Hackett 2023 HR Key Issues Research Finds Troubling Disconnect Between Critical Priorities and the Ability to Execute Improvements

There’s a troubling disconnect between human resources (HR) organizations’ priorities for 2023 and their ability to make improvements, according to new HR Key Issues research from The Hackett Group,

“But there are concerning signs of a real disconnect between stated priorities, investments and confidence in their ability to deliver. At the same time, workload is increasing significantly, with little to no increases in staffing and budgets, and a significant reduction in the growth rate of spending on HR technology”

Six of the 10 top HR priorities represent business and enterprise goals related to human capital, indicating that HR remains focused on its role in enabling the success of the overall enterprise. But HR executives do not consider any of the top 10 priorities to be well supported or sufficiently funded, The Hackett Group found. In fact, the top seven objectives are all critical development areas – priorities of high importance but for which confidence in the ability to deliver is mixed. In most cases HR organizations also do not have improvement initiatives planned in 2023 to address their cited priorities, indicating a potential mismatch between priorities and investments of resources.

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The research revealed that developing executives who can lead effectively in a changing business environment is the top priority for HR in 2023. Recruiting and retention and enabling growth both remain high priorities for 2023, while acting as a strategic advisor and creating/maintaining a high-performing culture fill out the list of top five priorities.

In addition, HR leaders face increasing productivity and efficiency gaps, with workload expected to increase by 10.5% and only minimal increases in staffing and budgets, the research found. Growth in HR tech spending is also expected to slow to just 1.8% in 2023, far less than last year’s 9.1% projected increase, which will make it more challenging for HR to rely on technology to close efficiency gaps. At the same time, HR technology adoption is expected to grow in 2023. Cloud-based core human capital management suites have become pervasive and successful, as have process management/workflow tools and HR point solutions.

While improving insight is key to an HR organization’s ability to anticipate shifts in demand, supply of skills, and changes in the labor market, the research found that most lack effective strategic workforce planning capabilities. Small-scale deployments of advanced analytics, data visualization and master data management are the norm, with less than 20% of all HR organizations reporting large-scale implementations.

“Clearly, HR is recognizing the pressing need to equip managers to guide their organizations through today’s challenging business environment. This is why leadership has been elevated to the top priority for 2023, up from the seventh spot last year,” said Senior Research Director Anthony DiRomualdo. “But less than 40% of HR organizations said they have a major initiative to address this objective, and executives expressed low confidence in their ability to deliver improvements. Significant change won’t happen without action.

“Another area of concern is the No. 3 priority – acting as a strategic advisor to the business,” DiRomualdo continued. “With so many people-related issues affecting business success, this is critical. But only 23% of HR organizations have a major 2023 initiative planned to address this objective – the lowest among the top 10 priorities. Strategic workforce planning capabilities, which are key to the ability to serve as a strategic advisor, are also a significant issue. Yet only 9% of respondents consider their organizations highly effective in translating business strategy into talent implications. Similarly, most HR organizations lack highly effective capabilities for identifying risks associated with attraction and retention of critical talent. These are all troubling signs for HR moving forward.”

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According to Associate Principal Franco Girimonte, “Many of the changes over the past three or four years have caught HR off guard, and I think HR leaders are realizing they need to be better prepared. If you think of all of the uncertainties today, including inflation, the economic cycle, the impact on the cost structure what’s happening with your workforce, it’s understandable that HR is focused on how to develop executives who can lead more effectively in an unpredictable environment.

“But there are concerning signs of a real disconnect between stated priorities, investments and confidence in their ability to deliver. At the same time, workload is increasing significantly, with little to no increases in staffing and budgets, and a significant reduction in the growth rate of spending on HR technology,” said Girimonte. “So HR operations are going to have to focus on cost reduction and improving efficiency as well, which will make it more challenging to effectively transform the HR organization, improve talent management, and leverage data and advanced analytics to produce insights. If these gaps and disconnects continue, HR organizations are likely to fall behind, and when the next crisis hits, it will be even more of a struggle to keep up.”

The Hackett Group’s 2023 Key Issues research series is based on results gathered from more than 350 executives in finance, procurement, supply chain, HR, information technology, and global business services at a global set of midsized and large enterprises.

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