What trends will define the world of work in 2023?

Business leaders could be forgiven for hoping that when the pandemic receded as a driving, all-consuming force, the world of work would return to something like normalcy. After all, the past two-plus years wreaked havoc on the relationship between employer and worker; it’s simple human nature to wish for a breather.

But as we study trends for 2023, we advise you to prepare for another year of major work-related opportunities. An ongoing shortage of talent, the growing emphasis on sustainability, the need for new leadership skills and other factors guarantee that in order to thrive, companies and leaders must be more flexible, proactive and purpose-driven than ever.

Here’s a look at top trends for 2023.

This tops our list because it is the uber-trend faced by all businesses. Talent scarcity is not a new challenge, by any means. Started by the digital and green transitions, and augmented by the COVID-19 pandemic, the skills shortage will not slow down even in the face of the looming economic headwinds ahead. Many businesses are struggling—just when attracting, retaining, and engaging with top workers is more important than ever. The talent industry will continue to play a crucial role at a critical time of transition, as it is people and their skills who are set to solve the challenges the world is facing.

The global economic outlook for 2023 is a complex one. Many believe inflation either peaked recently or will do so imminently, and modest growth or even slight contraction are predicted for many regions. Additionally, the world faces political unrest and even upheaval. According to the OCED, labour markets remain tight and well below pre-pandemic levels with lower-paying sectors still lagging behind. Ordinarily, such an economic climate would make for a buyer’s market—but these are not ordinary times for labour.

The tight labour market that began with the Great Resignation will persist, with several results. One is that university graduates in the class of 2023 may have a far easier time finding their first jobs than did the classes of 2020 and 2021, when Covid turned the world upside down. Indeed, a National Association of Colleges and Employers study found that businesses plan to increase hiring of new graduates nearly 15%, and that employers think that the class of 2023 is entering a “very good to excellent job market.”

The continuing tight labour market means it’s crucial for companies to manage their talent well. That means workforce planning—Having a talent strategy to anticipate future talent needs and upskilling and re-skilling workers is key for companies to stay resilient in the face of economic headwinds, and “future-proof” themselves against the unexpected, like market volatility, inflation, the Green Transition, and future supply chain crises. This is an important component of an overall vision of sustainable employment. We’ll elaborate on this more later.

When we talk about the evolution of skillsets, we often mean upskilling or reskilling workers with technical skills. Additionally, though, leaders at all levels—from newly minted managers all the way to the C-suite—themselves need to update their leadership skills in order to drive the business forward. The secrets to increasing retention, and reconnecting colleagues with the company culture are in the hands of managers and leaders.

More and more, those skills revolve around personal and corporate purpose. Workers – especially younger workers, like Gen Z, are looking for purpose within their work. That’s why it is so crucial for employers and organizations to demonstrate how their work connects with a larger purpose.

While it has always been important for leaders to update their skills, it’s more vital than ever, and the landscape has shifted, with increased focus on making workers feel heard, respected, and purposeful. Today’s teams are likely to be multigenerational and geographically dispersed. Workers are more vulnerable to burn out as stresses from Covid, an uncertain political and economic environment, and “change fatigue” from re-organisations pile up. In fact, almost half of workers (48%) globally say they are worried about burnout. Phenomena includingthe Great Re-evaluation and “quiet quitting” have resulted; if they are to stay close to their people, motivate them, and create effective succession plans, leaders must stay resilient—and that may require coaching or training.

Indeed, brands as diverse as McDonald’s, Nestle, and GE Gas Power have recently introduced mass coaching at many levels of the organisation, in order to help managers at various levels build communication skills, manage conflict, think strategically, maintain customer focus, and promote diversity and inclusion. This trend will continue and accelerate in 2023 as employers seek to maximise their in-house talent and reduce turnover.

With talent at a premium, it’s clear that talent retention will be crucial in 2023, helping the savviest businesses create a competitive advantage. Reskilling and upskilling workers, and in general providing career mobility opportunities, can make a big difference here—but too many organisations don’t know how to create such a culture of growth.

As we have discussed, employers will continue to work hard to find the right skills. If they fail to effectively develop their own front-line talent to grow into key roles, they risk losing workers—and competitiveness. Indeed, in our latest Global Workforce of the Future report, career progression was the third most common reason for respondents to change jobs, trailing only salary and work/life balance. With almost a third of workers (27%) saying they will quit their jobs in the next 12 months, companies are taking it seriously.

That report showed how organisations risk shutting off their talent pipeline if they fail to create career paths, and re- or upskill talent; we found that only about half of workers believe their company regularly assesses or invests in their skills. Among non-managers, matters are even worse, with less than 40% believing their employer does so. And workers are often right to believe this! About a quarter have never had a career-progression conversation with their manager. The lack of conversations is directly proportional to people’s visibility and encouragement to pursue internal development opportunities. Less career conversations means less progression.

In 2023, HR leaders need to offer a new employee value proposition adapted to changing times; growth, development and internal mobility will be key components of this proposition.

The crucial role of talent management today, confirms that Chief Human Resources Officers will continue to grow in importance. This trend, that started in 2020 when the COVID-19 pandemic put the spotlight on the HR department, will snowball in 2023 as both C-suites and Boards of Directors come to see that the skills that make for a great CHRO also make for a great CEO.

There are already examples of this progression. Mary Barra, CEO of General Motors, once served as that company’s vice president of HR. and Leena Nair was CHRO at Unilever before becoming CEO of Chanel.

There’s a reason for this trend. Leadership research has shown that businesses should consider CHROs when seeking to fill the CEO’s chair. Attracting talent, creating the right organisational structure, and building a worker-supportive culture are all considered essential for driving strategy. Experience as a CHRO, researchers say, makes a top executive more likely to succeed in these areas.

Whether a CHRO ultimately becomes CEO or not, however, the role is more important than ever. Going forward, organisational design and change management will be crucial to business success, as will be effective talent and workforce planning that anticipates future talent needs. The CHRO should not only be a consulted stakeholder here, but instead empowered to be the driving force behind what are strategic imperatives.

As we’ve explored in this paper, retaining top talent to avoid losing know-how is a business-critical task today. This requires the creation of a culture of inclusion and safety, and of internal mobility. The CHRO must stay close to people, understanding and responding to their needs. Overall, managing talent well is crucial for companies that want to stay resilient in the face of economic and other headwinds. At the end of the day, this falls to the CHRO.

At a time during which ESG competes with energy costs and supply chain disruptions, it is becoming critical for sustainability to hijack workforce strategies.

Indeed, talent attractiveness, workers’ physical, mental and financial health as well as long-term employability can no longer be disconnected from a company’s ability to create long-term value, sustainable performance and resilience. Employers face fierce competition for talent in a market that has become extremely transparent with social media comments that can make or break employer brands.

In that environment, employers should aim to excel in each step of the full employment journey. Is the way you attract your talent truly inclusive? Do you invest in employability for (all) your workers instead of replacing workers when their skills become obsolete? Do your employees recognize your company purpose as being sustainable? Do you have an alumnus programme in place for those who leave your company? And is all this underpinned by an empathetic leadership style?

Investing in circularity of workforce will therefore become an imperative in 2023: Connecting your workforce’s profitability and purpose will allow your organization to go beyond great onboarding process, wonderful lunchrooms or comprehensive training offerings to articulate sustainable employment practices.

For many, agency work serves as a means to achieve sustainable employment and employability; it may mark a first step, a further step, or a return to the labour market. Agencies, properly run and regulated, provide myriad protections and rights. Agency work is not only sustainable employment in and of itself—but it also leads to progress toward other sustainable employment options. That is why proper regulations are so crucial for reputable agencies, workers, and society at large.

So it’s especially dispiriting that the world has recently witnessed shifts in the wrong direction. In 2021, Mexico found itself dealing with a number of non-compliant employment agencies. They were recruiting and employing without respect for workers’ rights, and without paying taxes or other mandatory contributions.

Unfortunately, instead of enforcing existing rules to rein in the rogue agencies and perhaps clarifying its regulatory framework, the Mexican government banned the industry altogether. The move had unfortunate, but predictable, results: a year down the road, workers who were once employed via bona fide agencies have largely moved into the informal sector. These workers still lack access to both social protection and assistance with tax collection.

Mexico’s ill-fated move seems to have caused a domino effect in the region; Peru and Chile have considered similar measures, although some have been more open to input from business—they are seeking an actual solution to a problem, rather than making a symbolic gesture.

We’ve seen similar movements in Europe as well, in Norway and Czechia. In both countries, policymakers see a vulnerable group of workers on the labour market. Action must be taken to protect workers, but symbolic measures that restrict the ability for compliant agencies to serve millions of jobseekers might not be the right one.

The labour market has some non-compliant actors. We also see this for example in the discussions about platform work, and the abuse of (bogus) self-employment models. In many cases however, there is not a lack of rules that apply. We believe agency work is actually the most well-regulated form of flexibility.

What is often lacking however, is proper and efficient enforcement targeted at areas of high risk, rather than creating more restrictions to access compliant flexible work. In 2023 we foresee a bigger focus on effective enforcement of labour market policies to protect all diverse forms of work. That’s where the real difference can be made.

Quite recently, the world of work has been shaken up by the rise of decentralised autonomous organisations, or DAOs, and the Metaverse. We believe they will have a significant impact on 2023. Our 2022 Global Workforce of the Future study found that nearly half (46%) of Gen Z workers believe the Metaverse will become part of their job in the future, and perhaps more importantly that they want to work in the Metaverse. While DAOs are less familiar as a concept, 67% of those Gen Z workers have already worked in one or are considering doing so.

By any measure, DAOS are hot. The number of DAOs, and the number of participants in them, have skyrocketed (by some measures, they grew in 2021 from 13,000 to 1.7 million people around the world).

DAOs mark another step in the growing power of the individual to work when, where, and for whom they want. But they also raise questions about accountability and how the emerging Web 3 space should be governed. What happens when the walls come down between organisations? Will talent sharing be a tenet of the future of flexible work?

While nobody can pretend to know all the answers about the coming impact of DAOs and other dezentralised structures, this is an area that leaders must keep up with and educate themselves on.

The same goes for the Metaverse. The pandemic accelerated the adoption of remote and hybrid work, but what remains missing for many is a human desire for a more interactive, cohesive remote work experience. We believe that the Metaverse, while dismissed by some as a place for trivial socialising, can help fill this gap. Beyond the massive gaming possibilities, there are innovative Metaverse applications in the healthcare, fashion/design, and art sectors.

As the metaverse continues to be adopted and mature, virtual twins of physical workspaces could fulfill the desire for connection and interaction with teams and colleagues, removing barriers and improving company culture and engagement.

Like DAOs, the Metaverse opens the door to new employment arrangements and new ways to handle leadership development and coaching. But the metaverse is still in its infancy, and many questions have been raised about its efficacy and practicality. As with DAOs, leaders should investigate the Metaverse during 2023, tracking its possibilities, flaws, and uptake.

In today’s digital world, where workers enjoy unprecedented power and aren’t bashful about exercising it, leaders need to be savvier and more adaptable than ever. Staying mindful of these key trends can lead to greater talent retention and a happier workforce overall heading into the coming year.