HR Trends 2023: The Key Trends in People ManagementBlog / February 1, 2023 / with Christoph Drebes
The HR world is in a constant state of change. As external business conditions change, HR teams must react and respond. These transitions mean that each year offers its own themes, its own major HR trends. In 2023, we’re seeing the return of several trends that have been lying low, as well as the mainstreaming of HR trends that were once confined to start-ups.
While 2022 brought us buzzwords like the "Great Resignation" and "Quiet Quitting", 2023 will see less of an emphasis on recruitment. In a time of high inflation, when many companies can longer afford to pay stratospheric salaries, benefits packages, flexible hours, and company culture will be key parts of HR strategy. Meanwhile, HR Tech continues to improve in leaps and bounds.
When examining the HR Trends 2023, we grouped them into four areas:
- Strategic leadership decisions
- Workplace policies & best practices
- Human-focused HR
- Taking the next steps in digitization
This blog will be a short introduction to the 10 2023 HR trends that fall into these categories. For the full version, including links to relevant research and comments from industry experts, download our whitepaper:
HR Trends 2023: Strategic Leadership Decisions
While much of HR’s work is directed outward at managing people throughout their organization, there will be changes to how HR works internally.
HR as Drivers of Change
While many of the most successful global companies already have an HR representative on their boards, this trend will likely spread in 2023.
One reason is that, in a year of rising costs, HR must be a key partner for management. For example, HR can offer input on the most cost-effective roles to hire or whether individuals could be effectively redeployed elsewhere rather than spending on a new hire or letting them go. Their knowledge of local employment law will also be essential if a company needs to implement layoffs.
When a high percentage of companies have implemented a hiring freeze, HR’s suggestions can help leadership teams to retain talent through challenging times. Their learning and development schemes can also be intelligently deployed to cover an organization’s skill gaps internally.
HR’s input can help a company’s leadership be more creative when planning their long-term people strategy. Still, in 2023 it will be their expertise that enables flexibility and resilience in the short- and mid-term.
Changing KPIs for HR
As already mentioned, many companies have implemented hiring freezes or are decreasing the number of roles they need to fill in 2023. With less of an emphasis on recruitment, HR teams in 2023 will find that their KPIs are also focused elsewhere.
2023 will be the year of retention. But retention doesn’t just happen through willpower.
In order to increase retention figures, there are other goals that HR teams should be actively tracking:
- Diversity and inclusion metrics
- Talent satisfaction
- Talent turnover rate – including by ethnicity, gender, or age
- Learning and development statistics
HR Trend 2023: Centering Employees
With retention, engagement, and talent satisfaction on the rise as KPIs in 2023, HR teams will find themselves challenged to improve the working environment for their colleagues.
However, as the inflation crisis continues throughout the year, they may find that they have less budget than usual for employee-focused initiatives. People managers will have to think creatively about how to support employees on a number of fronts in a cost-effective way.
Wellbeing and Mental Health
The good news is that employees think that their employer is doing more to support mental health initiatives than ever before. The bad news is that more employees foresee themselves facing mental health challenges in 2023 than at the start of 2022.
Another data point that is highly relevant for HR: 81% of US employees will be looking for workplaces that actively support mental health when considering new job opportunities.
Mental health initiatives are therefore moving from a ‘nice to have’ benefit to an essential component of employer branding. Fortunately, one of the key solutions to mental health from an employee’s point of view is one that’s free – a positive, trusting company culture that respects time off and an individual’s responsibilities outside the workplace.
Bringing Humanity to Management
HR can only achieve so much without the buy-in from the rest of an organization and from managers in particular.
To ensure that workplace culture is sensitive to mental health needs, it’s important that individuals are valued for themselves, not simply for their productivity or the role they were hired to fill. Instead, employees can be valued for their addition to company culture, for the role they play in motivating their colleagues, and for their creativity during group sessions. They are not, for example, just another software developer, but someone with unique past experiences and goals for the future.
This experience and enthusiasm can only be unlocked by a manager that takes the time to understand their team members as individuals.
There are other benefits to individualized management. For example, employee retention and engagement are far higher when the employee feels valued and that they can develop their skills in directions that interest them.
Managers that understand their direct reports as individuals can easily flag when someone is ready for a leadership position or when someone has skills that could be useful in another project or department.
Bringing an individual, human side to management, therefore, can help HR to achieve their engagement and retention KPIs.
“Classic management styles aren’t good enough anymore. With them, you might have the best workers but get no results. But if you want to change your culture or collaboration style, then you must figure out how to work without a rigid hierarchy. We aren’t socialized to share or collaborate; we aren’t socialized to make mistakes or fail at work. You have to teach people.”
Bastian Bärenfänger, Founder of Siomo
Naturally, changes in management style don’t appear overnight. As a result, HR teams looking to improve an organization’s culture in 2023 will need to invest time and energy in training and workshops.
For one thing, employees and employers alike still report difficulties in remote and hybrid workplaces. Remote leadership hasn’t been a prominent part of traditional leadership training. However, as hybrid work becomes a permanent fixture, it will be necessary to develop best practices within an organization.
Once again, great remote leadership requires both individualized management and a certain amount of trust. Different employees will need different amounts of contact to achieve the same results.
Culture change can’t simply lie with middle management. HR and senior management will need to communicate their goals to every team member. Training in certain practices, such as effective remote teamwork, hybrid collaboration, or DEI topics, shouldn’t be restricted to managers. For soft skills that will fundamentally change an organization’s work culture, all levels of a company’s hierarchy need access to training.
In 2023, as we move from surviving in hybrid environments to helping organizations to thrive in them, HR will need to be aware of the soft skill gaps in their organization and apply strategies to remedy them.
2023 People Management Trends: Improving the Work Environment
If 2020 was the year of remote work and 2022 was the year of going back to the office, 2023 will be the year in which organizations refine the practices that work for them.
Improving Hybrid Work
In the last two years, hybrid work has moved from being a temporary necessity to a fact of life. But simply because organizations were pushed to hybrid work models doesn’t mean the transformation ends there.
Littler’s European Employer Survey asked those employers who offer some remote work about their plans to require more in-person work. 72% said that they did intend to increase the amount of time their employers spend together to some degree. The way that increase looks will vary from organization to organization.
Some employees are entirely resistant to any mandatory return to the office, preferring complete flexibility. However, others are feeling isolated and shut out from career opportunities when working from home.
From set weekly, monthly, or quarterly collaboration days to regular off-site events or workations, there are many different ways that teams will be collaborating in 2023 and beyond. It may even vary within an organization depending on a department’s culture and practical needs. These changes may also need to be mirrored by changes in existing office space and the resetting of benefits packages so that remote, hybrid, and office-based workers can all benefit equally.
An essential need for newly hybrid companies is the maintenance of a level playing field between remote and office-based workers. Whether that’s in meetings or in the assignment of work between team members, it’s clear that hybrid and remote work policies will still be critical areas where HR teams will focus in 2023.
“In general, companies containing teams that were already well-developed had a far easier time
transitioning to remote or hybrid work. These teams knew how they needed to function, and it was relatively simple for them to find tools to take that collaboration into a digital space. Meanwhile, teams that saw a lot of turnover, that faced constant changes to personnel, leadership, or strategy, struggle without in-person communication.”
Alexander Straub, Managing Partner of changefication
While many companies made headlines in 2022 for reducing their remote work quota, a small but stable number of organizations have gotten rid of their office space completely. Littler’s 2022 European Employer Survey revealed that approximately 5% of companies are now working entirely remotely. Meanwhile, a survey conducted by HR and Payroll service provider SD Worx suggests that 14% of Europeans would like to work remotely full-time versus only 8% who want to work full-time in an office.
For smaller companies and start-ups, there are clear benefits to be had from a remote-first or remote-only model:
- No rent to pay on office space
- No additional costs related to office space (cleaning, coffee, rec rooms, etc.)
- Employees are often more focused when working from home
- No need for new employees to relocate, opening up the employment market
However, there are still challenges for remote-only companies to overcome, including onboarding, creating a great company culture, and ensuring good communication. For remote-first companies, workations and in-person teambuilding events are still crucial, though they happen less frequently due to the dispersed nature of their teams.
Our prediction: more companies will actively choose remote-first in 2023, and those who already have will increase the amount of contact time between team members.
Support during Inflation and the Cost-of-Living Crisis
One thing that became clear in the second half of 2022 is that inflation and costs were on the rise.
Employers can’t resolve all their employees’ financial problems. Still, to retain employees that might be facing pressure, the question is likely to come to HR teams: how can we keep employees engaged amid external pressures? And without spending too much money?
Some potential strategies include:
- Ensuring that employees have a mission or company vision that motivates them
- Investing in learning and development or mentoring schemes so that employees feel that they are getting added value from their position
- Developing affordable but motivating bonus schemes
- Training leaders in how to best communicate during times of uncertainty or crisis
- Encouraging the development of internal employee networks
- Trialing a four-day week without loss of pay
While many organizations won’t feel the need to directly address the cost-of-living crisis, HR will find that it is changing the way that employees view their positions, from the value of their salary to the other benefits and opportunities on offer at work.
2023 trends: Taking the Next Step with HR Tech
Of course, one trend that takes a step every year is the area of HR technology. However, in 2023 there are two areas of development that are finally seeing more practical use. While neither trend will necessarily be mainstream by the end of the year, 2023 will be the year of more public experimentation with HR tech and potentially the first breakthroughs in long-term change.
AI & Algorithm-based tools
In February 2022, a review of HR AI start-ups counted 100 companies working in this space. The trend is only set to increase.
The review also discussed the multiple areas where AI could be applied within HR, largely reducing the administrative burden on HR teams. The key areas of application identified were:
- Administrative and legal support
- Filtering candidates during recruitment
- Developing personalized career paths
- Evaluating key HR KPIs in real-time
- Evaluating the performance of individuals
AI won’t be making hiring or firing decisions in 2023. However, as the technology grows in sophistication and reliability, more companies will begin to experiment with the different solutions on offer to see if there’s a way to lighten the administrative burden and streamline their ways of working.
2022 has been a year of speculation about the metaverse and its potential impact on HR. The metaverse is understood here as a series of virtual locations which allow users to represent themselves as avatars and interact with other avatars and virtual settings.
It’s clear that the metaverse is still growing – McKinsey calculated that over $120 billion was invested in metaverse companies in the first five months of 2022 – but it is far from clear how it will impact the HR space. Currently, the majority of metaverse users (83.5%) are under the age of 18, so they aren’t yet members of the workforce. However, we can expect the next generation to be well acquainted with the metaverse.
What does that mean for HR? There are several processes that could be facilitated inside the metaverse:
- Recruitment: interviews, job fairs, and tours of the office could all take place in the metaverse, enabling candidates based further afield to get a more immersive application experience
- Learning and skill development: immersive learning experiences can better engage existing employees
- Collaboration and meetings: for hybrid and remote employees, a shared space in the metaverse could enable them to feel more connected to their colleagues and the company culture
“While it might not be the metaverse exactly, something is coming that takes us beyond the flat 2D of Microsoft Teams and helps us to feel more connected. Whether that’s VR or a metaverse meeting room, it’s not yet clear. But we’re open to experimenting.”
Christoph Drebes, CEO at Mystery Minds
2023: Another Step Forward for HR
For the last three years, HR leaders have had to think on their feet in response to one crisis after another. For many of their team members, stability is something they haven’t experienced in their professional careers. It looks like 2023 will offer no great reprieve from crises.
However, a lot of progress has been made in the last few years. The COVID-19 pandemic forced many businesses to digitize and adopt new ways of working. And 2023, although it brings its own challenges, will offer HR leaders the opportunity to refine policies and practices that were brought in quickly and without much strategic planning.
It will also be a time to try new things: to discover how to build environments where employees want to stay and grow, to experiment with communication with a dispersed workforce, and to reveal how new tools and technologies can be implemented in a way that frees HR teams from administration.
And as we take another step into the Future of Work, we get to return to the core of HR – remembering that every organization’s greatest assets are the humans who make everything happen.
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