CEOs and chief human resources officers began 2023 facing a multitude of exceptional challenges. A weakening economy, a stubbornly tight labor market, persistent inflation, banking instability, war and a new cultural dynamic in which workplace talent is dispersed globally make the job of managing modern workforces exceptionally trying and turbulent. Navigating these challenges will require an honest, hard look at their talent strategy, and those who succeed will be willing to make some hard and sometimes significant changes to emerge out of 2023 in a position of strength:
Here are some practical tips for leaders to consider:
1. Reorganize vs. restructure, and deploy other solutions to address your headcount cost structure. As weakening demand began to emerge in 2022 and signs of a recession grew, many companies responded by cutting staff. Signs suggest this trend may continue. Layoffs that began in 2022, when it was estimated that tech companies alone laid off 150,000 people, have continued into 2023 and are spreading to a much broader set of industries. Disney began cutting 7,000 jobs, Dow 2,000 jobs, Goldman Sachs 6.5 percent of its workforce. Even Blackrock, the traditionally high-performing investment fund, is cutting 3 percent of its global workforce. While layoffs are sometimes necessary, a host of other solutions may help you optimize your organization for the future:
Take advantage of existing and emerging lower cost hubs: areas like India, Mexico, Spain and Southeast Asia (Vietnam, Cambodia, etc.) are all investing significantly in building infrastructure to support global business. Many are offering attractive tax incentives to lure potential employers. A number of these areas possess talent hubs that have been building for a number of decades, where knowledge companies can find quality staff able to complete a number of roles that were previously not viewed as easy to do outside their traditional headquarters. The move to diversify global talent and supply chains outside of China are also accelerating these plans. Determine what work can be placed into these hubs, redirect hiring efforts to focus there, and capture savings to either lower costs or redeploy to ensure you can be competitive in main talent markets.
2. Re-embrace the flexibility of remote work, part-time workers, returning retirees and contractors. Recent reports suggest many CEOs are trying to mandate people back into the office out of a concern for productivity and culture. While having some time face-to-face is important for core staff, reducing your overall office footprint can save significant costs. Those companies with flexible work are more likely to attract talent, keep talent and mitigate accelerating salary inflation. Additionally, embracing part-time workers, retirees or contractors can help address needs that may not require a 100 percent full-time head, but can be done quite effectively by these types of workers. These workers can often help identify other areas of efficiency as they bring additional reference points from other companies, and can be a way to “test out” talent you may want to bring on full-time when needs grow or recover.
Regularly re-evaluate your hiring and workforce plan: Many companies determine their hiring plan at the beginning of the year and then execute for 12 months, only to re-evaluate when they plan for the next fiscal year. During a turbulent time like this, review headcount plans every quarter, and add additional processes to ensure each hire is in line with current needs. The last thing companies want to do is bring on talent only to discover they aren’t needed a few months later.
Plan for the organization you will need, not the one you have now. When market forces change, companies need to re-evaluate their business strategy, product plans, product market fit, marketing approach and more. With these strategic reviews, CEOs and CHROs should be integrating talent plans from the beginning, looking at the implications of these shifts on their workforce:
Do we have the capabilities today to deliver these new products or business plans? When will we need these capabilities?
Where are the main gaps?
What is our plan to close these gaps?
Do parts of our organization now have skills we don’t need? Can staff be retrained for the areas we will grow? How will we do that and what will it cost?
If not, how can we provide the right solution over time to reduce this portion of our workforce?
What does this mean for who we consider our talent peers, and as that shifts, how should we change our recruiting approach and recruiting structure?
3. Institute or further ingrain a performance measurement-oriented culture. When the talent market was incredibly tight and companies were just trying to keep up with potential growth and demand, many performance management practices became unfortunately lax and less disciplined. Now, is a good time to revisit your performance management approach and ensure you are identifying and keeping your top performers. Top performers, according to Marc Effron of the Talent Strategy Group, can be anywhere from 50 to 900 percent(!) more effective than your average employee. The best way to identify and quantify your high performers is through a rigorous and challenging goal-setting process. If you don’t have a formal goal setting or OKR process set up for your employees, build one. If you do, make sure the goals are challenging enough, and that they are focused on the right areas. Are they aligned to your go-forward strategy? Are they meaningfully contributing toward the associated goals for the year for the company and for their respective departments? How are you cascading them and reviewing them? These are all good questions to ask to help refine your approach. In some cases, this will need to involve training your managers to help them identify high performance. Some can confuse potential for performance, and a clear goal-setting process can help better distinguish the two. To further reinforce your performance-oriented culture, ensure your rewards and recognition processes are properly supporting performance assessment. Does your bonus program appropriately differentiate high performers and low performers? When you have limited merit or salary increases, how are you identifying who is most important to keep and allocating accordingly? Put in place talent reviews to ensure you have a clear line of sight to who are the top 10 to 20 percent of employees, and ensure they get the right time and attention from you, the leadership team and the organization, overall.
4. Train your leadership and management team to be resilient and navigate uncertainty. In today’s environment, there are constant setbacks and shifting priorities. A study in October 2022 by McKinsey agrees. In its research, organizations that are rated in the top quartile for resilient behaviors were 50 percent less likely to go bankrupt over the next two years than those in the bottom quartile.
The key is to build adaptable leaders with self-sufficient teams that can shift in an agile manner as business circumstances change. Just like with anything else, building resiliency takes time and dedicated training. Building resilient leaders includes:
— Skill-building in active listening, to understand what’s really happening on teams.
— Minimizing bureaucracy and unnecessary meetings to make sure people have the time, space and authority to get things done.
— Establishing time to think, and putting in place systems to support that: “Meeting-free” days.
— Dedicated leadership-only sessions or off-sites to talk through status of issues and problems.
— Peer-to-peer coaching and learning.
— Ensuring leaders are clear on how decisions should be made by establishing a matrix for who handles more risky decisions (and how), and empowering less risky decisions to be made quickly at lower levels.
— Teaching leaders about self-sufficiency and self-care, so they can de-stress, be as effective as possible and instill that behavior in their teams.
— Increase the frequency and level of transparency with your employees, leverage your values, and use them as an opportunity to build trust and dedication.
Employers have a trust problem. In a recent DDI study of nearly 14,000 leaders and hundreds of organizations, only 32 percent of employees “trust senior leaders at my organization to do what is right.” And only 46 percent trust their direct manager. That’s an astounding trust gap.
If the gap continues to increase, employers risk making employees feel disconnected from their organization, less effective, less likely to be as productive and more likely to leave. The best way to close that gap is through constant communication. Consider providing regular business updates on strategy, plans and progress. Hearing from the top is important. A regular monthly session with the CEO or other senior leaders to provide updates, ask questions and celebrate success can all help. Address existing problems and the plans to fix them. Utilize more modern communication methods: live presentations on Zoom so more employees can attend and original short-form video clips with updates from leaders on new programs (similar to what you would see on social media). These methods make updates to your organization more consumable, which will increase their reach.
5. In addition, leverage your values and what you are doing for society to help engender trust. Edelman recently released its annual “Trust Barometer” report, which surveys more than 32,000 people around the world on trust and stability. In that study, 69 percent of global employees said “having a societal impact is a strong expectation or deal-breaker when considering a job.” How the business reflects their values, how they address social problems, and that the CEO addresses controversial issues they care about are all included in that definition. Employees want to know they are working somewhere that has a greater purpose. Infuse that into your regular business updates and leverage your culture and values as a strength.
The next 12 to 18 months are likely to remain dynamic and full of risk. To emerge in a position of strength, companies must take proactive steps to build the right organization with capabilities needed for its future, have a resilient and agile leadership team and communicate clearly, regularly and transparently.
Jesse Meschuk is a career and human resources expert, and a senior advisor with Exequity. He has more than 20 years of consulting and human resources experience and has worked across a wide variety of industries including technology, entertainment, gaming, retail, hospitality and sports. His work has spanned across the Americas, Europe and Asia.