Work life is about to get a whole lot easier with AI in performance management.

5 HR Trends Predicted for 2023

By Betterworks
January 5, 2023
6 minute read

The magnitude of change and complexity of work in the past three years can make predictions about HR trends for 2023 seem like a game of roulette. That’s why we’ve asked several HR industry veterans and leaders who work at or with Betterworks to share what trends they believe HR leaders can expect to see. While by no means an exhaustive list, these 2023 predictions take into account the workforce behaviors, gaps, challenges, and cultural and demographic changes that we have seen building over the past year.

With future trends anchored by recent history, it’s worth first taking a look back at the ‘year that was’ as a way to frame predictions for 2023.

The past year may well be remembered as the year when employees collectively extended their palms out and up to say “no more.” The Great Resignation even got its own unofficial anthem, Break My Soul, by Beyoncé. Many of those who didn’t leave their jobs decided to enforce stricter boundaries between work and personal life, as evidenced by “quiet quitting.”

Behind these trends were underlying forces, call them trends if you will: The reality of permanent  hybrid and remote work for many employees juxtaposed with return-to-office mandates (or the possibility of them) for others. An ongoing talent shortage and the skills mismatch continued to vex employers. And, the levels of post-pandemic stress and burnout experienced by everyone — regardless of position — fueled a reevaluation of work’s value and place in our lives. Employees realized they wanted and needed more agency and control. And of course, demographics played a starring role. These key trends seemed to define nearly every HR response.

Putting employees at the center — mostly

Though painful, these factors accelerated the shift to employee-first cultures and human-centered leadership. (Of course, human-centered leadership is what we should have been engaged in all along.) Newly freed to live anywhere or to work untethered to an office much of the time, remote workers rapidly became accustomed to the flexibility and autonomy afforded by this transformation. Flexibility is now table stakes for companies that wish to attract the best talent. On the uglier side, some organizations doubled down on identifying high-performing and low-performing employees, and singling out the latter, in response to a slowing economy and the need to cut costs.

For employees who remained in the driver’s seat, we saw a renewed emphasis on better pay and meaningful benefits, with more efforts by HR to customize benefits to the needs of employees. As the ratio of job openings to people willing to fill them remained at roughly 2:1, organizations focused on attracting and retaining employees by offering higher pay, and promoting purposeful work and skill-building opportunities. 

Hybrid work (and the short shelf life of hard skills) have made soft skills like communication, collaboration, and empathy more valuable — a trend that will continue well into the future. Listening and establishing cultures of transparency, trust, and inclusion have risen in importance as employees have sought roles that provide psychological safety. 

As Gen Z employees entered the workforce in greater numbers, they flexed their collective muscle, demanding greater priority on relational issues such as empathy, intentionality, collaboration, inclusive decision-making, and deeper connections.  

While some may question whether this “rise of the employee” will reverse if the economy slows down and layoffs deepen, it should be recognized that the fundamental psychological shifts of the past few years are unlikely to reverse anytime soon. Given this backdrop, what do our experts see as the big HR trends of 2023?

HR trend 1: In-office mandates will lead to a spike in turnover

All signs are pointing toward companies and leadership forcing their employees back into the office in 2023, which will lead to a spike in turnover. In-office requirements mean limited reach. Organizations are guaranteed to lose great people, not only for lack of flexibility, but because many of the best employees moved out of expensive cities during the pandemic and won’t be moving back. According to a recent Gartner study, 75% of hybrid or remote workers report that their expectations for working flexibly have increased, and four out of 10 employees may leave if they are required to return to an in-person office environment. With the right performance management technology in place, where productivity can reach optimal levels and the best talent can work from anywhere, there’s no reason employees should be forced to work from an office. Work is about achievement, not when and where you’re working from. 

– Doug Dennerline, CEO, Bettworks

HR trend 2: The most successful HR leaders will be strategic business leaders

Many current HR processes — including performance management — are ill-suited for today’s workforce. We are at a point of confluence where the employee experience directly impacts business execution. The most successful HR leaders will be those who can help their companies navigate downstream by leveraging their experience to push for transformational change.

This means moving from being operational to being strategic by making the business case for how the employee experience directly impacts what leaders care about. These include bolstering productivity in an economic downturn where hiring will be limited, reducing costs, and decreasing risk. These transformative HR leaders can link concepts like employee experience and satisfaction to business metrics. In addition, they are able to provide transformation roadmaps that go beyond technology implementation to include change management strategies and governance. The complexity of this work means that strategic HR leaders must build partnerships across their organizations to gain insights, find other innovators, and develop solutions that reflect stakeholder needs. 

 – Jamie Aitken, VP of HR Transformation, Betterworks

HR trend 3: Greater emphasis on building hyper-personalized employee relationships will drive performance and retention

A top reason employees stay — or leave — at an organization is tied to their manager relationship. To build stronger, authentic relationships, people managers will need to become highly relational — forming connections based on similar interests and listening in order to learn new perspectives and new ideas. Understanding what employees do outside of the office (e.g., on weekends, commuting) goes a long way. Connection, collaboration, and transparency lead to trust. Trust is critical when leadership asks employees to switch direction, which will be expected as we move into 2023 and an anticipated economic downturn. 

Pivoting from “managing” employees to being coaches and performance enablers will be key. With millennials and Gen Z predicted to make up 61.8% of the workforce in 2025, it’s no longer expected that employees will stay in a role more than two years. Rather than lose talent to a competitor, companies will need to keep and guide them to their next career in the organization. This can only be done by understanding what motivates and inspires employees. 

– Andrea Couto, VP Solution Engineering, Betterworks

HR trend 4: The most diverse and inclusive employers will win the talent war

The ethnic and racial diversity of Gen Z means that if companies don’t create an environment that attracts and retains a diverse workforce, they will be even more hard-pressed to access the talent they need. This generation holds their employers to a high standard — and this will not go away next year and for many years down the line. In a September 2022 poll, Staffing Industry Analysts found that 75% of Gen Z said they would reconsider applying at a company where diversity, equity, and inclusion efforts are lacking. An inclusive workplace is often a more productive and engaged one, so companies will have to continue to invest in this space in order to find and retain great talent. DEI initiatives will need to be elevated within the organization and treated as a company-wide goal with measurable outcomes for which individuals are held accountable — in the same way they are responsible for achieving other work goals tied to business strategy. 

– Kristen Robinson, Betterworks HR Advisory Council

HR trend 5: Pay transparency will become a common practice

Be prepared for job applicants and employees to ask more direct questions about pay. This past October, New York City passed a new law that companies with at least four workers that post a job will be required to include salary ranges — joining a few other states that require employers to disclose salary information. According to Harvard Business Review, at the beginning of 2023, a fifth of all U.S. workers will be covered under pay transparency laws. This trend will only continue to grow as a culture of transparency remains a priority in the modern workforce. With employees clearly in the driver’s seat and a talent shortage that is unlikely to abate, employers will need to be forthcoming in their explanations of how pay is determined. Economic conditions, including inflation, have made many sensitive to pay gaps according to Gartner, and only one-third believe they are being compensated fairly. An employee’s perception of whether they are being treated justly impacts their trust in their employer and in turn, their willingness to stay.

– Susan Lovegren, Betterworks HR Advisory Council

Interested in learning more about what HR leaders can do to make work better in 2023? Gain additional insights by listening to the on-demand version of our recent Make Work Better Summit.