Ask a corporate executive about 2022 business conditions and you'll get an earful about weakening bottom lines, onerous supply chain issues and higher costs due to inflation and slower economic growth.
So where do CEOs and others in the C-suite see the business climate headed in 2023? SHRM's Executive Network recently canvassed a group of senior executives to discover the trends they foresee and the actions they're taking to prepare.
1. A reset for the job market. During the past few years, strong economic growth and demographic trends yielded record-low unemployment rates. But 2023 will be a different story, executives say.
"In recent years, employees are more in demand than ever before and have had stronger bargaining power for compensation, benefits and work/life balance," said Sandy Fliderman, chief technology officer at Industry FinTech, a digital financial services firm in Miami.
The U.S. labor market is projected to go through a period of contraction and layoffs that's starting with the technology sector and will likely seep into the general economy.
"Companies will be able to be selective in who they hire," Fliderman said. "They won't have to continue to raise salaries to attract talent, and they'll be able to set more structure around in-house office work as compared to organizing their companies around remote work."
While this scenario is typical with most recessions, it will likely be even more pronounced, given record-low unemployment.
"We should see companies able to once again build teams that plan to work together for the long term and reduce the job hopping that has made it challenging for companies to effectively build," Fliderman noted.
2. Getting a grip on costs. Thorny economic issues will lead to conservative spending habits for both businesses and customers. Consequently, a senior leadership team's initial goal is to keep costs in check.
"As with every challenging economic environment, minimizing liabilities by rigorously analyzing costs and their corresponding contribution to business outcomes will be the early priority," said Patrick Ward, vice president at Los Angeles-based Rootstrap, an outsourcing development company that counts Google and Sony among its clients.
Once a solid financial standing is established, employers can once again focus on sustainable growth. But with unemployment so low, it's important to continue to nurture staff.
"Employees can particularly feel the strain of recessionary environments, so ensuring they continue to feel supported in their roles while fostering that camaraderie during tough economic times is also paramount," Ward said.
3. A pivot away from new customers and back to existing ones. Ahead of a potential recession in 2023, more companies are moving into client-preservation mode.
"Shifting our marketing budget to focus on our existing customers has been a big priority for us," said Brian Clark, founder and CEO of United Medical Education, a Provo, Utah-based medical services certification company.
With more than 85 percent of consumers reporting they want their preferred brands to better understand them, it's no longer good enough to only have a great product or service—especially in recessionary times.
"In an economic downturn, customers usually stick with the brands they already know and trust," Clark said. "As we experience the same situation, we'll focus on our current customers, as it is six-to-10 times more expensive to acquire new customers, depending on the industry."
Clark said his company leans into free marketing channels, such as social media, to keep its new-customer funnel active. "That said, we've shifted our marketing budget to almost exclusively centering on our current customer base," he noted.
4. Digging deeper into digital. Many corporate decision-makers say the biggest priority for 2023 is mastering financial planning.
"That means staying ahead of the curve in a tough economy," said Walid Hajj, founder of On The Move Canada, an immigration services company. "For example, CEOs will need to look into digital transformation opportunities, such as cloud computing, automation and artificial intelligence applications."
Delving deeper into these technologies not only provides cost savings—it allows companies to compete more effectively with rivals.
"With economic uncertainty due to events like recessions, natural disasters and geopolitical strife, digital transformation can help stabilize a company," Hajj said. "Leaders should leverage technology to create plans that anticipate potential disruptions so they're prepared no matter what happens over the course of 2023."
5. Juggling inflation and labor costs. Rising prices have made a dent in consumers' discretionary incomes, and that's making a big impact on company bottom lines.
"Rising inflation is compelling companies to increase wages to offer fair cost-of-living adjustments," said Pankaj Srivastava, CEO at San Francisco-based MentorCloud, a training and learning development firm. "In cases where businesses are either unable or unwilling to pass on the increased labor cost over to their customers, they will be forced to cut costs by laying off employees."
For most businesses, continuing to raise wages is an unsustainable practice right now. "Consequently, leaders will also need to become creative on how to attract and retain talent during potentially difficult times," Srivastava said.
6. More reskilling, upskilling and purpose-focused jobs. Rapid changes in technology are making certain jobs obsolete or changing the nature of work.
"All these changes will require business leaders to focus on reskilling and upskilling their employees continuously or face a massive dearth of skilled labor," Srivastava noted.
In addition, remote and hybrid work environments are hampering the ability of managers and leaders to truly connect with their people and stay on top of productivity. It will be important for managers to build those virtual bridges in 2023 and help employees find deeper value in their work.
"The modern workforce is demanding a connection to purpose, a sense of belonging and an ability to make an impact beyond just the self," Srivastava said.
This trend of seeking purposeful work has triggered a mass exodus of disengaged employees. Corporate leaders have begun to notice.
"I'm finally seeing business leaders paying real attention to their people now," Srivastava said. "Forward-looking leaders are altering their frame of reference from 'How does the company win?' to 'How do my people win?' "
7. Building culture based on resiliency and learning. "In 2023, my priority is to foster a resilient, collaborative team mentality to help our company continually optimize the customer experience," said Todd Simon, CEO of food products giant Omaha Steaks. "Constantly learning and gathering feedback is at the center of everything we do, so we can pivot and adjust to meet and exceed our goals and satisfy our customers."
The food industry is continuing to face labor, transportation and product-sourcing challenges, and those issues aren't going away in 2023.
"Factors like inflation and strained supply chain affect consumer behavior and, of course, impact our vendors and suppliers from the logistical side," Simon said. "It's a huge priority for our leadership team to constantly be in tune with these circumstances and adjust accordingly."
Brian O'Connell is a freelance writer based in Bucks County, Pa. A former Wall Street trader, he is the author of the books CNBC Creating Wealth (John Wiley & Sons, 2001) and The Career Survival Guide (McGraw-Hill, 2004).