Years of disruption have left a lasting impact on how business takes place, and Chief Human Resources Officers (CHROs) are on the frontlines of developing the future of work. But what will that look like?
Conflicting pressures from senior leadership and the workforce are amplified by economic uncertainty, and traditional HR strategies are not sophisticated enough to address these circumstances. According to Gartner research, “HR leaders must manage investments in people and technology, cultivate a positive culture and employee experience, and transform HR to be more automated and digital — all while new employee expectations are impacting retention and attraction.”
We surveyed over 450 CHROs from the world’s leading organizations to identify their mission critical priorities for 2023, and the results indicate HR leaders are shifting their focus and seeking innovative approaches to meet both C-suite and employee needs within the confines of their limited budgets.
In this report, we are examining this shift and diving into the top three priorities and challenges for CHROs in 2023 - based on results from our annual Leadership Perspective Survey.
The Top Five Priorities for CHROs in 2023
HR leaders are experiencing dramatic change in their functional priorities compared to years prior, with leadership development and succession planning, talent retention and organizational culture as their top three priorities.
For this year’s survey, a few functional responsibilities were recategorized to get a better understanding of where their priorities fall. Recruitment, onboarding and retention strategies were formerly evaluated together, ranking #2 for 2022, but this year, they were separated and it provided interesting results. Retention remained in the #2 spot, while recruitment (#6) and onboarding (#13) both dropped out of the top five.
Organizational culture and employee experience were also separated this year. They are no longer in the top position, but they are still regarded as critical initiatives, ranking #3 and #4 respectively.
Diversity, equity and inclusion has been on a steady decline each year, landing at #5 in 2023. Many CHROs commented that DE&I remains a top area of importance, yet they are refraining from using the term. They are making a conscious effort to ingrain it into every aspect of their strategies instead of looking at it as a separate initiative.
Implementing Leadership Development and Succession Planning at All Levels
For the first time, leadership development and succession planning ranks #1 on the list. CHROs are looking to expand resources and training for critical leadership skills to managers at every level, not just senior positions. Investing in this area is shown to aid both retention and employee experience by helping talent envision a future at the organization and improving the manager-employee relationship.
Two-thirds of CHROs cited developing talent and skills as the top goal for their leadership development and succession planning initiatives, and they cited competing priorities as their greatest challenge.
Goals for Leadership Development & Succession Planning
75% Developing talent and skills
50% Creating opportunities for growth
48% Improving business outcomes
Challenges for Leadership Development & Succession Planning
40% Competing priorities
29% Quickly changing landscape
28% Lack of resources
We conduct follow-up interviews with the CHRO community to gather qualitative data on the results, and these are just a few of their comments on leadership development and succession planning:
Complementary to learning and development – a pretty significant skill gap is leadership. The focus on how to manage and lead in today’s world vs. in yesterday’s world is a pretty big gap. We’re rethinking the whole structure. What is it we need to deploy to frontline leaders, middle managers, all the way to executives?”
When people join, they want to have career paths – it’s really incumbent on employers to create those opportunities.”
It's crucial to start developing leadership skills and identifying potential successors at all levels… It's essential to understand the link between growing our leaders and addressing any skill gaps in the business. It's essential to create a robust succession plan and teach leaders how to do it. I believe that leadership development, identifying successors, and growing people are all interconnected.”
We have some really good people functionally but there are gaps in skill areas when it comes to leading a large company. Leadership development is paramount.”
Survey respondents also shared discussion topics they are interested in having with their peers, and 67% percent of HR leaders indicated they are looking to learn practical leadership development and success planning strategies to take back to their organizations.
Focusing on Retention
To cope with recent talent crises, skills shortages and economic pressures, CHROs are focusing on retention in 2023, their #2 priority. CHROs can no longer afford the cost of high turnover, and they are focusing on retention strategies over recruiting this year. “Quiet hiring,” upskilling, and improving employee experience are just some of the various tactics HR leaders are utilizing to keep talent within the organization.
Respondents indicate improving employee experience (57%) is their top goal, with developing talent and skills (55%) and improving business outcomes (54%) close behind. Strong competition is the greatest obstacle for 65% of respondents.
Goals for Talent Retention
57% Improving employee experience
55% Developing talent and skills
54% Improving business outcomes
Challenges for Talent Retention
65% Strong Competition
41% Quickly changing landscape
31% Lack of resources
Here is a sample of comments provided by CHROs on their retention strategies and challenges:
We need to take a more holistic view, be a little more human, understanding, kinder, but also balance that with the other complaints. We need to have consistency, making sure we’re being fair and equitable. If people feel good that’s going to help us with attrition and retention.”
We have a two-year employment commitment. But this is not about making people redundant, it’s about making things great and growing. We make people understand development, career planning and opportunities. This is new and exciting, but it is not for everyone.”
We’ve had really good retention of the professional population, but the hourly population is where we have a chance to improve.”
We’re seeing staff turnover at record levels. We have a strong employment brand so attraction is not a problem, it’s how to keep the workforce. There is a difference between hourly paid colleagues (not enough people in the workforce to hire constantly) and office-based (high-demand skills are hard to find). This creates a level of immaturity and lack of experience in the workforce. So, it is a challenge to accelerate and execute on company strategy and objectives.”
When asked what they would like to learn from their peers on this topic, 70% of respondents shared that they are looking to validate strategies. Talent retention continues to be a major topic on the CHRO agenda, and recently the San Francisco CHRO Community gathered to discuss how to foster purpose and connection to improve engagement and retention - here are the key takeaways.
Organizational Culture
Organizational culture is foundational to how employees experience and engage within the business, and it is the #3 priority for CHROs this year. HR leaders must navigate the nuances of hybrid/virtual work environments, five generations of employees, and an exhausted workforce to create a culture where everyone feels a sense of belonging.
The top three goals for organizational culture are nearly tied, but an overwhelming number of respondents select improving employee experience (85%), improving business outcomes (83%) and developing talent and skills as growth areas. When it comes to challenges for organizational culture, 66% of respondents stated competing priorities is their greatest hurdle.
Goals for Organizational Culture
85% Improving employee experience
83% Improving business outcomes
82% Developing talent and skills
Challenges for Organizational Culture
66% Competing Priorities
58% Quickly changing landscape
57% Lack of resources
A few CHROs shared how they are addressing organizational culture:
The shift in generational profile [Gen X, Millennial, Gen Z] means that our employees' expectations have changed, and we need to focus more on being a purpose-led organization. We need to make decisions with a purpose and be consistent in our values and expected behaviors. We are focusing on bringing this to life through the employee experience.”
Many people don’t have the mental capacity to think about culture change. Our focus is performance accountability and a culture of entrepreneurship. People can get creative on where to grow the business.”
Improved culture will lead to increased retention, reduce turnover and help to curb ‘the exodus’ [of employees].”
Two-thirds of respondents indicated that they are looking to learn from their peers how they can be better leaders of cultural change. The New York CHRO Community discussed this topic at their most recent Executive Summit in a session called, “Is Culture Downstream from Leadership, or What?” - learn insights from the conversation here.
CHROs Top Enterprise Priorities in 2023
In addition to functional priorities, executives were also asked about their top objectives as an enterprise leader. Here you can see a comparative analysis of the top enterprise priorities for each of Evanta’s C-level communities:
CHROs joined the rest of the C-suite in naming driving growth and increasing operational efficiencies and productivity as mission critical priorities for 2023, and they joined CIOs and CISOs in focusing on optimizing or reducing costs, which jumped from #10 in 2022 to #5 this year. CHROs are the only members of the C-suite to list employee satisfaction and engagement and increasing revenue in their top five enterprise priorities
What Lies Ahead for CHROs
CHROs are growing in influence for value-driving initiatives, but they often lag behind other functions of the business when it comes to digital transformation. With responsibilities to drive growth and revenue, power innovation through talent sourcing (both internal and external), design employee experiences and culture and determine the leadership path of the organization, digitalization in HR is required to see bigger impact.
HR automation only ranked as the #10 priority for CHROs in 2023, but it was a common trend during follow-up interviews with CHRO Governing Body Members. One HR leader shared, “I work closely with the CIO as everything is linked to tech. We must connect HR functions to digital solutions.” Another stated, “We need to make sure we are looking after people and automating and digitizing when and where we can.”
One CHRO questioned how generative AI can appropriately be used to increase efficiency. They voiced, “Compensation costs are increasing to levels we’ve never seen, and investment in wages is the highest in the history of the company this year. We’re looking at where we can create efficiencies and open ourselves to being more strategic. ChatGPT has really opened peoples’ minds, and how can that be something we can potentially incorporate into our HR process?”
To learn more about the results of Evanta’s Leadership Perspective Survey and connect with like-minded CHRO peers on these mission critical topics - find your community and apply to join today.
This article is an update to our previous report, which you can find here: Top 3 Goals & Challenges for CHROs in 2022.
Based on more than 450 CHROs’ responses to Evanta’s 2023 Leadership Perspective Survey.
by CHROs, for CHROs
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