4 HR trends that will shape the workplace in 2023

What hasn’t happened over the last 12 months/? Hybrid work, once a novelty, gradually became business as usual for thousands of companies worldwide. And don’t forget the “quiet quitting” phenomenon, even if you don’t buy the hype.

On top of that, concerns about inflation and higher interest rates have put executive teams in an uneasy mood. Nowhere is this more apparent than in tech, where a steady drumbeat of layoffs has left CEOs openly using the dreaded “R” word to describe the state of the economy.

Hard (and anxiety-inducing) as it may be to predict what next year will bring for the workplace, there are specific trends we can bank on taking center stage in 2023. The teams that make it through will have a plan for what comes next.

1. Companies are going to index on performance

The economy has a way of changing the conversation. After years of espousing the virtues of engagement and culture above all else, CEOs’ priorities are making a hard pivot. Performance, productivity, and the bottom line will take the lion’s share of HR teams’ attention spans heading into 2023. Tech may bear the brunt, as some companies have already cut headcounts by as much as half.

We’re seeing this play out in real-time via return-to-office plans and the growing use of surveillance software to track employees. According to Top10VN, the demand for employee monitoring software increased by 58% over the last two years.

Though they may feel justified, leaders should tread carefully here. Engagement may be even more critical in uncertain times. Research shows that highly engaged teams are 18% more productive and 23% more profitable than low engagement teams. Low-engagement teams also have 18% to 43% higher turnover rates. Not only does it require time to hire and train a new employee, but by some measures, the cost of replacing an employee can be as much as twice their annual salary.

2. Manager burnout comes to a head

Delivering high performance and engagement falls on managers. For example, Gallup data shows that the manager is responsible for 70% of the variance in team engagement. Data from GoodHire also indicates that 82% of American workers would quit their jobs because of a bad manager. No pressure, right?

The fact is that most managers do not have the resources or bandwidth to combat burnout when they’re facing it themselves. They’re in a hapless position, navigating the executive pivot to high performance while trying to remain open and accommodating to employees. The frustration could soon reach a breaking point, as Humu’s State of the Manager Report 2022 found that managers are twice as likely as individual contributors to be looking for new jobs — even in this economy.

Companies need to find ways to support their managers. In addition to paying close attention to manager concerns and engagement data, that means implementing the right systems and processes to enable them to succeed. Another issue plaguing managers is lack of clarity: Managers are less likely to know what’s expected of them than the people they manage. Setting clear goals and priorities falls on executives, who will need to be exacting about what work truly needs to get done in the months ahead.

3. Ready or not, pay transparency is here

Pay transparency has reached a turning point. California recently passed a pay transparency law requiring all companies with more than 15 employees to list salary ranges for jobs. The state joined a growing list of others, including Colorado, Connecticut, New York, and Washington.

But legislation isn’t the only motivator for employers to get on board. A Lattice survey found that 67% of U.S. employees strongly believe companies should offer greater transparency around pay. On the flip side, another survey of HR leaders shows businesses are woefully unprepared, with 54% of respondents indicating that pay bands are only known by their companies’ finance or HR teams.

New regulations and mounting employee expectations promise that it’ll be a messy year for compensation managers. But what most overlook is that “transparency” isn’t an all-or-nothing proposition — it starts with greater transparency on the fundamentals, not just salary figures. For instance, how are raises and promotions handled at your company? What’s the minimum or maximum someone can earn within the same pay band? Does geography play a role? These are essential questions to answer and are just as crucial to the transparency discussion.

4. “Hybrid work” loses its novelty

Behavioral economics teaches us that people avoid loss more than they seek gain. Regardless of what in-office perks companies may offer, remote and hybrid employees remain unmoved by appeals for a return-to-office life. Gallup data shows that 6 in 10 remote employees would be “extremely likely” to change companies if they lost the flexibility to work from home.

Some early concerns with remote work were about how managers and employees needed face time together for productivity and engagement. However, managers have become comfortable managing their teams remotely, with 45% saying they have enough face time to manage most employees and situations effectively. Even the 26% of respondents who would prefer more face time feel they have enough of it to handle major issues.

Put simply: For the companies where “hybrid” is already in place, the train has left the station. Gen Z is the first generation not to be required in the office five days a week, and their workforce share will only grow. Further, managers who have never supervised in-person teams are rising through the ranks, and in time they will rise to the C-Suite as well. And on a more practical note, companies have already downsized or terminated office leases, major decisions not easily undone.

Read more: Hybrid works best when it’s close to home

Looking back on how 2022 turned out, predicting what will follow comes with risk. But for hardened HR teams, who have weathered seismic shifts in the workplace for three years running, it’s just part of the job description.

Dave Carhart is the Vice President of Lattice’s People Advisory Services at Lattice, a group focused on helping People leaders identify and execute on the People strategies that fit their company’s unique needs.