As business leaders mark the mid-point of another volatile year, here’s a look at how predictions on 2023 forward-looking trends are tracking in an environment of continued disruption and upward momentum in many sectors. These five trends reflect continued efforts of boards and senior management teams to create normalcy in an environment where the 2022 term “permacrisis” continues to apply.
1. Current risks subside as new ones appear. Tracking as predicted. 2023 began with the world again facing COVID, severe weather events, war, inflation, recession, talent shortages, cyber events, supply chain disruption, new viruses, and ongoing geopolitical tension. As predicted, some of these risks have subsided (such as COVID and supply chain disruption), others have not (such as severe weather events and war), and new ones have intensified (such as data security associated with generative AI and quantum computing). Performing amidst perils has become table stakes for effective leaders as they acknowledge risk is a key element in decision making and are prepared to act decisively when events happen. Discussions of risk remain prominent among boards and senior management teams, as leaders address volatility across the organization to increase resilience and drive performance regardless of circumstance.
2. Inflation remains high while recession looms. Tracking as predicted. Inflation remained high entering 2023 despite trending down from recent peaks in major economies around the world. Experts anticipated inflation in most countries would decline further in the year ahead, but likely stay above pre-2020 levels. The most recent inflation figures vary significantly by economy, with the U.S. reporting 4.0%, the U.K. reporting 8.7%, and the Eurozone reporting 6.1% in May. All these figures are below recent highs and are trending down, but remain above pre-2020 levels. Concurrently, many boards and senior leaders remain concerned about recession, which is present in some economies. Effective leaders continue to focus on growth in the context of higher costs and wary customers.
3. Talent shortages ease but persist. Tracking as predicted. At the outset of 2023, labor markets indicated growing stability: pandemic-related job shifts had slowed, labor participation rates partially crawled back from historic lows, immigration channels reopened in some countries, and industries that over-hired in recent years reduced their staffs. At mid-year, quit rates remain high (though lower than a year ago), labor participation rates for people 25-54 in the US have returned to their pre-pandemic levels, and the number of job openings in the US is 1.1 million lower than in December. Nevertheless, the significant underlying causes of what many called The Great Resignation and Quiet Quitting remain. Recognizing this, effective leaders plan for how permanent demographic shifts and changes in worker preferences will manifest into talent shortages for certain jobs, skill areas and geographies that could persist for years. They emphasize talent strategies that involve both offense and defense, create great places to work with unique cultures, transform pay, benefit, and career programs, and redefine employee experiences.
4. Employees crave flexibility and security in work and technology. Tracking as predicted, with a twist. Heading into 2023, employees desired remote and hybrid work arrangements, while acknowledging the benefits of in-person interaction. Boards and senior leaders added technology developments (such as advances in AI and robotics) and reshoring strategies (designed to address supply chain challenges) to their plans. At mid-year, leaders are progressing with efforts to reach consensus on how to balance the often-conflicting needs of flexibility and in-person interaction. Organizations are finding a new equilibrium sooner than anticipated by many, but still not complete. Simultaneously, advances in generative AI and quantum computing and their impact on risk and work have been dizzyingly fast-paced. Effective leaders are continuing to assess work arrangements, technologies, and processes, creating flexibility wherever possible and aiming to achieve interdependent goals of efficiency, cost-effectiveness, stability, security, retention, and performance.
5. ESG matures into its next stage. Tracking as predicted. Polarization around ESG continues to intensify as parties with varying and often conflicting ideologies and interests debate its relevance and impact. Those involved are shifting their approach, often downplaying the term itself and focusing on ESG’s component parts (such as climate, social responsibility, employee wellbeing, and corporate governance). Investors increasingly are compelling boards and management teams to be more effective long-term stewards of the enterprises entrusted to them and more responsive to the constituents they serve. Some stakeholders are encouraging leaders to tone down ideology and articulate decisions based on business need and rationale, as well as to be transparent and objective in reporting data and results. Effective leaders focus on a broad range of issues related to stewardship that include performance and protection priorities in addition to purpose, people, and planet.
Midyear in 2023, effective leaders continue to focus on strategies and actions knowing that the environment is ever-changing.
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