In 2023, the mandate for HR leaders is to manage talent costs effectively.
However, skills gaps, economic volatility, employee turnover & lack of insights into talent management are making this difficult. HR leaders will also need to strike a delicate balance between attracting and retaining top talent while keeping labor costs under control.
The challenges and hurdles associated with managing talent costs effectively are likely to be major drivers of HR trends in 2023. To address these challenges, HR leaders will need to adopt a range of strategies and tactics that reflect the changing needs and priorities of the workforce.
Some of the key HR trends that are likely to emerge in 2023 are discussed in this article.
Hybrid is here to stay
The new schedule of working for a couple of days at the office and the rest of the week at home seems to work for everyone. Since this is an employee-centric flexible model of work, the rise in job satisfaction and employee engagement is widely visible across industries.
The key benefit of a hybrid environment is the fact that alignment and communication between employees will not suffer. At the same time, employees’ work-life balance would also be managed easily. However, to maintain this structure, companies must build systems that would allow it.
The hybrid work model will eliminate traditional talent bottlenecks and help companies reduce a multitude of talent costs. With reduced office rent, increased productivity, and lower employee turnover, companies can save approximately $11,000 per employee. For instance, Cisco, which cut its real estate footprint in half five years ago, reported savings of $500 million.
Studies also show that integrating a hybrid model can lead to higher employee engagement, resulting in a 20% increase in sales for certain companies.
Looking at the current job trends and an increasing surge of people opting for Hybrid, it is clear that Hybrid work is here to stay. Even organizations are reinventing their policies and infrastructure to facilitate hybrid work. Together, employers and employees are setting the foundation for Hybrid in 2023.
Focus on DEI&B
With the rise in hybrid work models, organizations can now hire globally and maintain a global workforce.
This means HR can hire from global locations based on the talent cost for specific roles.
But this is easier said than done.
One key point of potential friction could be a mismatch in diversity, equity, inclusion, and belonging (DEI&B) principles between the company and a prospective candidate. HR leaders will need to ensure that candidates from diverse backgrounds feel valued, respected, and supported within the organization.
This means understanding and addressing potential cultural differences that may arise in the hiring process, as well as providing training and support to managers to ensure that they are equipped to manage a diverse team.
DEI&B initiatives serve not only to boost productivity but also to improve profitability while reducing talent costs. Companies implementing DEI&B policies have seen a 33% rise in global profit by closing the diversity gap by 50% and fostering greater employee engagement. This translates to a profit increase of $ 1.05 Trillion for US businesses.
In addition, data shows that a company with around 50,000 employees can save up to USD 8 million per year by increasing the retention rate of women talent by just 5%.
DEI&B is an essential long-term component of any organization as it not only motivates employees to outperform but also helps to reduce talent costs by increasing employee engagement and retention rates.
Rise in HR Technology
HR professionals are rapidly integrating tech into their work systems, and why not? Tech-powered HR is set to be the future. If traditional HR has to break its limitations and explore the full potential of talent management, they have to turn to talent intelligence.
Talent intelligence will be at the forefront of HR technology in 2023, and the years ahead will only see the rise of this technology.
Talent intelligence is a perfect combination of talent management with Artificial intelligence that is backed by a load of data. Data, when combined with necessary intelligence, facilitates data-driven decision-making and saves tons in talent costs, and that is why HR loves it.
In 2023, the cost of replacing an employee can be very high, ranging from 30-50% of their annual income, 150% for mid-level talent, and a whopping 400% for high-level, specialized talent. However, by using talent intelligence to objectively screen candidates with data-backed insights, companies can prevent bad hires and save tons in attrition costs.
Enterprises have also reported cost savings of 10% or more on total talent costs by adopting HR SaaS technologies. More than 46% of companies have reported clear monetary benefits from implementing HR tech, which has significantly reduced their talent costs.
Talent intelligence platforms like Draup For Talent are now being deployed by Fortune 500 companies indicating a strong move towards AI-powered talent management.
Reskilling/Upskilling will shoot up!
Almost every industry is starting at a critical talent gap of ~20% to 33% in the future. Statistics indicate that over 50% of the global workforce will need reskilling/upskilling in the next five years.
Today, traditional job roles are turning obsolete, and new-age job roles are emerging. With technologies such as AI/ML, AR/VR, Cloud, Data Science, IoT, and more. As the nature of work changes and traditional jobs rapidly become obsolete, organizations have the responsibility to develop a workforce studded with in-demand skills needed to keep up with the emerging trends.
Reskilling and Upskilling to battle the talent gap head-on and craft a workforce that is ready for the future. Today, Reskilling is the top priority for nearly 60% of L&D professionals and has delivered a proven ROI of over 250% in a 12-month period.
Since Reskilling boosts employee engagement and minimizes attrition, it saves about $660,000 to $2.5 Million per year for the average 100-person company. Reskilling has also been proven to save up to $61,000 in talent costs per employee compared to recruiting or making a role redundant. This strongly indicates that L&D is going to be one of the most exciting aspects of HR Management in 2023.
Shredding Talent Costs with AI
As companies strive to become more competitive in the global market, reducing talent costs has become the top priority for HR. Be it cost-to-hire, attrition costs, or even lower profitability, companies are struggling to manage these talent costs.
This has led to a recent trend of watching talent costs closely and eliminating them using AI and data. Businesses are shredding talent costs using multiple methods, such as:
Streamlining HR Processes: AI can automate recruiting, onboarding, and training processes, reducing the need for dedicated HR personnel. Companies are using AI-powered tools to analyze employee performance and identify areas for improvement to boost employee productivity.
Alternative Talent: Companies are exploring alternative talent sources, such as gig workers or independent contractors, to reduce the costs associated with hiring full-time employees. They are also looking into adjacent talent pools, acqui-hiring, and more such methods to save talent costs.
Better Compensation Structures: Companies are implementing performance-based pay structures that reward employees for achieving specific goals and targets. This gamifies the working experience and promotes healthy competition. This helps motivate employees to perform at their best while also reducing costs associated with other forms of compensation.
Internal Mobility: Promoting employees from within the organization is cutting down recruitment costs while boosting employee engagement. Internal mobility is helping companies retain their talent and take them to higher levels as opposed to spending dollars on external recruitment.
Every trend discussed above can be leveraged by the use of one all-inclusive Talent intelligence platform, Draup for Talent. Spanning over 4Mn+ career paths, 750Mn+ professional profiles, 30k+ skills, and 100k+ courses across 33 industries, Draup for Talent provides an Eagle’s eye view of the entire talent ecosystem.