Leaders need to get serious and pragmatic about skills: skills clusters will need 'owners', and these will not be people in HR. Meanwhile, CHROs will look beyond EX towards "people sustainability" - derived from DEI, benefits, health, and more.
The year 2023 will be a year of transition as we redefine work, the workforce, and HR, global HR leader Josh Bersin writes in his HR Predictions for 2023 report.
"We have come through three years of the pandemic while dealing with supply chain issues, inflation, hybrid work, and continued economic growth. At this turning point, we have ended 14 years of near-zero interest rates and now face a slowdown in both the economy and in consumer spending. And people—our workers and employees—remain overworked, tired, and ready for change.
"CEOs and CFOs are going to push to maintain and grow profits, focus on cash and financial sustainability, and search for new postures for growth. This means carefully placing bets on the new, green-energy, sustainable economy and reallocating resources and skills to this area," he shares. CHROs and employee-facing teams, at the same time, must consider the pressures that will take place in a workforce that is "quite tapped out".
With the above in mind, the report showcases 15 trends for HR leaders and their teams to keep in mind as we go further into 2023. HRO has pulled out excerpts below:
#1 A new, multifaceted workforce — diverse, aging, and scarce—will emerge
According to the report, three big workforce trends will shape companies this year: diversity, longevity, and scarcity.
First, comes the fact that diversity is expanding. Whether it's different genders, races, age groups, or other demographics defining 'diversity', it is time for companies to leverage the multifaceted workforce this presents. And to do so, leaders will need to understand the business need for diversity.
With diversity spanning so many groups, CEOs and CHROs now face an ever-growing need to build organisations that are as diverse as customers and the workforce as a whole, Bersin points out. "The process is held back by education inequalities, racism, and all sorts of old ideas, but the bottom line is simple: the workforce is diversifying rapidly, and we, as companies, must continue to do the same."
Another thing on leaders' minds is: the workforce is getting older, and there are two reasons for this: increasing longevity coupled with a very low fertility rate. People are living longer, and our energy and vitality last well into our eighties and nineties. This means our entire definition of career, work, and jobs must change.
Bersin highlights: "Young employees in their twenties are looking for new relationships, career guidance, constant communication, and excitement. Early families need flexibility for childcare and child activities. Middle-aged workers strive for growth and promotion and want to improve their standards of living. And older workers want purpose, meaning, and work that fits their older eyes, hands, and bodies.
"We also can’t forget elder care benefits: this is one of the fastest-growing add-ons to your complete benefits programme."
So, what does this mean for leaders? It's time to get serious about reverse mentoring, part-time careers for older workers, job-sharing, and accommodations for aging eyes, backs, and hands. "These are not just nice things to do: they’re essential if you want your company to grow."
The third point is, worker scarcity is increasing. As noted in the report, the size of the workforce is shrinking. In tandem, the working population in every developed economy is starting to peak. According to World Bank data cited in the report, the total population in highly developed countries will peak around 2045, after which only countries in Africa, Indonesia, and India will continue to grow. This means that immigration, a topic many countries find politically difficult, will be the only way for economies to expand.
"This tells us workers are in charge. And that leads us to our biggest trend for the year ahead: redefining how you attract, retain, develop, and employ your people. And to do all of that, you need to think about jobs and careers in a different way."
#2 Jobs and careers will be redefined by the convergence of industries
As uncovered in Bersin's Global Workforce Intelligence Project (GWI), virtually every industry has moved beyond "digital transformation" to adjacent industries and business models. And this creates a massive need for new skills, new job titles, and new organisations — all of which means we have "entered an even more brutal war for talent."
It also points out that no company can "hire their way" to growth anymore. Not only are there fewer workers to choose from, but also the high-demand skills are in short supply. To address this, companies must recruit, retain, reskill, and redesign simultaneously, creating a new HR operating model called "systemic people solutions."
Additionally, as a result of the pandemic and hybrid work, companies have moved from "recruit based on experience" to "recruit based on skills." This requires employers to understand both the skills they have and the skills they need, so they can create "career pathways" to fill these critical positions.
Bersin notes: "We believe this trend will continue, regardless of the state of the economy. Our GWI research shows that every industry is morphing into something new, creating the need for new job roles, skills, careers, and employment models."
#3 Every company will get serious and pragmatic about skills
"Skills and skills-based strategies are not a replacement for the competency models we built in the 1980s and 1990s. This is something completely different, so it warrants a different approach," Bersin writes.
First, he shares, companies are becoming flatter, more team- and project-oriented, and more focused on internal mobility. The formal relationship between the "person" and the "job" is weakening.
In most companies today, employees have many roles and work on many projects. Each of these types of work requires capabilities and skills.
Bersin delves deeper: "In the competency model era, we selected competencies from a book (or wrote them down) and matched them each to a job. Today these formal matches are changing all the time. For example, the skills needed in software engineering seem to change every few months. Thus, we need to remember that we are now dealing with tens to hundreds of thousands of skills, each of which might trend up or down based on technology and the workforce.
A skills-based organisation is using this data to focus on specific business problems: whom to hire, whom to promote, how to develop people for increased performance, and whom to consider for an internal position. Many companies are now 'paying for skills,' encouraging employees to figure out what skills are in demand and go out and build them."
This new, dynamic way of managing people is different from competency management, he highlights. And in 2023, this will become clearer to companies as the technology market starts to consolidate.
- Skills projects should focus on an agenda: increasing performance, revitalising a business to move in a new way, or transforming a business to move into a new area. Just "doing a skills taxonomy" is not an effective way to proceed.
- Teams should focus on capabilities first, skills second. Employees should understand the major business capabilities they need and dive into specific skills as needed.
- Skills clusters need 'owners,' and these are not people in HR. Bersin explains: "If you’re a bank you want to accelerate your customer experience and digital offerings, and you need a digital product owner to watch over the digital skills you need. Ditto sales, marketing, finance, and of course HR."
- Skills data is being collected and used in many systems. In 2023, skills systems can be expected in the HCM platform, the recruitment tools, the talent marketplace tools, the L&D tools, and even the employee experience systems. Every vendor now has its own skills database, and leaders will need to figure out what data will go where.
#4 Employee experience will be put to the test by hybrid work
As people come back to the office, most companies are trying to build a new hybrid work strategy. The real trend is toward three important things:
- Redefining what the "workplace" really is, teaching managers and employees how and when to come into the new office, and refining collaboration and workspace tools to accommodate hoteling workers and part-time office holders.
- Creating better models for teamwork, team performance management, team alignment, and multifunctional teams. Employees in hybrid work teams operate in an agile way, so they often have multiple bosses, multiple team projects, and multiple assignments in parallel.
- Embracing a new generation of HR and workplace technology for scheduling, workplace optimisation, real estate planning, presence awareness, mobile video, and similar productivity tools that extend the employee experience into the workplace experience.
Ultimately, however, hybrid work requires a focus on culture. First, managers and team leaders must learn to be comfortable with remote, disconnected teams and learn how to lead them, listen to them, and help them.
Second, senior leaders must trust that the "invisible workers" are really, in fact, working.
#5 Organisations will move beyond employee experience and focus on "people sustainability"
Throughout the last decade, HR departments have been piling on wellbeing programmes, coaching, education, and services.
Additionally, companies must address financial wellbeing. "While we know what mental and physical wellbeing ailments look like, we don’t see the invisible problem of people worrying about their mortgage or rent payments, scratching to find money for bus and transportation, and poor diet or education from low wages," the report highlights.
To add to that, a new breed of social sustainability issues have emerged, including such topics as contractor health and safety, nondiscrimination (often veiled as DEI), child protection, the right of collective bargaining, freedom from sexual harassment, and the rights of employees to rest and have leave for their personal needs.
These topics, each of which falls into traditional areas like DEI, benefits, health, and safety, or employee experience, cluster together around the concept of "people sustainability."
"There is a never-ending stream of good ideas to promote fairness, equity, belonging, and wellbeing at work, but we need to think about all these programmes as long-term investments and wrap them all up together into 'long-term sustainability'," it explains. Given the myriad labor and talent risks companies have today, "this is a definitive trend we will see in 2023." Companies will need to move beyond "people as a source of innovation and growth" to think about people and workers as a core asset and infrastructure in the company."
#6 Every company will need to revisit its leadership model
In 2023, we will need to learn to balance the new world of empathetic, flexible leadership with the need for ever-increasing levels of productivity. It is now time for leaders to be more deliberate, careful, and strategic in their hiring.
A key tool many leaders would be familiar with by now, listening (or feedback) will continue to be important in 2023. "In a world where hybrid work practices are not clear, we must let employees tell us what they believe will improve productivity. Every new idea for job redesign, team performance, or new work processes is most likely to come from a passionate, well-intended employee," Bersin writes.
Leadership is also inseparably linked with culture. Leaders set the tone for behaviors, priorities, and values. Thus, the need for a leadership framework that embraces and reinforces our culture.
#7 New models of performance management will take hold
Given that the economy is slowing, performance management has become a hot topic for companies once again. Not only do companies want to improve productivity but also they are discussing layoffs and workforce reductions when their revenues slow down.
During the pandemic, Bersin points out, most company leaders had relaxed (or stopped) the annual appraisal, primarily to save time and give people more flexibility to adapt. Today, many companies embracing OKRs (objectives and key results), more formal check-in processes, and new tools that let team leaders manage performance "in the flow of work".
Performance management approaches must support current management models, and with today’s focus on productivity, individuality, and trust, a new generation of philosophies (and supporting tools) have emerged, he adds. However, there is no "best model" for implementing performance management. Research has shown that high-performing companies hold people accountable, but they focus on "performance enablement" and not only year-end reviews. They build a process and system that is continuous, not just episodic. In 2023, it’s time to revisit this process and make sure that growth, efficiency, and user-centered design are included.
#8 Organisations will seriously revisit their pay and rewards strategies
The year 2022 was seen as "the most disruptive period" for pay practices. Driven by inflation, companies have been raising pay, changing pay models, and benchmarking pay "at a fevered pitch." In that vein, come 2023, it is "important to revisit pay practices in a systemic way". Every time a new person is hired, promoted, or moved, the pay system may need adjustment.
Bersin shares: "While it’s tempting to develop a highly differentiated pay-for-performance model, our research shows this only works in some roles and some companies. Remember: every individual is part of the overall corporate 'system,' so beware of pay models that overfocus on the individual as the driver of performance."
#9 CEOs and CHROs will increase their focus on wellbeing
The focus on wellbeing has entirely changed. Once considered a "benefit" to be offered along with vacation and insurance, it is now a strategy for corporate growth. As studies and research have shown, CEOs, CFOs, and CHROs have developed a new level of respect for this. They understand that today, when economics and technology change faster than ever, skilled and highly engaged employees are the most important "supply chain" asset they have, and CEOs are now actively involved.
"In 2023, it’s clear that the wellbeing issue is not only a problem of benefits or insurance programmes; instead, it’s a design issue. When we design the company for productivity, employee wellbeing will flourish—which takes us to the next prediction: productivity," Bersin writes.
#10 Productivity will become an essential measure of employee success
At this point in the economic cycle, we must work to prevent any overhiring that may result in reduced productivity, the report notes. This brings forth the issue of design: job design, team design, and skills design. If you hire someone with complementary skills to the team, will they be shared? Will the hire effectively make the whole team better? Or will they get in the way? HR professionals must watch for this.
"Don’t just 'fill the slots' created by hiring managers: look at the organisation and make sure you’re redesigning jobs to make work easier.
"Also, think about the entire employee experience at work: every new product, process, or policy you create should improve productivity, not reduce it.
Another critical point the report highlights is: productivity creates employee engagement! When people feel productive, they love their jobs. When they feel they are wasting their time, they check out, quietly quit, or depart. Every HR organisation should thus create an organisation design center of excellence and let this team go out and implement projects around productivity.
#11 Growth in the flow of work will become a new focus for corporate learning
When companies go beyond development and facilitate growth in the flow of work, they are much more likely to build skills for the future. A study by The Josh Bersin company once found that companies that focus on growth are 29 times more likely to let employees "unleash their potential", four times more likely to be innovation leaders, and 7.2 times more likely to be best places to work.
Growth-oriented L&D teams take on several new innovations:
- Talent marketplaces where people can build skills through projects, gigs, mentoring, relationship-building, networking, community events, and more.
- Capability academies to focus on comprehensive strategic business capabilities.
- Career pathways with tuition-free education to build capacity in particularly constrained roles.
"These novel solutions are no longer point solutions to address a specific knowledge or skills gap, they are strategically embedded in the broader business and talent strategy of the organisation and become part of the systemic HR operating model," it was pointed out.
#12 The role of the recruiter will become increasingly important
In this trend, Bersin highlights one important point for leaders to realise: "Your recruiters are more important than you think. They are not salespeople looking for candidates. Instead, they must consult with hiring managers, help decide if a candidate fits the culture, and be armed with powerful tools for sourcing, assessment, and selling 'the deal'.
"Additionally, we suggest recruiters take on other roles to really see how their job fits into other areas of the business. Some of the most passionate and highly-skilled HR professionals work as recruiters; make sure you’re using them effectively."
#13 People analytics will evolve into talent intelligence
The agenda for people analytics teams keeps growing. This is a good thing, but we must focus on a new problem. "Now that the economy is slowing, how can we use data to better help the company grow?" "Can you predict how many people you can hire, reskill, grow through retention, and enhance through redesign?"
In 2023, the people analytics teams should work with the sourcing intelligence and workforce planning teams to be even more relevant than ever. Doing an analysis of burnout and turnover will continue, but the big ROI will come from a strong look at strategic skills gaps, sourcing strategies, strategic retention, reskilling, redeployment of people, and how leaders address job redesign. In other words, forward-thinking companies will expand their people analytics teams and add labor economics, workforce planning, sourcing intelligence, and skills intelligence.
#14 A new HR tech landscape will arrive
2023 will see the emergence of a new integrated 'skills-powered talent platform'. Companies will have multiple intelligence systems that create, infer, or store skills, and would want this to come together into an integrated place.
There will also be higher availability of employee experience tools, with the continued expansion of learning systems, recruiting, offerings in pay equity, wellbeing, DEI, and more.
#15 HR organisations will move to a new operating model: systemic HR
The final, and probably most interesting, trend is what Bersin calls the new operating system for HR. Most companies call this the "operating model," but the substantial change is not simply better service delivery, improved access to data, and more HR business partner skills. It’s also a new framework for integrating HR into a total operating system, so information and insights captured in one part of the company can be leveraged and addressed elsewhere.
A few fundamental principles highlighted are:
- Every HR team should understand what other teams are doing.
- The overall top priority talent strategies should be shared and agreed on by everyone.
- Every HR professional should strive to have "full stack" skills.
- HR teams should share their roadmaps with each other regularly.
- HR professionals should rotate around HR and into and out of the business.
- HR technology roadmaps should match the HR talent strategies and be shared regularly.
- Local or embedded HR teams should have a voice in all strategic programmes.
- An integrated analytics and talent intelligence function should inform all major decisions.
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