CHROs are starting the year on a positive note, with their forecast of business conditions 12 months out reaching its highest level in over one year. The HR leaders attribute their optimism to falling inflation, smoother supply chains and increased executive team alignment. Their first-quarter rating of future business conditions jumped more than 5 percent to 6.9 out of 10, continuing last quarter’s double-digit climb.
HR leaders’ rating of current business conditions remains unchanged since the last quarter of 2022, standing at 6.7 out of 10 in StrategicCHRO360’s poll of 108 CHROs on January 31 thru February 6. The pattern is in alignment with that of CEOs, whose rating of current business conditions also remained unchanged when polled in January, at 6.1 out of 10.
Now both CHROs and CEOs forecast future business conditions to be stronger than they are currently for the first time since January 2022. CFOs, however, rate both current and future business conditions at 6.1.
There is a sentiment among polled CHROs that the pandemic is behind us and the future will bring more economic stability. They share that after navigating so much uncertainty over the past few years, their teams are more prepared than ever to take hold of any opportunity that presents itself or balance their priorities through another downturn.
“My rating is driven by input from the market on our position and coming out of pandemic-related reactions in the market. We are getting smarter (on a macro level) at managing/balancing costs vs. growth,” says the CHRO of a $500 million-plus software company. She expects conditions to improve, rating current ones a 7 and future conditions an 8 out of 10.
The CHRO of an upper-mid-size insurance company agrees that conditions will improve, from a 5 to a 6 out of 10, for a similar reason, stating, “We have a number of initiatives in place to address some current gaps.”
Overall, 31 percent of CHROs agree with the idea that business conditions will improve over the coming year. This proportion is up 11 percent since the final quarter of 2022 when only 28 percent of CHROs expected conditions to improve. Now, only 22 percent of CHROs expect conditions to deteriorate, down from 35 percent last month, and the lowest in the C-Suite.
Marty Mahoney, VP of HR at Jay Cashman, an upper-mid-sized construction company, also expects conditions to improve from a 6 to an 8 out of 10. He says that his forecast is driven by “aligning the success of our business with the importance of an employee-centric culture of the organization,” echoing many CHROs who note increased teamwork and common strategic initiatives.
Still, most CHROs expect conditions to remain the same, at 47 percent. However, many of these ratings are very strong, and unchanged, like that of Jeff Thompson, EVP of HR at 1st Franklin Financial, a large financial services firm, who attributes his excellent rating of both current and future business conditions (10 out of 10) to “expansion.”
The VP of HR at a mid-size staffing and recruiting firm also forecasts unchanged conditions at a 6 out of 10, stating his reasoning as, “Economy and market conditions with our customers balanced with our business development efforts.”
The SVP of Global People & Culture at an IT services firm says, “More stability is expected at the global macroeconomic level. Most organizations have entered the year with a conservative outlook, it will be a wait-and-watch and gradually pick up.” He expects conditions to remain unchanged at a 7 out of 10.
The Year Ahead
The proportions of CHROs forecasting an increase in profits and revenues over the coming year have increased again at the start of 2023—after double-digit increases in the final quarter of 2022. Now, 61 percent of CHROs project increasing profits, and 70 percent of CHROs forecast increasing revenues. These proportions are in line with the percentage of CEOs who projected the same when polled earlier in January.
Not all forecasts are up, however. The proportion of CHROs forecasting a boost in hiring fell this quarter, down 20 percent, from 69 percent in 4Q22 to only 55 percent now. Similarly, the proportion of CEOs forecasting increases in hiring over the coming year fell between December and January from 53 percent to 51 percent.
“Hiring increased in 2021 and 2022. It will decrease in 2023,” says the VP of HR at a mid-size insurance agency software company.
The proportion of CHROs who expect workforce investment to climb in 2023 jumped 18 percent since last quarter, now at 66 percent.
Five percent fewer CHROs expect wages to continue to grow over the coming year, at 86 percent of CHROs who forecast wage growth this quarter, compared to 91 percent last quarter. The same proportion—86 percent—expect the cost of labor to climb in the coming year.
About the CHRO Confidence Index
The CHRO Confidence Index is a pulse survey of U.S.-based CHROs and HR executives at organizations of all types and sizes on their perspective of the economy and how policies and current events are affecting their companies and strategies. Every quarter, StrategicCHRO360 asks participating CHROs about their top issues and challenges for the months ahead. The results are published on StrategicCHRO360.com and a report is distributed to participants.