Much like everyone else in the C-Suite, and boardroom, CHROs are revising their one-year forecast for business, expecting volatility to persist longer than anticipated.
That’s the main finding from StrategicCHRO360’s latest CHRO Confidence Index, a forward-looking indicator that measures sentiment for business among HR chiefs at U.S. companies. In April, after two consecutive quarters of growth, the Index retracted nearly 3 percent, as America’s talent chiefs brace for a longer-than-expected path to recovery.
At the time of our latest survey, conducted April 17-20, CHROs rated their view of the current business environment at 6.5, as measured by a 10-point scale where 10 is Excellent and 1 is Poor. That is more than 4 percent lower than their Q1 rating in January (6.7).
Similarly, when looking at the next 12 months, CHROs expect the business environment to be 6.7, down from 6.9 in Q1.
Despite the downgrade quarter over quarter, a reading of 6.7 remains well above any level recorded in 2022—the year ended with an average of 6.2. And at 6.7, the Index is flirting with Very Good levels, according to the 10-point scale labels, where 5 and 6 are within Good territory and 7 and 8 are Very Good.
Overall, 35 percent of the 129 CHROs we surveyed said they expect conditions to improve over the next 12 months, vs. 31 percent in January (+12 percent). Only 20 percent expect conditions to be worse in April 2024. Instead, 46 percent don’t anticipate things to change much over that one-year period.
CHROs say their forecast isn’t rooted so much in doubt over the probability of a near-term recovery but rather in what they now see as a slower-than-anticipated turnaround of the economy and how that will translate for business.
In fact, many said that despite the slowdown, they are still experiencing strong growth and sustained high demand as a result of the post-pandemic environment.
“I believe the economy will experience a rebound next year,” said the CHRO of a large nonprofit. “We’ve experienced a slight decline in the rate of our growth, however, I expect we’ll start to pull back up in the coming year.”
“We have been seeing a loss of demand in the first few months of the year,” said another CHRO participating in the survey, “[but] our customers are saying that their demand is starting to return.”
CHROs also said they expect inflation to slow and the labor market to stabilize, thus helping ease the talent crunch and fast-rising costs.
Fewer CHROs this quarter said they expected wages and the overall cost of labor to continue to increase over the next 12 months, at 76 and 84 percent respectively compared to 86 percent for both measures last quarter.
The Year Ahead
Against this backdrop, fewer CHROs expect an increase in profitability over the next year, from 61 percent in Q1 to 58 percent in Q2.
Their forecast for revenues, however, remained somewhat flat, with 71 percent expecting growth vs. 70 percent the previous quarter.
Interestingly, the proportion of CHROs anticipating an increase in their headcount by this time next year rose 5 percent, from 55 percent in Q1 to 58 percent in Q2.
Meanwhile, the proportion of those expecting to pause—and even cut—their workforce-related investments shot up in April: 9 percent now expect to cut back, vs. 4 percent in January—and 32 percent said they’re not planning on making many changes, vs. 30 percent in January.
Most still plan to increase their workforce-related investments over the next 12 months, though that majority is narrowing, now at 59 percent from 66 percent last quarter.
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.