With business confidence eroding, HR leaders need to prepare now to help their organization succeed.
In mid-2022, 40% of CFOs surveyed by Gartner said they’d turn to cost cutting if inflation persisted for six more months. That time is up, and hiring budgets are just one of the line items likely to be under review. Are HR leaders about to be blindsided?
In a September 2022 survey, 25% of HR leaders said they had started to optimize or reduce costs in human capital, but two-thirds said they were making no or minimal changes to their budgets.
“Finance and HR may not be totally aligned on the outlook, but they do agree on the talent challenges,” says Matthias Graf, VP, Team Manager at Gartner. “Two-thirds of organizations — and half of CFOs — expect increased talent competition into the early months of 2023, even in the souring economic conditions. The key for HR leaders is to prepare for a range of scenarios to protect your talent strategy.”
HR leaders must prepare for multiple scenarios
As per a recent Gartner survey, 21% of HR leaders don’t prepare for multiple scenarios. Although it seems as if there is an unlimited number to plan for, when boiled down, there are four general scenarios based on two factors: business performance outlook and critical talent availability. Focus on where the organization falls within these two parameters to stay agile and develop a targeted plan of action.
Take 3 steps to protect your talent strategy
To achieve strategic talent goals, HR leaders must be proactive, plan ahead of time for the most likely eventualities and prepare to adapt quickly if the circumstances change. Ask the following questions and take these three steps to achieve clarity and act assertively.
Action No. 1: Identify functional priorities. Analyze the state of the HR function to understand current capabilities and identify priorities. To do this, get clarity on your functional maturity and focus areas.
Action No. 2: Prioritize talent non-negotiables. HR may face a greater array of challenges and not be able to meet them all simultaneously. Recognize the likely talent risks that will prevent you from achieving strategic goals by assessing the criticality of potential talent risks in the organization, and prioritize the top risks to escalate to the business and the board. Also prioritize talent non-negotiables to execute at least the minimum goals.
Action No. 3: Align on the needs of your business leaders proactively. Regularly seek feedback from other business partners on HR’s performance and partnership. This creates alignment between organizational and functional strategic plans, and helps execute goals. This way, you can take the lead in addressing uncertainty and decide confidently when facing trade-offs.
While CHROs’ confidence about performance outlook is diminishing, talent competition is still a top concern.
To prepare for multiple talent scenarios, focus on where your organization falls within the organization’s performance and talent demand environment.
Identify functional priorities, talent non-negotiables and align with business leaders to stay agile and develop a targeted plan of action.
Matthias Graf is a VP, Team Manager at Gartner and leads Gartner's Function Strategy and Management research for the HR practice. He is a researcher and advisor with more than 15 years of experience in human resources, management consulting and project management as well as in applied and scientific research.
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