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Q2 Report

2023 Employee Engagement Trends & Forecasts

Using the collective experience and expertise of Inspirus thought leaders and subject matter experts, this report dives into what we see trending for the second quarter of 2023, and our vision of how these trends will impact the future of our industry and our clients’ programs.

These trends and forecasts cover current business critical topics that HR professionals need to know:

  • Embracing change and championing transformation
  • A modern approach to total rewards
  • Using AI to personalize the employee experience
  • Creating a winning culture using people first strategies
  • Dealing with economic disruptions
  • Developing leaders to drive success and sustainability
  • Stretching the HR dollar

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2023 Employee Engagement Trends & Forecasts: Q2

We’re pleased to present our 2Q 2023 Inspirus Trends & Forecasts Report. The new shortened quarterly report started in 1Q and has been met with fantastic feedback, all positive! Over 9,200 professionals have read it since the January 17th, 2023 release. This 2Q report again draws upon the collective wisdom and thought leadership of our Inspirus team to reveal what we see as trending now and our vision of how these trends will impact the future of our industry and our clients’ programs. And, as a part of the multinational Sodexo Group, we’re able to layer in insights that drive quality of life from the prestigious Sodexo Quality of Life Institute.

What’s changed since 1Q? While the Conference Board forecasts that economic weakness will continue in the United States, predicting three-quarters of negative gross domestic product (GDP) growth, rising interest rates and higher inflation are contributing to fears of a looming recession. For U.S. businesses, that likely means decelerating growth, tightening spend and accomplishing more with less. According to the latest employment report from the U.S. Bureau of Labor Statistics, employers only added 311,000 new jobs in February, down from 504,000 in January. The Deloitte 2023 Human Capital Trends report reveals that work has changed, but leaders haven’t. One example is the shift from the traditional job structure to a skills-based approach. While 93% of leaders who responded said moving away from a focus on jobs is important to their organization’s success, only 20% said they were ready to tackle the challenge. Plus, there is a large leadership gap causing disconnect: nearly half of survey respondents said their organization’s leaders are overwhelmed and struggling to identify what they should prioritize in this “new normal.”

McKinsey reports that productivity growth in the U.S. is declining. Labor productivity is growing only at 1.4% since 2005, resulting in missed opportunities for companies totaling $10 trillion. Business leaders need to embrace change and champion transformation to return productivity to historical levels, and that includes boosting morale levels and addressing workforce shortages.

Our findings support that many organizations continue to juggle a competitive talent landscape with an exhausted workforce. Employees have many choices at their fingertips, giving them the edge in compensation negotiations, benefits and geography. Employers have responded with “quiet hiring,” a new way to acquire new skills and capabilities without adding additional full-time employees. The approach deploys employees to the areas where the organization most needs them, to help stretch their budget.

Another hot area that is changing so quickly it is making our heads spin is artificial intelligence (AI), and it is big business. Microsoft will invest billions in OpenAI, Microsoft Bing’s ChatGPT integration launched with claims to reinvent search and Google unveiled Bard. McKinsey reports (New York Times, paid subscription) that investors are clamoring to invest in generative-AI companies, pumping at least $1.37 billion into them in 2022, similar to the kinds of investments we saw when the internet and mobile devices burst onto the scene. AI will have many business uses, but we see Human Resources (HR) professionals using it in the immediate future to alleviate their administrative burden and personalize the employee experience.

These are just a tiny fraction of our findings — there are many more in the pages that follow. I hope you find this report holds value for you and your organization. Our goal remains: deliver fresh insights, unique perspectives, actionable strategies and of course, best practices to help organizations elevate employee engagement and create a thriving culture.

Tatiana Frierson
Chief Executive Officer
Inspirus / Sodexo Benefits and Rewards Services, USA

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Business Leaders Must Embrace Change and Champion Transformation

When will the workplace get back to normal? According to McKinsey senior partner Katy George, “if by normal, they mean ‘2019,’ the short answer is ‘never.’ And that might be a good thing.”

The workplace is evolving, and business leaders who rethink their HR strategy and embrace change will be better able to find, hire and keep more talent. Research has found that purpose is interconnected with earnings, engagement and loyalty. Basically, if employees find their work boring or pointless or if the culture is toxic, nothing else matters. Talent drives the workforce, so it’s crucial to address the need for purpose.

How your organization responds to change, whether internal or external, contributes to your work culture, helps predict business outcomes and can make or break the employee experience. Here’s what we see top organizations doing now to navigate today’s fast-changing business environment.

Business Agility Helps Facilitate Change

Change is an inevitable part of life and, thus, of business. Historically, businesses that are more agile are better equipped to navigate changing circumstances — which generally translates to greater business outcomes. Organizations with high levels of business agility are able to adapt quickly to market changes (both internally and externally), respond promptly to customer needs, navigate change in a cost-effective way without sacrificing quality and tend to consistently hold a competitive advantage over organizations with less flexibility.

Business agility isn’t a fancy buzzword to describe an organization’s ability to cut costs or reallocate spending in response to market conditions. True agility comes from people. People who overcame the disruptions of the past few years are driving agility in their organizations by creating nimble processes and responding quickly to change. It’s the people who create the environment where agility can exist, so it’s the job of leadership to acknowledge and embrace change. This typically calls for a mindset shift, from a place where change is scary or harmful to seeing change as an opportunity to improve.

Ultimately, business agility — and the all-important sense of purpose we mentioned earlier — relies on alignment. Many HR teams may, in fact, be doing it all backwards when it comes to transformation. “To make true transformation happen for HR, to really change, it’s better to look at aligning the project to the business — understanding what the whole impact is, not funneling things up in a silo,” said Shari Yocum, partner/principal in EY’s People Advisory Services Practice. “You should go overall strategy down, instead of function up. If leaders can be very clear, and articulate why they need to do this, employees will understand it. People want to know the why so they can make sure it feels fair. Openness changes the way people accept change.”

Keep Talent in the Spotlight

Focusing on talent (with recruitment and onboarding processes dialed in) can transform work culture and business outcomes. This has always been true but the impact is even more tangible in times of economic uncertainty and talent shortages.

Hiring talent: Organizations who leverage a positive work culture to position themselves as a “destination company” will attract top talent. Leading with culture can help many employers improve hiring efficiency, a valuable advantage when the average time to fill open positions has slowed to 11 weeks, according to a recent report from Robert Half.

Onboarding: Maximize the opportunities to connect with your people from ‘pre-hire to retire.’ Many organizations put tons of effort into engaging with candidates and new hires, and rightly so. Many employers are seeing high levels of attrition during the first 90 days of onboarding, so it’s crucial to use that time to align your new hires with your company values. Recognition is an effective way to do that in the first 90 days — it’s never too early to recognize your people.

Developing talent: It may sound too simple but one of the best ways to boost retention is to give people reasons to stay. For many employees, growth opportunities are at the top of that list. In McLean & Company’s 2023 HR Trends Report, 78% of respondents indicate they are providing internal training and development opportunities. This means employers who don’t offer professional development are the outliers and will likely struggle more to attract and retain talent.

Recognizing talent: We already mentioned recognition in the first 90 days after hire but it remains crucially important throughout the employee lifecycle. According to Zippia, a majority (80%) of employees say they would work harder if they felt better appreciated, but 29% haven’t received recognition for good work in more than a year, if ever. That’s an opportunity for major improvement, and you can start today.

Connecting employees: Work culture happens organically but a positive, inclusive culture requires intentional effort. When your organization has a combination of remote, on-site, and hybrid workers, delivering an “equal” employee experience is a challenge. A digital approach to employee engagement technology, using a platform like Connects, centralizes employee connection points, giving them a place to interact, receive and celebrate recognition, and tune in to company values and news.

Retaining talent: Feeling disconnected from the culture and their peers is the top reason employees who work for remote and hybrid companies give for leaving, according to a survey from Airspeed. Being proactive about building community and encouraging employee engagement are essential to retaining your people, which is doubly important when you’re having trouble finding good people to hire in the first place. Building trust through open communication and prioritizing workforce well-being can help improve engagement, reducing turnover and the high costs associated with it.

Change is Growth

Throughout the history of business, the best leaders are those who rise above others, make bold choices and successfully navigate through turbulence using “strategic courage.” No matter the size of your business, the number of employees you have or where they work, using tools to facilitate and support employee recognition and engagement helps build a sustainable, agile culture — where people show up to work ready to take on the challenges of the day. When employees feel a strong sense of purpose and are confident that the organization’s leaders have their back — with the resources and perks they need to do their jobs while balancing the responsibilities of their personal lives — anything is possible.

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A Modern Approach to Total Rewards Will Improve Retention

Despite a rise in layoffs in some industries, most notably technology, concerns about retaining top talent remains top of mind for the majority of employers — many that continue to suffer from what has been called the “Great Resignation” and “quiet quitting.”

One insight that has emerged since the pandemic, likely spurred by many employees’ newfound freedom and flexibility amid remote and hybrid work, is a shift in what employees value most from their jobs. It’s a shift that is likely to continue into the future.

While compensation continues to be a driver of what serves to get employees to accept a job and to remain in that job, other benefits and rewards are becoming equally and, in some cases, more highly valued. Importantly, though, what employees value is personal — employee needs and preferences are diverse and employers need to be attuned to those differences.

The Evolution of Total Compensation to Total Rewards

Total compensation management (TCM) has evolved and must now be thought of as total rewards in an environment where it’s not just money that drives engagement and longevity. It’s a unique set of benefits — or the Employee Value Proposition (EVP) that employers need to be focusing on. The EVP reflects what employees receive in exchange for what they bring to the company — their skills, capabilities and experience.

Today’s employees want more than pay and traditional benefits; they want meaningful benefits that will enhance their lifestyles and improve their well-being. That’s what will set organizations apart in a post-pandemic environment.

A Look at Total Rewards

Gartner defines total rewards as “the combination of benefits, compensation and rewards that employees receive from their organizations.” This, Gartner says, can include: “wages and bonuses as well as recognition, workplace flexibility and career opportunities.”

In a broader sense, they say: “Total rewards may also refer to the function or department within HR that handles compensation and benefits, or the combined intrinsic and extrinsic rewards (or value) that an employee perceives.”

As employers look to the future, they should focus on creating a full suite of total rewards relevant to today’s modern workers, which will effectively drive retention for the long term.

Attributes of a Modern Total Rewards Program

Effective, modern total rewards programs:

Are social. Gone are the days when employee work anniversaries and recognition awards are celebrated with their small team — limited primarily by location — and capped off with a handshake and a paper certificate. Today, we live in a digital and highly social world, where everything is shared online and interactions are ongoing. Thanks to social media and employee engagement platforms like Connects, these experiences can be shared enterprise-wide, which is especially powerful in an increasingly remote and hybrid world.

Employee rewards shouldn’t be confined to once a year — or limited to small group interactions. By making recognition enterprise-wide and using technology, employees can choose how broadly they want to share these moments. The more they share, the more contagious the message becomes. Using the science behind behavior, employers need to understand that people follow the actions of others. Socializing rewards will drive action to improve organizational performance on a broader scale.

Leverage technology. Automation helps deliver a more robust experience that isn’t dependent on employee bandwidth. This has become abundantly clear during the pandemic as many organizations shifted suddenly to remote or hybrid work models requiring the use of technology to maintain productivity and performance. Driving retention through total rewards will require a continued focus on technology and how it can allow HR departments to do more, more effectively, with less.

Are high frequency. As Josh Bersin has pointed out, we don’t go to the gym once a year to work out and expect to stay in shape; we know we need to work out frequently to achieve results. The same is true of achieving results through employee rewards. Recognition is, or should be, a process — not a single event or action. But first, a recognition program needs to be in place. Perhaps shockingly, data suggests that 39% of employees say they aren’t recognized enough at work — only 15% say they are. Just 3% say they’re recognized too frequently. Clearly there’s no need to worry about overdoing it!

Thrive on connections. To engage and reward employees, organizations need to ensure that employees are both connected to the culture — and to each other. That’s important to give them a sense of belonging and to help them see in real and relevant ways how what they do, both individually and within teams, benefits the whole organization.

Are amplified by employees. Effective recognition isn’t something that occurs only between managers and employees. Recognition is amplified when peers have the power to recognize each other. Providing that power extends what a manager or HR department can do, multiplying the significant benefits of rewards and recognition.

Aren’t “cookie-cutter” initiatives. What motivates the Gen Z employees in your workforce isn’t what motivates your Gen X employees, or others. A Gen Z employee might want benefits that support diversity, equity and inclusion (DEI) initiatives, while a Gen X employee may prefer retirement planning and caretaker benefits. Of course, even within generational cohorts there will be differences in values and how employees want to be rewarded.

The Incentive Research Foundation (IRF) indicates that Gen Y and Boomers are highly interested in making a positive contribution to society and the health of the planet — 86% of Gen Y and 85% of Boomers say it’s important that their work involves “giving back.” That same sense of obligation isn’t as strong among Gen X employees; only 10% of people in their 30’s and early 40’s feel this same sense of obligation.

Employers need to consider how they will tailor their total rewards packages, including recognition programs, to meet employees where they are now — both in their life journeys and their employee journeys — to give them what they need to stay engaged, productive, and on board.

Are driven by employee feedback. Employers need to increasingly focus on ensuring their approaches to total rewards are based on what employees really want. Savvy organizations get this intel through employee surveys, which can play a vital role in shaping their total rewards strategies.

For instance, the Employee Voice tool within Connects gathers employee feedback to help employers pivot their strategy based on employees’ shifting needs and interests.

Strive for pay equity. While pay alone will not be sufficient to drive employee retention moving forward, it remains an important element of total rewards. It may be the elephant in the room, but pay is a financial incentive that employees value and consider the currency of respect. As the HR Daily Advisor suggests, organizations need to rethink their pay practices to retain top performers and attract top talent. That will mean a focus on equal pay, or pay equity, which may require equity adjustments.

Both employer and employee needs will continue to ebb and flow as technology, globalization and other factors make significant impacts. Modern total rewards programs that receive continuous attention will lead the charge in driving high employee performance. Taking a strategic and thoughtful approach to total rewards is one way employers can improve retention today, and into the future.

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Artificial Intelligence (AI) Will be Used to Personalize the Employee Experience

We know personalizing the employee experience helps improve engagement and can even help combat burnout. Personalization can be fairly easy for very small businesses but becomes more of a challenge as organizations increase in size. That’s where technology solutions, like employee engagement software, become useful to help you personalize employee communication, facilitate community connections and grant access to personalized rewards.

Now, AI has entered the chat…

Using AI for a variety of HR functions isn’t exactly new. But the new generation of AI tools (those currently available and in development) could mark a new era of employee personalization and help us take a collective leap forward — a much-needed boost when employee engagement is lagging in almost every industry.

Here’s what we’re observing at this stage of the evolution of AI in HR.

AI Can Improve the Employee Experience

Like any new technology that comes onto the market, the current version of generative AI tools come with caveats and cautions (think incorrect data, violation of privacy, lack of regulation, among others). But, they do offer some key benefits when it comes to improving personalization, data analysis, and the automation of time-consuming and repetitive tasks, all of which can have a profound and positive impact on the employee experience.

During the first week of February, we asked ChatGPT how AI can help HR, and here’s how it responded:

AI can help HR improve the employee experience in several ways, such as:

  1. Personalized Communication: AI-powered chatbots can help HR communicate with employees in a personalized manner and provide quick and accurate answers to common HR queries.
  2. Performance Evaluation: AI can assist HR in evaluating employee performance by analyzing data from various sources such as emails, chats, and project management tools.
  3. Employee Engagement: AI can help HR understand employee needs, preferences and behavior to improve engagement levels through targeted initiatives and programs.
  4. Recruitment: AI can help HR automate time-consuming tasks such as resume screening, candidate matching, and scheduling interviews, making the recruitment process more efficient.
  5. Career Development: AI can help HR identify skill gaps and provide personalized learning and development opportunities to employees based on their career goals.

These are some of the ways in which AI can support HR in enhancing the employee experience.

It’s worth noting that generative AI tools learn over time, which means their responses will evolve, too. When asked the same question a month later, ChatGPT kicked out a slightly different list of the top five advantages: recruitment, onboarding, performance management, employee engagement, and employee well-being. This new response doesn’t mean AI can no longer help with personalized communication or career development. Rather, this suggests that perhaps fewer people are asking questions about how AI can help in those areas or possibly that the AI is refining its answer to reflect what it’s received the most positive feedback about. Clearly, AI tools have more than five applications in the HR realm — and if we asked ChatGPT for an exhaustive list of benefits, it might go on forever (without getting even a little bit tired).

Weighing the Pros and Cons of AI Tools for HR

Without a doubt, we are living in a very exciting time where AI technology is concerned. While machine learning has long been a part of HR tools that help recruiters screen applicants, evaluate demographic data for diversity, equity and inclusion (DEI) progress and measure productivity, those types of AI tools are different because they are directed toward a single task or group of related tasks. The rise of generative AI, which sources responses from the (sometimes wild) world wide web, means we are now faced with a buffet of new possibilities for using AI to help HR teams work more efficiently and focus more effort on improving the employee experience.

Here is our take on the key advantages and pitfalls the current generation of AI tools comes with and how HR professionals can navigate the changing landscape cautiously, while still benefitting tremendously.

Advantages: AI can automate much transactional work, drive efficiency and power chatbots to ask and answer basic questions. Use cases for HR include:

  • A recruiting chatbot that asks ‘knock out’ questions and directs prequalified candidates to a virtual recruiting event, online chat with a human recruiter or specialized contact form
  • Tools built-in to your ATS or talent management system that evaluate resumes and applications to create shortlists of candidates for interviews with a recruiter or hiring manager
  • Tools that evaluate utilization rates of benefit programs and analyze results of employee surveys to make recommendations for perks to add, expand, or sunset and to help guide future strategy
  • Evaluate employee skill sets and compare to career paths, helping to identify areas for additional training or support — or suggest other roles in your organization where someone might thrive

Pitfalls: AI can show you the what, but it is not very good at finding the why, so we humans still need to apply our skills of deduction and critical thinking. In an article for HRExecutive.com, Mary Faulkner summarizes: “AI is an excellent tool for aggregating and summarizing information in a consumable format, but ultimately, there needs to be a bridge between that information and how to act on that information.” Essentially, the real pitfall of AI tools is expecting too much from them.

Understanding how AI tools function helps HR teams maximize the advantages while controlling the pitfalls. The net result? More efficient processes and data-informed decision-making that put the employee experience front and center.

Industry Attitudes Toward AI

It’s tough to find public conversations about AI applications for personalizing the employee experience and boosting engagement. For the time being, there is more focus on how AI can improve customer service with, for the most part, many of the same functions that can also help HR enhance the employee experience. We suspect the larger focus on customer service is because that is more easily tied to a business’s expenses and profits — but we all know the health of your workplace culture has a major impact on the bottom line, too.

We find that most business owners and HR leaders are skeptical — and hopefully curious — about using AI to personalize the employee experience. And we fully encourage employers to move forward with a healthy dose of caution, perhaps testing the waters with controlled experiments by using AI tools for small groups or for low-stakes applications at first. Over time, as you learn how AI fits into your processes and your culture — and as we all learn more about how this technology can positively impact the workplace — we expect to see adoption grow, alongside proven strategies and best practices to help guide us further.

Right now, many business leaders are concerned about the lack of regulations regarding the use of AI, especially when it comes to personal information. While we can’t speculate on when Washington will catch up, we know organizations can forge a path forward, by carefully planning AI use, weighing risks and keeping safeguards in place to protect employees’ privacy.

Personalization is the Key to Employee Engagement

The new (and next) generation of AI tools offers something HR desperately needs: untapped potential. With the right tools applied in the right ways, AI can help HR create more efficient processes and effective programs, and deliver a more engaging employee experience that results in better employee satisfaction, increased productivity and improvements to employee retention. We’re excited to see how AI will evolve in the coming months and years, and what new benefits will emerge that organizations can offer to employees.

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To See All 7 Trends Download the Full Report!

Trend #4

Winning Cultures Will Have Human-first People Strategies

Trend #5

Disruptions From an Economic Downturn Deliver Differing Employee Experiences

Trend #6

Leadership Development Will be Critical to Business Success

Trend #7

Stretching the HR Dollar: Doing More While Spending Less

Download the full Report to read all of the 2023 employee engagement trends for Q1!

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