With today’s competitive talent market, oscillating economy, and tight-fisted investment landscape, businesses have a high bar to climb in 2023 — and HR will be at the center of it all, responsible for increasing retention, morale, and performance to new heights while cutting costs. On the latest episode of High Growth Matters, we talk to Nancy Connery, Emily Sweet and Thanh Nguyen about the four major trends they predict will separate industry leaders and laggards in 2023, and how HR leaders can prepare to guide their businesses to be on the winning side.
This blog is adapted from that conversation and covers the 4 most important HR trends for 2023:
- Developing compensation IQ will be the most requested skill training
- VCs will demand pay progress from their portfolio companies
- One-time rewards and alternative benefits will rise in popularity
- The Dobbs decision will have unexpected effects
Emily is the VP of Social Impact at OpenComp and lead executive for OPEN Imperative. Thanh Nguyen is the Founder and CEO of OpenComp. And Nancy Connery, cofounder of OpenComp and Principal Connery Consulting and cohost of High Growth Matters. With decades of shared experience, these three leaders offer invaluable advice for the coming year.
Don’t miss the full episode: 2023 Trend Watch: 4 Changes Every HR Professional Needs to Plan For
Where HR has been and where it’s going
For the last decade, HR was focused on hiring and spending available capital on developing employees. But, according to Nancy, the world of HR is changing.
There’s been a considerable shift away from general spending that has required HR teams to buckle down and invest capital very precisely. Of course, hiring and development are still vital to a business’s success, but the existing HR environment requires a more intentional approach to hiring, retention and employee development.
“There’s even greater importance in developing the folks you already have and ensuring they stay,” Nancy says. “When you lose your employees, that is a cost. Investors don't want to see you spending right now.”
According to Nancy, the future of HR will continue on a similar trajectory, particularly regarding hiring. She predicts HR will slow down and take more of a visionary approach to hiring. Rather than filling positions with people who are a good fit today, HR will need to focus on who they believe will align with the company five to ten years later.
“There’s also a newfound appreciation for work ethic that will evolve in company cultures,” Nancy says. “We’re going to be a part of what we’re building rather than being entitled to it.”
Trend 1: Compensation IQ will be the skill training that employees and managers ask for most
People have increasingly relied on data to track and shape how they live their lives. From sleep data, calorie tracking and beyond, people have come to expect granular information about where they invest their time, energy or commitment.
This shift will continue to infiltrate businesses in the area of compensation, particularly in light of new laws and regulations requiring levels of pay transparency in many states. In fact, 63% of talent said they’d leave their current employers for another with greater pay transparency — even if the pay were the same.
“At the core, employees expect more transparency, knowledge and information around compensation and the structures of performance as it relates to their pay,” OpenComp cofounder and CEO Thanh Nguyen says. “If you don't have a clear message, strategy or understanding of how you will support your employees, you will struggle.”
Many organizations are implementing actions independent of location-specific laws, using regulations established in pay-transparency-leading states like California, New York, and Colorado as guiding principles.
Three types of laws
Three categories of pay-transparency laws inform compensation IQ and ultimately help guide a shift towards increased equity, says Emily Sweet, VP of Social Impact at OpenComp.
1. Prohibition of previous salary inquiries
The first type of trending regulation bars employers from asking employees about any previous salaries. This helps to protect employees from unfair salary offers in which a new employer may base proposed pay on previous pay rather than on company standards.
2. Obligatory salary range disclosure
These laws require employers to provide accurate salary range information to candidates and current employees for the position they are applying for.
3. Mandatory categorized pay data reports
A rising trend in pay transparency is the requirement of a regular pay-data report by employers. These reports must include pay data based on different categories such as gender, race, ethnicity and experience across job categories and salary bands, creating an opportunity to expose pay inequities and reveal opportunities for growth.
How to get ahead
While laws and regulations are continually developing and evolving, HR and business leaders can use them to establish foundational principles for a business’s strategies.
First and foremost, compensation IQ can’t be an afterthought, according to Nancy Connery, cofounder of OpenComp and principal at Connery Consulting.
“You must do it right from the beginning,” she says. “Arm your managers with the education and tools to successfully speak to and plan for compensation and philosophy simultaneously.”
While creating transparency for new candidates and employees will help shape your business moving forward, you must also focus on developing a positive experience for your current employees. Current employees will also see pay bands, which increases the likelihood of inequity exposure.
“There are challenges around retention, optimization and keeping our best employees at this point,” Thanh says. “Companies need to be really thoughtful and invest in delivering appropriate salary ranges.”
Check out OpenComp’s Pay Transparency Legislation Tracker to stay ahead of regulations in your state and surrounding areas.
Trend 2: VCs will demand pay progress from their portfolio companies
According to Thanh, good faith will no longer hold the same weight as in previous years, especially regarding investment.
“This is the first step into more stringent rules about what you're going to have to provide and do within your organization to protect and to guard against bias and pay disparity,” he says. “These laws are about protecting and helping humans in a way that is progressive to communities.”
While decreasing pay inequities should be a moral obligation for investors, it’s also becoming increasingly important for financial well-being. Many states have established high-dollar fines for failure to comply, potentially costing businesses thousands of dollars.
According to Nancy, investors and VCs have a responsibility to help guide their founders and ensure they understand the importance of the evolution of compensation.
Emily offers several steps for pushing pay progress forward:
- Conduct pay audits quarterly.
- Analyze multiple factors such as race, ethnicity, gender, education, and experience.
- Categorize by job levels, specific roles and departments.
- Analyze at high and specific levels to reveal areas of discrepancy.
But, most importantly, businesses must address pay discrepancies as they are revealed.
Ready to join over 300 other businesses in the fight to close pay gaps? Receive a free, confidential pay equity report by joining the OPEN Imperative coalition today.
Trend 3: Economic uncertainty will increase the popularity of one-time rewards
According to Nancy, we will see an increase in hiring and spot bonuses, alternative perks, learning and development opportunities, and other one-time costs.
“Employers focus more on rewarding and retaining employees while also being responsible in the current economic climate,” She says. “Losing an employee and rehiring have a lot of hidden costs. Investing in one-time costs can go a long way in retaining and developing top performers.”
While previous years have seen indulgent alternative benefits such as in-office chefs and health and fitness classes, future rewards will likely be a bit more modest.
We expect things such as remote and hybrid work to continue their upward trajectory and for employers to offer more flexible work policies and stipends for holistic health.
Trend 4: The effects of the Dobbs decision will emerge in a very real way
The overturning of Roe v. Wade continues to have unforeseen consequences. We expect these consequences will continue to infiltrate every facet of our lives, including employment.
Public health issues are workplace issues, and restricting access to reproductive health care is a public health crisis in this country.
Businesses' stance on reproductive rights and the support they provide to women will become a significant differentiator, especially as younger generations enter the workforce. According to a recent poll, 34% of younger employees reported that they would leave a job due to the company’s stance on abortion.
Reproductive rights are practical and tactical issues, Emily says. “From broad scale philosophy and social values perspective, companies are going to need to take note.”
“At the end of the day, we're delivering what we believe is mission-critical in reducing bias and discrimination,” Thanh says. “This is the data that's needed at the point of action in terms of what businesses need to perform.”
Need help navigating the development and implementation of reproductive health care benefits? Get the free Pro Repro Playbook, an excellent tool developed by Gender IDEAL.
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