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10 of the Biggest HR Challenges in 2023

By Alex Larralde
10 minute read
Updated on February 27, 2023

Employers have faced endless human resource management challenges in recent years, and each year seems to bring more than the last. This year is no different, with the continuation of many HR challenges from last year and a few new ones.

Here are 10 of the biggest future trends and challenges in HR management for 2023.

Rethinking the employee value proposition

Work has fundamentally changed because of the pandemic and larger social issues, and so have people’s expectations of the employee experience. They still want competitive pay, strong benefits packages, and training and development, but that’s not enough. Employees increasingly expect a holistic value proposition that encompasses career growth, skills development, inclusion, belonging, fairness, trust, authenticity, purpose, a supportive culture, and wellness.

A sense of belonging is high on the list of employee expectations. More than half (54%) of respondents to a recent Randstad survey said they’d leave a job if they didn’t feel like they belonged there and 42% would reject a job offer if the employer’s values didn’t align with theirs.1

Employees are looking for a public commitment to doing the right thing, too, with 77% prioritizing companies that have committed to sustainability, diversity, and transparency. However, enthusiasm for sustainability breaks down along generational lines, with younger workers caring more about whether a company supports social and environmental progress.

As HR professionals, it’s time to rethink the employee value proposition in light of changing employee expectations and values. Given the faltering trust that employees have, HR must develop a holistic approach that addresses their concerns and the entire employee experience. 

This is a significant challenge, but one that your HR team is uniquely equipped to tackle. You have your finger on the pulse of the workforce, ‌and your people are giving clear directions as you redesign the employee experience.

Re-engaging the workforce

For decades, employee engagement has been a concern for HR professionals. Engagement metrics were trending upward in the early part of the pandemic, driven by an increase in transparency and communication. But those gains have receded as employees and employers differ on when, where, and how people should work.

And Gallup research shows that employee engagement continues to decline, from 36% in 2020 to 34% in 2021 and 32% in 2022. Meanwhile, the ratio of engaged to actively disengaged employees is flattening, dropping from 2.6:1 in 2020 to 1.8:1 in 2022.2

Re-engaging the workforce requires frequent performance conversations. These help team members see their role in driving the business forward and flexibly adjust their work objectives to remain in sync with the strategic objectives of the organization. HR and managers are central to helping employees understand how they contribute to the company’s mission, vision, and values. Connecting daily work to the ‌business strategy helps workers feel a sense of purpose.

Additionally, Betterworks’ State of Performance Enablement report shows that career development is rising in importance. Companies need to provide meaningful opportunities for growth and career advancement for employees — along with delivering flexibility, competitive pay, and employee well-being.

Attracting talent to the enterprise

Talent acquisition remains one of the highest-priority HR challenges in 2023 with nearly half (47%) of respondents in a recent HR Executive poll ranking hiring and retention as their top challenge.3 U.S. unemployment is at historical lows, and many organizations struggle to fill open roles in a timely fashion. 

Hiring and retention could be more difficult in 2023 than last year. While the U.S. economy added 4.5 million jobs just in 2022, according to the U.S. Chamber of Commerce, the workforce has shed nearly 3 million net participants because of the pandemic and the Great Resignation. Some people are sitting out because they have high levels of savings, while early retirements and a lack of child care also sideline many people.

To win back workers, companies need to demonstrate that they’ve invested in the employee value propositions and experience. People are less willing to stay in unfulfilling jobs, so businesses need to show how they foster strong values and a clear sense of purpose. 

Flexible work arrangements remain a key attraction for talent, but taken alone, may not be substantive enough because flexibility is considered table stakes in some industries. When combined with other cultural elements — a sense of fairness, autonomy, a supportive team in a healthy environment, diversity, a learning focus, and a vision that inspires prospective employees — companies will be in a prime position to attract and retain the best talent.

Strengthening manager-employee relationships

Fostering relationships between managers and employees was a big focus in 2022 and remains so this year for HR. These relationships power the modern workplace.

With hybrid and remote work, the manager’s role has changed, with a greater emphasis on relationships. Yet most managers lack a frame of reference for what that should look like, as few managers and employees started their careers in hybrid and remote work environments. And many first-time managers enter their roles without adequate training, leading to lower satisfaction among their direct reports.

Managers continue to struggle with hybrid and remote work. They need new skills, along with intentional support, training, and tools from HR teams. But according to research from RedThread Research, managers in 2022 received less clarity around expectations and fewer data-based insights into team performance‌. Many managers were left to figure things out by themselves.4

In 2023, HR must alleviate the pressure on managers. They must support and strengthen managers’ ability to coach employees for growth and career advancement. 

Betterworks’ research shows the high trust levels that employees have in their managers. If HR can provide ongoing support for managers, then you’ll see managers, employees, and the organization thrive. 

Fortunately, there are many ways to help managers succeed. Managers can practice active listening and solicit ideas and perspectives from across the team. Another way to build trust is to learn about team members’ career goals. With that knowledge, managers can provide guidance and support, including insights into career paths and development opportunities. They can help employees clarify their career options and help them make connections throughout the organization.

HR plays a supporting role in encouraging and incentivizing managers to create these connections and advance their top performers rather than hoard talent. Building a talent pipeline within the company through a focus on training and skill-building is one sure way to reduce hoarding while also promoting a sustainable workforce with ever-broadening capabilities.

Promoting talent mobility and skill-building

In 2022, we saw employees “quiet quitting” and employers “quiet firing.” In 2023, HR leaders are engaging in “quiet hiring,” which describes a needs-based approach to filling skills gaps. Through a combination of talent mobility and skill-building, HR teams are adding skills and abilities to their organizations without increasing headcount. 

But for quiet hiring to be successful, employees need to maintain control over their growth and development. Pressing an employee to take a role they aren’t interested in (even if they’re a great fit) can backfire and lead to their exit. Present openings as opportunities for employees to expand their knowledge and skills so they can make informed career choices.5

Managers are instrumental in this process and should not be sidelined simply because technology enables business leaders to go directly to the employee with the offer. Such an approach reduces managers to executing the employee’s transition out of their team without enabling them to provide guidance to that individual. A good manager will have their employee’s best interests at heart and will be able to explain what a particular opening means for their career trajectory within the organization. 

Train managers to help employees set development goals with the same care that they set work objectives. When managers commit to developing their employees, they strengthen this critical relationship.

By setting goals related to skill-building and mobility, you increase agility within the workforce. And, when you link learning and upskilling to tangible objectives and measurable results within a performance management system, employees are more likely to complete courses and apply their new skills. 

The Betterworks platform, for example, promotes integrating learning and performance with online learning systems including LinkedIn Learning and Udemy. That approach helps you build development goals directly into your performance management process.

Retaining talent with a better employee experience

HR remains concerned about employee turnover. Nearly three-quarters (72%) of HR professionals in a recent HR Executive survey said they were somewhat or extremely concerned about losing talent this year.6

There are a plethora of employee retention strategies out there, but expect HR to focus on improving the employee experience in 2023. One of the top ways to improve employee experience is to offer flexibility. According to recent data, 50% of office workers in the biggest U.S. metro areas are back at their desks — the highest percentage since before the pandemic. But that’s not the end of remote and hybrid work. Employees still want these options and are willing to switch jobs.7

In fact, 75% of employees expect more options for flexible work, not fewer, according to recent Gartner research. Leaning into that flexibility works in your favor: Allowing remote and hybrid work improves your retention odds in a tight labor market and helps you find the best talent without worrying about geographical limitations.

Another key element of a good employee experience is the talent management process. People don’t want to stay in an environment where they are micromanaged. They crave the autonomy to set their goals and exercise strategic thinking. They expect their companies and managers to enable their performance by helping them problem-solve and remove roadblocks to get work done. Adopting performance enablement practices that make this possible can increase employee loyalty and retention. Traditional performance management practices, which are typically based on annual or semi-annual performance reviews and are backward-looking and compliance-driven, actually inhibit performance. Modern performance management, by contrast, helps employees and their managers continuously improve performance in a way that empowers the workforce and yields a positive employee experience of achievement, support, inclusion, and recognition.

Another area where flexibility matters is employee development. Employees need to see their path forward; in other words, how they can learn and grow. That clarity is found in a clear employee development plan. When HR and managers can help employees see their options for learning and development, they can envision themselves with your company for the long term.

Pushing ahead with DEIB programs

There are plenty of studies that show the value of diverse teams. The Peterson Institute for International Economics found that having women at the C-Suite level significantly increases net margins. McKinsey reported that companies with gender-diverse executive teams outperformed peers, on average, by over 20%.

Achieving diversity, equity, inclusion, and belonging (DEIB) remains a priority for HR leaders in 2023. Yet many organizations are still struggling to build DEIB goals into their broader strategic planning. Many have made public commitments, but moving the needle requires concrete action and results. You need to create an action plan and assign accountability to leaders for executing it.8

That’s easier said than done: Many executives are feeling uncertain about the economy, and they might look to downgrade DEIB efforts and spending. It’s up to HR leaders to make sure that DEIB initiatives stay top of mind and are adopted throughout the organization. 

To bring DEIB to life in 2023, incorporate program goals into a performance management process. Convert DEIB goals and metrics into concrete, practical, and measurable achievements that managers and teams can track.

Managing uncertainty

Instability and uncertainty are expected to be major themes in 2023. There’s already a lot of speculation and worry about the effect a potential recession will have on business and employment. More than a third (37%) of respondents in a recent Randstad survey are concerned about layoffs, and 52% worry about the economy’s effect on their job status.9 

These fears, along with highly publicized layoffs in the tech sector, high inflation, and the increased use of automation and artificial intelligence contribute to a sense of financial fragility among your employees.

HR will need to manage employee morale, demonstrate transparency, and continually re-earn trust among employees who feel insecure about their jobs. Make sure you’re communicating relevant business and financial information with employees without revealing privileged information. Encourage managers to help employees see their unique value and discover new ways they can contribute to the business.

Focusing on employee health and well-being

Employee stress levels are at all-time highs, according to Gallup data, and that’s taking a toll on workforce well-being.10 In fact, nearly half (48%) of respondents in a recent Gympass survey reported a decline in well-being in 2022, with the same percentage unsatisfied with their workplace well-being.11 The Workforce Institute at UKG reports that 46% of middle managers plan to quit their jobs in the next 12 months due to work-related stress.

Standard benefits packages can’t solve all the problems of stress and unhappiness. Companies today need to offer better and more varied benefits, including mental health services and benefits focused on child care and elder care. Beyond benefits, HR has other ways to support employee health and wellness in their daily work lives. This could mean offering flexibility around hours, more paid time off, or better schedule management to prevent employees from feeling overwhelmed. 

For managers, look for ways to provide clarity on what they need to do to succeed in the future and provide data-based insights into their team’s engagement. HR can also better support managers by giving them tools and resources to have regular 1:1 conversations — which build trust— and have more effective performance and development conversations with their direct reports.

Before you make changes, survey employees and managers to find out where they need support. Be sure to communicate that their physical and emotional health is a business priority. 

Leaning into your strategic impact as an HR leader

If the HR challenges and solutions described above make anything clear, it’s that HR leaders influence nearly all parts of the business and are critical to helping transform work, as Betterworks CEO DOug Dennerline and VP of Transformation Jamie Aitken explain in their upcoming book, Make Work Better. This year is an opportunity to expand your strategic influence — to take these challenges, and respond with new approaches that put people first

HR leaders require high levels of business and financial acumen in their evolution to becoming strategically minded and operationally focused. Fundamentally, chief HR officers should be active in the C-suite to help realize business goals — not just HR goals. To make the case for broad transformation, HR leaders must understand the company’s risks and explain how people-based initiatives solve for those risks — and the bottom line.

Leaning into strategic work can affect your health and wellness, too. The work of HR has been known to cause burnout because its heavy emphasis on administrative work can be uninspiring. By transforming HR into a strategic asset, HR professionals can make a positive difference for their company and take on work that’s more challenging and exciting.

Overcoming challenges in HR in 2023 

The scope of the challenges facing HR managers and HR departments in 2023 might seem overwhelming, but the months ahead present just as many opportunities. As HR leaders, look at how these trends can help you redefine not only your HR strategy but also the fundamentals of work. 

HR professionals are redefining work by redefining how we work — and by placing people at the center of it all. As you address HR challenges in your organization, consider how you’re laying the groundwork for the future of your company and enabling the success of your workforce.

Want to learn more? Discover 5 HR trends predicted for 2023.

1What are the top 5 things people want from work? New report:

2U.S. Employee Engagement Needs a Rebound in 2023:

35 takeaways from HRE’s What’s Keeping HR Up at Night? Research:

4What’s Holding Back Manager Effectiveness, and How to Fix It:

5How Quiet Hiring Will Shape The Workplace:

6The economy is transforming recruiting and retention in 2023; here’s how:

7America’s offices are now half-full. They may not get much fuller.:

8Josh Bersin’s 9 HR areas to focus on this year:

9Randstad workmonitor 2023:

10State of the Global Workplace: 2022 Report:

11Startling new wellbeing data is a call to action for HR leaders: