5 Key HR Executive Challenges For 2024
The 2023-24 SHRM State of the Workplace Report finds HR leaders caught between the
talent challenges of the past few years and an AI-powered future.
THIS REPORT EXAMINES FIVE CRITICAL ISSUES
HR DEPARTMENTS WILL FACE IN 2024:
- Balancing Inflation and Talent Challenges
- Training an Evolving Workforce
- Realizing the Full Potential of AI
- Persistent Organizational IE&D and Mental Health Challenges
- Struggles with Engaging Workers
The report finds that HR executives often have more positive assessments of their departments than both HR workers1
and U.S. workers.2 When asked to grade their department’s effectiveness, HR executives gave their department a B+ rating, and HR workers gave a B. But U.S. workers gave their HR departments a C rating. There has long been a gulf between how HR executives see their department and how workers experience it, but the gap is widening at a time when leaders need to understand and respond to the changing needs of their workforce.
1. Refers to nonexecutive HR workers.
2. Refers to workers in non-HR roles.
THIS REPORT EXAMINES FIVE CRITICAL ISSUES HR DEPARTMENTS WILL FACE IN 2024:
Introduction:
If transforming your department amid economic and political uncertainty sounds like a tall order, remember that your competitors operate in the same demanding environment.
Clear-eyed leadership may well be a decisive competitive differentiator in the years ahead.
As you read through the trends identified below, consider how your organization cana pproach each as an opportunity to surpass your competitors in 2024.
Balancing Inflation and Talent Challenges
While inflation has moderated in recent months, the cumulative effects of higher inflation between 2021 and 2023 will continue to impact workers and businesses in 2024. Inflation was the most commonly cited organizational concern among HR executives, with 74% saying inflation was a concern for their organization. The labor market has cooled somewhat compared to the height of the Great Resignation, with rounds of significant layoffs in tech, retail, manufacturing and finance making headlines in the past year. Yet unemployment remained low at the end of 2023, and there are still more job openings than available workers.
A combination of labor demand and pay transparency laws will incentivize companies to offer competitive salaries to attract and retain workers.
But businesses must also contend with rising osts in other areas, the drive to increase profits and the need to hedge against a potential economic downturn.
Most HR executives (51%) said they expect budget constraints to be a barrier to meeting organizational goals in 2024. Just 65% of HR executives said their organization reported planned staffing increases in 2024. Among those organizations, 79% are planning for pay increases of 4.9% or lower, roughly commensurate with the current inflation rate.
About half (52%) of HR executives said they considered inflation when determining pay
increases, but it is not a standard factor, while another 27% said they consider inflation as a
standard part of their annual cost-of-living pay adjustments.
This could be why few (35%) HR professionals3 believe their organization effectively delivered fair compensation to current employees in 2023. Notably, HR executives were more optimistic and more likely to report effectiveness in providing fair compensation to newly hired employees (64%) and current employees (55%) than HR workers (47% and
34%, respectively). Despite these differences in perspective, both groups agree that current employees lagged behind new hires.
At the same time, 39% of organizations plan to transition more of their workforce to inperson work in 2024, compared with just 5% transitioning toward remote work. Some employees will see the end of remote work as a loss of a benefit with monetary value, which could blunt both the fiscal and psychological impact of pay increases. However, more than a
third of organizations (35%) plan to improve flexibility and leave policies to better fit their current workforce’s needs—perhaps to increase retention. This strategy could also help attract prospective employees since HR professionals named schedule flexibility a barrier to talent acquisition.
HOW SHOULD EXECUTIVES RESPOND?
Many workers are still struggling with the cumulative effects of two years of pay increases that didn’t keep up with high inflation rates or productivity gains. In the long term, if workers can’t connect their contributions and their compensation, it could lead to declines in morale and productivity. HR leaders must find ways to make workers continue to feel valued in a shifting work environment, especially since retaining a productive worker is more costeffective than replacing them. As the workplace evolves in response to some of the trends discussed below, upskilling workers and giving them clear paths to advancement may help improve retention, reduce skills gaps, and increase productivity while containing costs, offering executives the best of both worlds.
CHALLENGE 2: Training an Evolving Workforce
Heading into 2024, 37% of organizations plan to invest more in training and development, making it the most common investment area, while leadership development was the thirdmost common at 33%. Fewer organizations are planning increases for talent acquisition (29%).
What’s driving the need for investments in training? About 12,000 people a day will reach the age of 65 in the U.S. in 2024, more than at any other time in the nation’s history. Organizations know that retraining existing workers to replace retirees is more cost-effective than hiring new employees for critical roles.
Training is an area rife with opportunities for improvement. HR executives rated their organizations’ training and development programs a B- on average, while U.S. workers would only give them a C. Training leaders and people managers will be a particular focus in 2024, as it offers organizations a cost-efficient chance to increase staff retention rates and organizational effectiveness. Progress is needed, considering HR executives give their organizations a C+ for leadership development, and U.S. workers would give them a D+
HOW SHOULD EXECUTIVES RESPOND?
Today’s HR leaders can see two accelerating trends poised to transform workplaces. Baby Boomers are leaving the workforce just as AI tools become increasingly capable of automating many basic tasks. The remaining workers will
need training to replace departing colleagues and work productively alongside AI.
It’s critical that HR leaders not only fund training and development programs in their organizations but also look to modernize their approach and address longterm challenges. Rather than treating the need for enhanced training as a resource sink, treat it as a chance to modernize your workforce and enhance productivity while showing your workers you’re willing to invest in them.
CHALLENGE 3: Realizing the Full Potential of AI
Looking ahead, another 26% of HR departments plan to adopt AI tools in 2024 or later. This means that by
2025, half of HR departments could be using AI.
9 Among HR professionals who use generative AI, 60% considered it “quite” or “extremely” useful. Only 5% said it was not at all useful. Despite AI’s utility, only 20% of HR professionals report that integrating it into the workplace is a high priority in 2024.
HOW SHOULD EXECUTIVES RESPOND?
AI adoption will be about balance for most organizations. Businesses should not rush into AI use without a coherent strategy and sound policies to govern its use, but they also shouldn’t try to avoid the technology. HR leaders need to use this time to actively study potential use cases and risks rather than passively waiting to see what approaches become dominant. With careful planning, you can ensure strategic alignment between your AI use and your talent strategy, particularly regarding training and development. Your workers will need to adapt to AI and will need organizational support to adjust to the new working methods associated with these tools.
CHALLENGE 4: Persistent Organizational IE&D and Mental Health Challenges
Only 52% of organizations are planning to implement or expand inclusion, equity and diversity (IE&D) initiatives. In a Q4 2023 survey for SHRM’s CHRO Business Outlook, CHROs were asked how much their organization prioritized IE&D. Half (50%) indicated that it was not a priority or a low priority, compared with 39% who said the same in Q4 2022.
There are many reasons why IE&D programs could be floundering.
It could be about a shift in priorities, a lack of resources, or perhaps some IE&D programs aren’t delivering the results HR leaders expected. Or it may reflect concerns about potential legal challenges to programs designed to promote workplace diversity in the wake of the U.S. Supreme Court’s recent ruling on affirmative action.
Whatever the cause, IE&D programs are struggling. Organizations’ 2023 IE&D efforts received a C rating on average from U.S. workers, HR workers and even HR executives, who typically assign higher grades to their organization’s performance in most areas. According to HR professionals, just 28% of organizations were effective at achieving greater workplace IE&D in 2023.
Yet only 39% of organizations plan to increase mental health benefits in 2024. At the same time, just 35% of HR professionals said their organization is effective at supporting employees with mental health concerns.
Part of the challenge may be that many organizations aren’t evaluating IE&D and mental health programs properly. According to SHRM research, only 25% of HR professionals said their organization measured the effectiveness of their IE&D programs in 2022, and just 17% said the same for mental health programs. If these programs aren’t being tracked and continuously improved, they won’t deliver the results HR leaders need.
HOW SHOULD EXECUTIVES RESPOND?
Instead of seeing IE&D and mental health as separate challenges that can be ignored in favor of focusing on engagement and retention, you need to recognize that these are parts of the same conversation and require a coordinated approach.
Rather than de-emphasizing these critical areas, look for ways to make IE&D and mental health programs more systemic and integrated into all employee experience programs so they’re strategically aligned with your organization’s
broader talent goals.
CHALLENGE 5: Struggles with Engaging Workers
HR departments are not immune to morale challenges. More than half of HR professionals feel they are working beyond their typical capacity (57%) or are short-staffed for their workload (56%), and there are significant turnover implications as a result. HR professionals who say they are working without enough staff for the workload are more likely to say they are actively searching for another job (34% versus 22%). In addition, HR professionals working beyond their typical capacity are also more likely to say they are actively searching for another job (31% versus 22%).
However, only 29% of HR workers said their organizations were effective at retaining top talent in 2023, and just 45% of HR executives stated that their organizations were effective in this regard.
13 Perhaps this is why more than half of HR executives (58%) say limited time or dedicated personnel is a top
barrier to achieving 2024 priorities. Organizational budgets are not likely to address these issues in 2024.
About half (52%) of HR executives say they expect their organization’s investment in HR to remain the same in 2024, while 37% say they expect their organization will invest more in HR. Just 34% of HR professionals report increasing their budget for HR employee compensation for 2024.
This reflects HR executives’ various high-stakes challenges, tight budget pressures and high board expectations.
HOW SHOULD EXECUTIVES RESPOND?
HR departments are right to focus on morale and employee engagement in 2024, but many departments will need additional resources to counter their challenges effectively. Burnout is a real risk for HR professionals at the executive and nonexecutive levels. Remember that you won’t be able to help others with their challenges if you aren’t engaged and energized by your work. Carefully monitor your stress and apply self-care as needed. You need to look for ways to cultivate resiliency, in both yourself and in your organizations, throughout 2024.
Conclusion
Workplaces have endured a lot of transformation in the last four years, but the changes behind are nothing compared with the ones that lie ahead. In 2024 HR will bridge old and new ways of thinking about how organizations source, compensate, train and engage talent. The companies that will thrive in the world of work to come will be the ones that lay the foundations for those changes now. That will require strong leadership and the willingness to rethink old policies and procedures so that human intelligence remains the heart of the workplace experience no matter how advanced AI becomes.