DECEMBER 1, 2022
Over the past few years, creating a resilient organization has been a top goal for business leaders. But as economic uncertainty, record inflation and talent shortages are occurring in tandem, human resources executives are experiencing a dilemma about how to meet the growing needs of their workforce while facing economic pressures.
According to Gartner Research, “To emerge from the current downturn stronger, executive leaders need to make the right trade-offs in their budgets, secure critical talent and keep their foot on the digital accelerator.” CHROs are prioritizing these issues at Executive Summits this fall, with how to create a recession-ready talent strategy and how to build an agile Employee Value Proposition during an economic downturn as top areas of discussion.
We surveyed CHROs in our Evanta communities about the state of the economy, their outlook for 2023 and strategies they are putting in place to come out on top. Here are five key takeaways from our Community Pulse Survey on the current economic landscape.
1. Are economic headwinds stifling business?
Most respondents specified that their business is impacted by inflation (82%), rising wages (76%) and supply chain constraints (63%). Despite these economic factors and years of global disruptions, nearly 60% of CHROs indicated that their organization is in “growth mode.” Thirty-seven percent stated that business is steady, and only 6% of respondents shared that their business is declining. In the comments, one HR leader stated that they are focusing on “how to shift from being reactive to proactive” to stay ahead during these unprecedented times.
2. Are CHROs shifting their investments?
In correlation to their views on business performance, more than half of the CHROs surveyed stated that they are increasing their investments in key areas next year. Fifty-eight percent are planning to increase investments in business growth and innovation, 55% in technology acquisition or expansion, and 47% in product or service expansion.
Investments in human capital are divided among the respondents with 42% planning to increase investments, 44% planning to stay the same and 13% planning to decrease their spending. One CHRO gave deeper insight into the challenges they are experiencing in this area. They shared, “Reconciling the increase in cost pressures to our business, including employee sentiment expecting an increase in wages, while uncertainty and inflation are accelerating. How will this play out in 2023?”
3. What economic pressures are CHROs facing now and in the future?
CHROs are confronted with economic pressures from various angles, and they expect it to increase into 2023. Currently, 63% are experiencing pressure to reduce spending, while about one-third of respondents are enduring economic pressures around cash and profitability, changing consumer or client preferences and slowing growth.
In 2023, the number of CHROs expecting to endure pressure to reduce spending jumps from 63% to 73% and economic pressures around changing consumer and client preferences increases from 36% to 43%.
4. What is the economic outlook for CHROs?
Although the economy has been volatile for HR leaders over the past three years, most have an optimistic view of the future. When asked how they would describe their economic outlook for 2023, almost half of respondents (47%) reported having either a somewhat positive or very positive outlook. Twenty-seven percent cited neutral thoughts, and about a quarter of respondents (26%) suggested a negative outlook.
When asked when they expect the economy to stabilize, most CHROs believe it will take years to recover. Half of the respondents (50%) believe it will take one to two years and another 20% believe it will take more than two years. Only a small percentage (17%) believe the economy will balance in less than a year, and 13% indicated that they do not know.
5. What’s top of mind for CHROs in 2023? Talent.
The state of the economy on top of ongoing talent shortages has had a compounding effect on CHROs, and they made it explicitly known in the comments of the survey. We asked executives an open question about what is top of mind for them moving into 2023, and an astounding 67% of responses explicitly named talent - from workforce quality to compensation expectations - as something that needs to be addressed next year. Here are some of their responses:
People… we need more and better people.”
Maintaining a competitive Employee Value Proposition, retaining and attracting top talent during high inflation.”
Building and maintaining a stable workforce. Preserve or transfer of institutional knowledge.”
Maintaining an engaged workforce in the shifting world of work, competitive talent acquisition marketplace and adjusting the total rewards offered to meet the evolving market demands.”
by CHROs, for CHROs
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