variety of SME and larger multi-nationals gives us the ability to identify trends as they emerge.

The remaining 4 trends will be shared very shortly where we look in more detail at employee engagement and experience, enhanced benefits, the candidate journey to becoming an employee and the importance of Diversity, Equity, and Inclusion in today’s jobs market.

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