HR Business Challenges in 2023: Time for an Internal Reality Check

The year 2022 began with optimism not seen for many years. The pandemic, a horrendous event that created a global culture of fear, had all but ended. The growing demand for talent led businesses to fight to keep their staff. Consequently, many introduced shorter working weeks; remote, hybrid, and flexible working arrangements; promotions and pay rises; and a host of personal care options to stem a tide of exits during the post-pandemic period known as the “great resignation”.

However, as 2022 advanced, further shifts in the labor market have occurred. Businesses and their staff are now experiencing a very different economic climate and workplace. Having over-hired based on the expectation of continued growth in the economy, businesses now face having to reduce staff numbers to survive dramatically. Labor is no longer in short supply, and many businesses try to scale back the “flexible benefits” they previously offered their staff.

What are the biggest HR challenges businesses and their staff will face in 2023? Let's have a closer look!

Hybrid Work Is Here to Stay but Remains a Challenge

The traditional corporate office space is out for many businesses as new working arrangements exist. Businesses and their staff have grown accustomed to hybrid, remote work, and digital nomadism. Large corporate offices remain unoccupied. And for some businesses, they will become a rarity as they increasingly adopt a remote-first policy.

On the other hand, businesses have also learned that remote working provides many challenges:

• Many businesses have discovered that staff communicate, collaborate, and innovate better when everyone is together.
• When working remotely, the creative thought processes staff often experience in an office setting simply do not exist.
• People struggle to stay attentive for more than 90 minutes on Zoom and, in general, struggle to collaborate in remote settings.
• Strategic work and decision-making may be negatively impacted by remote working. 

Creative businesses that have struggled to perform may insist that their staff come into the office and spend productive time together. As a result, PWC found that some 95% of executives believe that staff needs to be in an office to maintain culture. So, businesses are increasingly demanding their staff spend more time together in an office, thus taking a calculated risk that their employees won’t or rather can’t quit in a depressed labor market.

Staff faced with economic uncertainty and the risk of layoffs are returning to the office to ensure they are ‘seen’ and, in many instances, are working harder than before. They dare not quit for fear that the business or role they jump to will not exist in 6 months.

Benefits Gained by Employees May Become Lost

For some leaders, such as Elon Musk, and businesses, such as Goldman Sachs, the recession offers a tremendous opportunity to "take back" the benefits they "had to give away" during the pandemic. Many such businesses will force staff back to the office and re-employ a traditional "command-and-control" structure they once had.

But companies and leaders who resist any degree of flexible working may put their business at a competitive disadvantage. Despite an uncertain labor market, employees got used to flexible working after two years of working from home. And if businesses push for a full return-to-office, they may see their employees leave. They may then face challenges replacing workers as they struggle to attract and retain talent in a work environment that does not offer the flexibility that employees now demand.

Managers Struggle to Remain Relevant

Managers may struggle and, in some instances, become less relevant. Managers are key to helping executives deliver effective working policies. Yet since the pandemic, managers increasingly struggle to balance executives' and staff's competing needs.

Executives increasingly want staff back in the office, but many employees are unwilling to give up their newfound flexible "life-work" balance. This leaves managers struggling to manage this balance themselves, stuck in the middle, trying to find a compromise between both groups.

Why is that?

• Managers find it more difficult to complete 1:1s or check in with their teams throughout the day, as they can’t physically "see" them. As a result, they may not identify minor staff issues, whether personal or work-related.
• Over time, their impact as managers or relevance to their teams may diminish, accentuated by the uncertainty around what the "best days" are in an office and what they want to accomplish when their teams are there.
• As some employees have started coming to the office, a "great awkward" will ensue because teams must learn to work with colleagues they have only met on Zoom. Pandemic staff, unused to organizational culture and office working, may struggle to cope with multiple office dynamics and politics. Many may continue to Zoom colleagues several desks or floors away. We may see some employees choose to wear masks in meetings while some may not.

As a result, employees and their managers will need to ‘re-learn’ how to work together as they re-enter the workplace in increasing numbers. And as new working patterns are established, managers will need to balance in-person work for collaboration and culture whilst providing flexibility in work patterns to retain their best team members.

New Approaches Will Be Needed

New learning, development, and leadership approaches will be needed. As complex workforce ecosystems mature, businesses will have to learn to develop employees in non-traditional ways. Hybrid, permanent, part-time, contractor, gig workers, and partner organization employees now play increasing roles in the company workforce. Hiring, developing, and leading a blended workforce is a challenge.

Blended workforces pressurize leaders to manage in new and creative ways. Yet, businesses now find themselves stuck with managers with limited management experience. During the pandemic, many employees were over-promoted to managerial status for companies to retain them. As such, organizations now find their leadership talent pipelines filled with candidates with limited leadership or management experience. 

Businesses and their HR leaders will be tested and challenged. They will need to find new ways to develop inexperienced managers and ensure they become effective leaders. Or they will need to find new ways to retain the talent of those same ‘inexperienced’ managers but remove the management part of their role.

Technology Will Grow in Importance

Technology will grow in importance. As the economy slows, additional investments in IT staff, automation and robotics, artificial intelligence, big data, algorithmic HR, conversational AI, conversational business applications, and other technologies that promise to bring staff flexibility and improve the quality of their work will be required. Businesses cannot afford to discard their current investments in ERP or CRM systems, RPA deployments, or other digital assets. But instead, they will find themselves needing to invest in technology platforms to keep their businesses agile and competitive.

Conversational AI is a technology trend not to be missed. Not even when improving your HR operations. Conversational AI is the necessary layer between your customers and employees and your existing technology stack. You won't replace anything from your current investment, from your ERP or CRM systems, your RPA deployments, or other digital processes, but you will rather enhance them with a conversational layer that will help you resurface valuable data and expose it via multimodal experiences (chat, mobile, voice) to streamline business tasks completion. Your employees will be happy to quit doing repetitive tasks and exercise only 30% of the creative brain while the rest is held hostage to mundane tasks. 

Businesses will need to invest in conversational applications to help staff struggling to cope with multiple disparate software applications and deliver consistent experiences in a manner that is easy to follow. This will unleash untapped business potential as employees will focus on more complex and profitable opportunities. They will offer extra time to build a closer, happier relationship with your customers. And we all know that happy employees bring happy customers. Which means brand loyalty and a thriving business. Technology, such as conversational AI and conversational business applications, allow businesses to provide exceptional digital experiences in a way that has not yet been possible.

To Conclude

The pandemic accelerated digital transformation by three to four years and forced businesses and their HR leaders to work differently. The slowdown in global growth will force businesses to rethink their business strategies. The economic slowdown, though unfortunate, will force HR and their businesses to become more productive. As such, 2023 is a golden window of opportunity to reposition businesses again. Human resource professionals played a significant role in guiding businesses through the storm of the pandemic. Now they find themselves once more occupying a position where they can support their businesses to survive and fight another day during this next period of economic uncertainty.