In this article, five experts from Harvard Business School discuss the key trends that are shaping the small business landscape.
As 2023 begins, businesses and employees face an uncertain economy and labor market, as the twin dilemmas of inflation and interest rates weigh on forecasts. Harvard Business School faculty share the top trends that they believe will shape the workplace and markets this year, including new ways to build incentives, potential conditions for entrepreneurs, and how to make work-from-anywhere work best.
Boris Groysberg: Look to hire back top talent
While it may seem counterintuitive given the economic forecast, 2023 could be the year of powerful hiring opportunities.
For the past 12 to 18 months, we have witnessed the Great Resignation and record turnover rates. What we are hearing from many people now, however, is a sense of regret. Many people feel that they made a mistake in switching jobs, that they acted impulsively and are now disappointed with their new manager or new company. For many reasons, people switched jobs during the Great Resignation without doing their due diligence or discounting what their company at the time had to offer. In this coming year, companies may have the opportunity to lure back former star employees they didn’t want to lose.
Over the past 50 years or so, many companies have changed their perspective on rehiring former employees, at least under certain conditions, such as the former employee was a high performer and left on good terms. As a possible recession looms, it is critical that companies ready themselves by having star talent in their most critical positions.
Strong talent is invaluable at any point in the economic cycle, but one could argue it is most important in economically challenging times. If companies need to strategically and selectively upgrade their talent to deal with the challenges ahead, perhaps they should ask themselves: Is there anyone we want to bring back?
Boris Groysberg is the Richard P. Chapman Professor of Business Administration.
Sandra Sucher: Employee trust is on the line
Companies will be pulled in opposing directions in managing the people who work for them in 2023, challenging their ability to maintain the trust that we know from research leads to better business.
One direction will lead companies to increase employee fears of job security, the top fear of 85 percent of employees globally, according to research by Edelman. Even as they cut back in some areas, companies will be hiring in others, whipsawing employees who won’t know whether their jobs are safe, leading to the well-researched drop off in engagement and risk-taking that accompanies fears of job loss.
The other direction will lead companies to put more demands on employees by pressing for a return to more in-person work and other actions to rebuild frayed company cultures. The pandemic was a game-changer for employee trust, and employees have responded to that wake-up call with a realization that their first obligation to themselves is to live a life worth living.
Inspiring these employees to abandon the flexibility they have come to rely on will be a tough row to hoe, and newly empowered employees will continue to push back on requirements that impinge on their view of what is important in their lives.
In summary, employees will receive mixed messages from employers: you don’t matter at all—and—you matter greatly. How they reconcile these tensions will determine the level of trust employees will give them.
Sandra Sucher is the MBA Class of 1966 Professor of Management Practice.
Julia Austin: Headwinds for entrepreneurs
In a year with more economic concerns and considering the downfall of several innovative unicorns last year, 2023 will bring more constraints to entrepreneurs than we saw in 2022. Entrepreneurs will be expected to be scrappier than ever by their boards and investors, requiring more detailed and thoughtful strategies around growth and doing more with less. “Diligence efforts will be more thorough, and entrepreneurs should expect funding rounds to take longer.”
While there will still be many investors writing checks this coming year, entrepreneurs should expect a higher bar to raise capital with more tranched rounds based on measurable KPIs. Prospective investors will be going deeper to understand the depth of progress made in earlier stage ventures with less leaps of faith than we have seen in the past; diligence efforts will be more thorough, and entrepreneurs should expect funding rounds to take longer.
Entrepreneurs must embrace new tools such as generative [artificial intelligence] AI to optimize their businesses, stay laser focused on core product offerings, and develop lean operational plans, resisting the temptation to overhire as a means for growth and maintaining at least 18 months of runway to ensure resiliency during these challenging economic times.
Julia Austin is senior lecturer at Harvard Business School’s Rock Center for Entrepreneurship.
Susanna Gallani: Incentives must change to lure quiet quitters
The pandemic years have highlighted the need to modernize how organizations incentivize and reward their workers.
Perceptions of lack of meaning in jobs and of not feeling appropriately valued at work are among the most reported reasons behind the Great Resignation of 2021 and the more recent “quiet quitting” phenomenon. Organizations across industries have faced unprecedented turnover rates and difficulties recruiting talent. Firms that responded to these labor market frictions by increasing compensation rates often discovered that such tactics are not financially sustainable in the long term and, more importantly, have yielded smaller benefits than expected.
In 2023, employers that want to meet the moment will profoundly rethink the structure of their incentive systems. “We will begin to see a shift from pay-for-performance arrangements and gig-like engagements toward relational connections between firms and employees.”
First, success in attracting and retaining talent will largely depend on employees feeling valued for their contributions beyond narrowly defined job descriptions. Thus, we will begin to see a shift from pay-for-performance arrangements and gig-like engagements toward relational connections between firms and employees, with greater decentralization of authority and utilization of worker skills at the “top of their license.”
Second, incentives will include greater non-monetary components, such as opportunities for development, recognition, meaningful work assignments, etc., thus rewarding employees in ways that respond to their preferences beyond financial rewards.
Third, organizations will begin to move away from one-size-fits-all contracting and offer menus of reward options (monetary and not) allowing each employee to personalize their reward package in response to their preferences. Acknowledging the variation in employees’ preferences and drivers of utility within the workforce will be the first step toward much-needed innovations in the design of incentive systems.
Susanna Gallani is an assistant professor of business administration in the Accounting and Management Unit.
Prithwiraj Choudhury: Work from anywhere takes off
This year could be the year of the digital nomad.
The increasing proliferation of the work-from-anywhere model, where companies are allowing workers to work from their preferred locations for part or the entire year, is driving digital nomadism and a race between countries and communities to attract remote workers.
While several companies have fully embraced work-from-anywhere, other companies, such as Citibank and Cisco, have allowed workers to work-from-anywhere for a few weeks every year. For individuals, this represents an opportunity to travel the world, forge connections, focus on wellbeing, and gain experiences. “Communities around the world can benefit from digital nomadism, but careful attention needs to be paid to mitigating adverse effects.”
Digital nomads can bring in entrepreneurial ideas, lifelong connections, consumption dollars, and several other benefits to local communities. Communities around the world can benefit from digital nomadism, but careful attention needs to be paid to mitigating adverse effects, such as gentrifying housing.
For individuals here is an idea—think about a locale (or two) that would like to explore this year and talk to your manager on how and when you could work from there for a few weeks this year.
Prithwiraj Choudbury is the Lumry Family Associate Professor of Business Administration.
This article was written by Avery Forman from Harvard Business School Working Knowledge and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to firstname.lastname@example.org.
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