As HR Departments finalize their strategies and budgets for 2023, their workforces face daunting challenges. According to The Conference Board, the US economy will continue to restrict and achieve only 1.5 percent GDP growth by the end of 2022 and slower or no growth in 2023. Morning Star and Congressional Budget Office expect inflation to subside in 2023 to between 2.4 percent and 3.1 percent, respectively, but it is still high now, led by oil prices. The US economy will still face a stubborn labor shortage due to demographic factors and exhausted workers, with unemployment remaining below four percent.
Worse, employees and employers have significantly different perceptions of what they want at work and how teams and cultures work best. Employees and employers are most notably split over the following:
- How well remote and hybrid work contribute to productivity and inflation.
- How best to perceive and react to “quiet quitting.”
- The disappointment with higher-than-average pay increases that still don’t enable workers to keep up with inflation.
- Differences in the gap between the benefits employees want (such as health care, flexible work, improved work-life balance, and retirement benefits) and what executives want to provide.
Below I will present my seven HR strategies to combat the war between executives and employees.
1 – Build relationships with employees
This month’s The Wall Street Journal article on Quiet Quitting and Quiet Firing includes observations from me on this popular and divisive topic. Employers and employees are angry and that anger is damaging relationships and employer brands. My advice to leaders and employees is not to overreact to the hype on social media. It’s foolish to punish quiet quitters in this small-growth economy.
Organizations over the past decades have always had employees who choose not to climb the “corporate ladder” – as Quiet Quitting was once called. These employees wanted to limit their time at work to 40 hours per week. (After all, the average time worked among office workers in the US during 2021 was 40.2 hours, according to the US Bureau of Labor Statistics.) These workers used to be called “B” players in executive circles and, typically, they are reliable employees. Every organization needs “B” players. Please do not confuse them with poor performers.
Sometimes, employees, including your high potential employees or “A” players, ask to take a back seat from climbing the career ladder for a while due to life events, such as having a baby, providing care to elderly parents, illness, or other issues. If corporations want to retain these workers, honoring their life events makes perfect sense. Remember, we are in a labor shortage that is likely to last the decade. A small growth US Economy of about one percent, which many predict for 2023, won’t create an abundance of available employees.
Some consultants suggest that executives ‘get back’ at those who choose to cut back their hours or not volunteer for extra work by demoralizing them with “Quiet Firing,” so they quit. The suggested tactics are often subtle: ignoring these employees, not inviting these employees to key meetings, assigning them worse tasks, lowering their pay increases and bonuses, and quietly look for replacements while they are still working for the company.
I suggest a different strategy. Instead, build relationships. Ask your managers to meet with each employee, including the “quiet quitters” individually to find out what they like about work, don’t like, what they could change if they had a magic wand, what job or career development they believe they need and what they want to be doing in three and five years. Then work with your employees to improve their experiences at work. This is also a great strategy to improve the inclusion of all of your employees. Learn more about Quiet Quitting and Quiet Firing here.
2 – Focus on Managers
A report titled Gallup on Quiet Quitting recently dropped a bombshell about managers. Gallup reported that only one in three managers are engaged at work. If this number is remotely accurate in your organization, start meeting with your managers individually.
Managers feel caught in the tug of war between executives on issues such as whether employees be returned to the office five days a week, demands for pay increases that can’t be met, and being encouraged to micro-manage employees, to name a few.
To ride out this difficult time, executives must be confident that managers are aligned with organizational strategies for leading the workforce. Executives should reach out to them and ask the questions I proposed above. Managers must believe that top executives are listening to their concerns and will address them. With middle management support, strategies will probably succeed. Without their support, they most certainly fail.
3 – Improve the compensation and benefit gap
Three national human resources professional organizations have released their predictions of salary increases for 2023. Their results show that while turnover and recruiting are expected to ease slightly, high salary increases will continue into 2023. The years of the three percent salary increase are over. The medium increase for 2022 will be four percent, with some one-quarter of organizations planning five to seven percent increases in 2023. As you will see, organizations need to consider other methods – such as improving their organizational culture — to improve employee retention. Pay alone won’t do it.
There is another major issue for compensation experts to consider. California, New York, Rhode Island, and Washington plan to join Colorado in requiring salary ranges on job postings. This public accountability will provide organizations with more to consider as they do salary planning for 2023. These regulation changes will lay bare the competitive pay standing of companies and therefore raise internal pay equity issues.
Since the 2008 recession, corporations have tried to reduce costs and offer headline-grabbing perks with respect to benefits strategies. Not anymore. Companies are switching their benefits strategies for 2023 to attracting and retaining employees and helping them deal with costs and stress.
Human Resources firm Mercer found in a recent survey that two-thirds of US employers are looking to enhance health and benefits offerings in 2023 in order to attract and retain employees. US employers expect health benefit costs to rise 5.6 percent on average in 2023, according to the employers who responded to Mercer’s National Survey of Employer-Sponsored Health Plans 2022.
Mercer identified four areas of focus:
- Improving behavior health care and Employee Assistance Plans services.
- Helping hourly and low-income workers by offering health and well-being benefits.
- Addressing health disparities and benefits gaps for LGBTQ+ and under-represented workers. Almost one-third of large employers said they plan to expand their benefits to offer fertility treatment coverage, adoption, and surrogacy benefits by 2023.
- Improving family-friendly benefits and supporting women’s reproductive health, including preconception family planning and menopause support.
However, a study by Transamerica Institute and its Transamerica Center for Retirement Studies, conducted in August, found a wide discrepancy between what employees want and what their employers believe they want. It is a big gap. While companies are switching their benefits strategies for 2023, they are missing the boat on employee priorities such as life insurance and cash balance pension plans.
For instance, the need for health insurance was rated as necessary by 93 percent of workers, but only 56 percent of employers offered it. And 89 percent of workers say a 401(k)-retirement plan is essential, although it’s only offered by 55 percent of employers.
Learn more on these benefits issues here.
4- Make peace with hybrid work
Studies by Pew Research and the Labor Department show that as work reopens, most employees prefer working from home, especially women. After the pandemic, women lag men in rejoining the labor force, exacerbating our labor shortage. Preference has replaced fear of Covid-19 as the reason for working remotely, and many workers would rather quit than return to the office. Previous studies show that about 70 percent of workers are more productive at home and enjoy their newfound flexibility. However, they are worried about being passed up for promotions.
However, today there is a gap between the belief among many managers about their remote employees’ improved productivity. This new phenomenon among managers is called “productivity paranoia”, a term coined by Microsoft. According to a recent Microsoft survey, 85 percent of leaders say the shift to hybrid work has made it challenging to have confidence that employees are productive at work. To its doubting bosses, Microsoft suggests that their managers set goals, such as OKRs, continually get feedback from employees and that managers provide employees performance and development feedback, coaching, and rewards for impact and success.
As companies struggle to hire and retain workers, it is time to get strategic about hybrid work models. Think of them as excellent strategies to accelerate hiring and retention, improve productivity and innovation, and reduce the cost of wasted office space — costs that executives can redirect to strategic business priorities.
The nasty discussion on Quiet Quitting has caused some executive to tell managers to micro-manage more and find ways to bring all workers into the office. It is the wrong strategy in a labor shortage especially with overwhelming evidence that remote and hybrid work improve productivity and novation
Learn more about the success of hybrid working and how to implement and improve it.
5 – Training and career development
A recent study by Criteria’s 2022 Candidate Experience report shows the top job candidate priorities. More opportunities for career advancement (or career pathing) was No. 2 on the list, behind improved work life balance. In an era of prolonged labor shortages with a small supply of fully qualified job candidates, employers need to improve the training and development they give their employees.
Career pathing is the process of identifying opportunities for employees and giving them the development opportunities to enable growth. It is not an exact timetable. Think of it as a journey with twists, turns, road closures, and open freeways. Most career paths in the 2020s will not be straight ahead. Instead, they will include lateral moves to develop missing skills and gain vital experiences. They often include special projects with risks and opportunities to overcome obstacles and strategic job rotations to new departments or business sectors of the company. As with any journey, it goes more smoothly when you have a map. Learn more here.
6 – Improve organizational culture
Gallup reported in May that US employee engagement has dropped in each of the last two years, from 36 percent in 2020 to 32 percent in 2022. However, employee engagement is higher for organizations that focus on culture. Gallup’s reporting raises the question: why not focus on improving organizational culture? After all, our research at InnovationOne shows that organizations that invest in their cultures have 22 percent higher financial results.
Our research is not alone. Consider others who have found similar conclusions:
- John Kotter and James L Heskett, in their book Corporate Culture and Performance, found that firms with innovative and adaptive cultures achieve extraordinary financial results. The results include nearly three times the review growth, 900% higher stock price growth, and 755% higher net income growth.
- Booz & Company found that organizations that focus on innovation capabilities report higher profit margins by up to 22 percent.
- Arthur D Little found that companies with a passion for innovation experience an increase in EBIT of four percent and more than 10 times higher returns from their innovation investments.
The evidence is overwhelming. Companies that work on improving their innovation improve the bottom line. Innovation is quite doable. It is tangible, measurable, manageable, and will drive results. You can transform your organization with the right information, direction, and culture. Learn more here.
7 – Recruiting remains a priority
The talk of a potential recession has some executives speaking of hiring freezes and layoffs. Indeed, layoffs and hiring freezes have begun in the high-tech sector, as reported by Crunchbase. However, as discussed above, the slowing economy is not expected to cause unemployment to be higher than four percent in 2023. With today’s labor shortage which will last for the rest of the decade, and continued high turnover, companies will be wise to maintain their recruiting teams and technologies.
We live in turbulent times with employees and management worn out by Covid, inflation, and our politics, and we have significant differences in the world of work. No organization succeeds when executives and employees are at odds with each other. I recommend that you follow my seven HR strategies in 2023 to combat the war between executives and employees. First on the list is to build relationships with employees and managers.
Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting and managing partner of InnovationOne. He works with organizations to transform HR and recruiting, implement remote work, and develop extraordinary leaders, teams, and innovation cultures. He is the author of the highly acclaimed book, Hack Recruiting: the Best of Empirical Research, Method and Process, and Digitization. Subscribe to his weekly blogs at www.VictorHRConsultant.com.