Hiring professionals don’t have an easy job right now. As inflation hovers around a multidecade high, the labor market has remained remarkably robust while many companies’ balance sheets are shrinking. The competition for talent is intense, which is a particularly difficult obstacle at a time when employee turnover rates have surged. Meanwhile, HR teams are attempting to meet increasing demands for workplace flexibility and navigating the cultural and logistical issues of the remote work era.
With all the economic turmoil, uncertainty, and unique challenges today’s hiring professionals are confronting, a natural assumption is that they aren’t especially excited for what the future might bring. But according to a survey of over 500 hiring professionals for our 2022 Hiring Benchmark Report, this assumption is flat wrong: 78% of respondents say they expect growth for their companies in 2023 compared with just 2% who anticipate a decline. While hiring professionals believe their companies will bring fewer people on board in 2023, they also expect their budgets to increase.
There has been a relentless stream of bad economic news over the past several months, but our report offers a rare note of optimism: Hiring professionals are well aware of the challenges they face, but they’re expecting a strong 2023 after a dismal 2022.
Confidence in the Hiring Process Is Up
Hiring professionals know they’re in a constant battle for talent, but many believe their companies are well positioned to compete. Our survey found that 80% of hiring professionals are confident in their hiring process, while 37% are very confident—a 22% increase from 2021. This rising confidence corresponds with the perception that many hiring challenges are becoming less acute.
For example, although 59% of respondents say reducing turnover is a challenge, this proportion dropped by 11% from 2021. Meanwhile, the proportions of hiring professionals who cite challenges such as optimizing employee training programs, making the hiring process more efficient, and maintaining a strong employer brand are down by 12%, 10%, and 10%, respectively. However, large numbers of respondents are still concerned about all these challenges, so they certainly haven’t been solved by any means.
While slightly more hiring professionals report that finding high-quality job candidates and cultivating a positive work environment became more difficult in 2022, there were reductions across most of the hiring challenges we track. HR teams have faced many unprecedented hurdles over the past few years, but our survey indicates they have been getting progressively better at surmounting those hurdles.
Hiring Demand May Be Leveling Off
The labor market has been extremely tight all year; demand for talent has significantly outpaced the supply of available workers, which means hiring managers have been scrambling to find qualified people to hire. According to the U.S. Bureau of Labor Statistics, there were roughly two job openings for every available worker at the end of August, while the quit rate remained near its highest point in years.
While the job market is still hot, there are signs that it’s beginning to cool off, such as a growing labor force and shifting expectations of hiring professionals. Our report found that total hiring volume is projected to decrease by 3.9% over the next year: 27% of companies are planning to hire more, 32% plan to hire about the same amount, and 41% expect to hire less. Despite this anticipated reduction, hiring professionals predict their budgets will increase by 7.4% in 2023.
There are many potential reasons for this projected increase, and they aren’t all positive. Hiring professionals may think their budgets will go up to keep pace with inflation, for instance. But more likely rising investments in HR departments reflect a prioritization of human capital when its importance has never been more apparent. Although less hiring may sound like a bad thing, it could be a sign that the labor market is returning to a more sustainable equilibrium.
How to Improve the Outlook for 2023
Amid incessant talk about an impending recession, it’s encouraging that hiring professionals are optimistic about what the next year will bring. Our report confirms that hiring activity—especially when one looks beyond the beleaguered tech sector—is still very robust. The report also offers several insights that will improve the prospects for HR teams even further. Although employee demands around issues such as workplace flexibility have shifted dramatically, there are also clear strategies for meeting these demands, attracting qualified candidates, and improving talent retention.
For example, our survey found that companies with talent mobility programs were less likely to say turnover is a major issue than companies that lack these programs (47% compared with 55%). HR teams can use their larger budgets in 2023 to “hire internally,” which will help them use talent more productively and improve employee retention at the same time. Focusing on remote work is a way to meet employees’ demand for flexibility. Our survey found that companies that haven’t implemented mandatory return-to-office policies were less likely to face serious turnover problems, while companies that are mostly remote or hybrid had less turnover issues than their peers with predominantly in-person workforces.
It has been a grueling couple of years for hiring professionals, but the responses to our survey demonstrate that a long-awaited reprieve may be on the horizon. This is all the more reason HR teams should prioritize efficient and predictive hiring processes to improve employee well-being and retention. Now is no time to be complacent.
Josh Millet is the Founder and CEO of Criteria.