To thrive amid uncertainty, technology and digital transformation will be key.
The prospect of a global economic downturn, geopolitical uncertainty and talent shortages driven by long-term demographic shifts all weighed on the minds of executives as they responded to our 2023 Key Issues Study.
Executives are looking to technology as they consider how to manage the forces of change: 45% of executives said they are accelerating digital transformation (automation, advanced analytics and modeling) – more than any other response measured, including capital spending and cost reduction programs. The cloud has moved to the forefront as the platform organizations must leverage for agility, growth and transformation. In the study, 42% of enterprises reported having legacy solutions that must be replaced.
But organizational disconnects hold back many companies from achieving the transformation they are targeting. More than one-quarter of study participants across business functions said the inability to successfully transform their business and related functions is of key concern.
Amid unprecedented uncertainty, human resources (HR) executives ranked their priorities for the coming year
Helping the enterprise to develop a new kind of leader who is better suited to meeting today’s complex business and organizational challenges has moved to the top priority for HR in 2023. Recruiting, retention and enabling growth remain high priorities, while acting as a strategic advisor and creating/maintaining a high-performing culture each dropped two places but remain in the top five.
Six of the 10 top HR priorities represent business and enterprise goals related to human capital, indicating that HR remains focused on its role in enabling the success of the overall enterprise.
Executives do not consider any of the top 10 priorities to be well supported. In fact, the top seven objectives are all critical development areas – priorities of high importance but for which confidence in the ability to deliver is low.
There are some significant disconnects between HR priorities and planned initiatives
Too few companies have 2023 improvement initiatives planned to address some top priorities.
Without action, HR organizations will struggle to meet business demands. Therefore, HR executives need to do a better job of properly balancing resources and priorities.
While staffing and budgets remain flat in 2023, HR will struggle to handle an increased workload
Addressing these diverse priorities will require resources. The Key Issues Study confirms and quantifies what HR executives already know: They must find a way to do more with less. In 2023, the HR workload is predicted to increase by 10.5%, reflecting the broadening of priorities. With head count and the operating budget remaining virtually flat, HR organizations must be prepared to fill a productivity gap of 10.2% and an efficiency gap of 10.1%. These gaps have grown slightly from last year’s study (8.9% and 9.5%, respectively), indicating that HR executives have a growing challenge in front of them.
How HR plans to fill gaps
HR workloads will be more evenly distributed across the organization and technology than in past years. HR leaders expect to rely more on self-service functionality and automation, including work executed by robotic process automation (RPA), artificial intelligence and chatbots, in 2023 to absorb the increased workload.
HR’s projected increase in technology is quite modest
HR leaders will need to rely on technology to increase productivity, efficiency and effectiveness, yet they expect only a modest bump in technology spending – far less than last year’s 9.1% projected increase and lower than increases expected by most other business services functions measured in this Key Issues Study.
Where HR organizations are spending
With a continuing mandate to do more with less, HR organizations are placing increasing focus on using technology to deliver HR services more efficiently and increase staff productivity. Adoption of digital technologies continues to grow, with cloud-based, core human capital management (HCM) application suites, business process management/workflow tools, and RPA projected to have the largest growth in adoption during 2023.
HR has opportunities to expand deployment of digital technologies – particularly those that largely meet expectations
For the most part, HR digital technologies are delivering on business expectations. RPA has mixed impact – with 46% of organizations indicating that it fell short of expectations. But it is worth a second look for resource-strapped HR groups with fragmented systems.
Cloud-based, core HCM suites are pervasive, but HR organizations can wring more value from some other existing systems and tools by expanding their use beyond smaller-scale deployments.
HR needs to elevate insight for strategic workforce planning
One reason so many HR organizations were caught off guard by the “great resignation” trend of 2021 and 2022 was their inability to anticipate shifts in demand, supply of skills, and changes in labor markets. Most respondents lack a wide range of effective strategic workforce planning capabilities. For example, only 6% believe their organizations are highly effective at identifying risks associated with talent attraction and retention, while only 22% have adequate capabilities for modeling alternative scenarios for workforce supply, demand, and economic variance. Improving insight will be critical to effective strategic workforce planning.
HR is adopting data and analytics at a steady if a bit more moderate pace than some other digital technologies.
But small-scale deployments of advanced analytics, data visualization and master data management are the norm.
At least two-thirds of respondents said they are realizing their objectives by using these technologies, suggesting HR is mastering the learning curve and should be looking beyond small-scale applications to larger-scale deployments.
How HR plans to enable a remote/hybrid workplace
For recruiting and retention efforts to succeed, HR must lead in creating compelling candidate and employee experiences. As with other top objectives, confidence in the ability to deliver is a major concern, but HR organizations are taking action. Nearly two-thirds of organizations have a 2023 major improvement initiative to address this objective.
One area of focus that will have a strong bearing on experience and, thus, both recruiting and retention, is the hybrid workplace. Attention to this area is evident in the percentage of organizations that have plans underway to enable the transition that began to take hold in 2022.
Adoption of digital workforce enablement tools continues to grow
Digital tools to enable hybrid meetings, learning and wellness are pervasive or soon will be, and deliver strong results. HR must leverage these tools to the fullest to meet expectations in 2023. Several other digital technologies are gaining traction – for example, internal talent marketplaces, which improve employee mobility and skills development and, thus, build organizational agility.
How HR is improving talent management for a hybrid workplace
Advanced talent management capabilities not only lead to better talent outcomes but can drive business performance as well. HR recognizes the importance of increasing not just its own talent management capabilities, but also those of people managers across the business.
This is particularly important as the hybrid workplace continues to come into focus. There are significant people aspects of this transition, which are often the least well understood and managed. HR organizations must remain abreast of effective emerging talent management practices in the new world of virtual working. These are among the steps they are taking:
Sharpen your focus for 2023
Given today’s unprecedented combination of threats, we believe HR executives must take progressive countermeasures rather than following the typical recession playbook. Certainly, realigning investments to reflect current top priorities is critical for making meaningful progress toward objectives. Here’s what else we think will make the biggest impact in 2023:
- Provide ample training and development experiences for organizational leaders and people managers to improve leadership acumen.
- Leverage digital technology better, starting with fully utilizing the capabilities of existing platforms.
- Rethink talent models and strategies, and improve your employee value proposition by workforce segment.
- Elevate the role and upgrade the skills of HR business partners, and arm them with relevant insights.
- Implement comprehensive data management strategies, and fully leverage existing analytics and reporting capabilities.
- Prioritize filling gaps in business acumen, change leadership, strategic thinking, data savviness and customer-centric design.
- Change HR operating models to align high-level HR business partners with HR leaders.
Download the full report to learn more about HR executives’ top priorities for 2023, including developing effective leaders, recruiting and retaining staff in key positions, enabling enterprise growth strategies, creating a high-performing organizational culture, addressing critical skills shortages, and increasing agility of the HR service delivery model.