Looking back, looking forward

As we reflect on the past year, 2023 stands out as a crucial moment in time for organizations, shaping how work will be accomplished in 2024 and for many years to come.

Below are some of the highlights from our recent conversation on the McKinsey Talks Talent podcast, as we look back and look forward.

Looking back at 2023

  • Generative AI changed the game

    Generative AI was front and center for most organizations and business leaders in 2023. From a talent perspective, HR departments continued to use AI technology, including generative AI, to support talent acquisition and retention. AI-based bots have proven especially helpful, as we saw at a multinational retail corporation that uses one to help employees better navigate HR policies.

    Organizations have also started to think very seriously about the impact of AI on talent, including how it may change roles and skill sets. As skilled talent shortages continue and skill gaps increase, understanding how AI may help alleviate or intensify those challenges—and what can be done to prepare the organization and its people—is critical.

  • Middle managers made a comeback

    2023 was the year of the manager: Emily Field, Bryan Hancock, and Bill Schaninger published the book “Power to the Middle,” which calls for a reimagining of the middle manager role in organizations.

    During and following the pandemic, the middle manager role has taken an elevated position within organizations, as these employees serve as the direct point of contact with frontline and junior staff. Middle managers are responsible for broadly communicating company policies, helping address the questions and concerns of their direct reports, and delivering tough news to their teams. “Power to the Middle” calls on organizations to lean into these strengths and tap these employees to do what they do best: manage people.

    As generative AI continues to gain traction, middle managers will also play an important part in shaping how the technology will impact the day-to-day and increase team productivity.

  • Hybrid work and flexibility hit their stride

    In 2023, many organizations landed on their new business as usual. We saw in-office attendance stabilize, reaching alignment between how many days employees want to be in office and how many days they actually are in office. We also saw a portion of the workforce push back about increasing in-office attendance expectations—which can have real, tangible impact on retention and what the organization can accomplish.

    We’re seeing balance and burnout play a role in how workers are approaching workplace flexibility as well. Employees continue to see value in flexible schedules and working arrangements to find balance and relieve stress. Addressing demand for flexibility and ensuring productivity requires asking the right questions. One industrial client has seen success by creating new working norms that emphasize getting the right people in the room at the right time.

    Things may still shift in the coming years, but for now, we’re seeing fewer dramatic changes in leaders’ approaches to hybrid work and flexibility.

Looking forward to 2024

  • Productivity will shape the organization

    In 2024, performance management relative to productivity will be a focus for organizations and their leaders. This will be influenced, at least in part, by trends including generative AI and other technologies powering digital transformation.

    Our research has shown that transparent performance expectations and incentives are key drivers to success, but these must be properly aligned to individual employee motivation. Organizations will begin to explore redesigning how work gets done, how culture can reinforce it, and how success can be measured and rewarded going forward. In turn, the organization of the future will truly begin to take shape.

  • Skills-based hiring will help fill the gaps

    Momentum continues in skills-based hiring, a trend we’ve had our eye on in recent years—and one that could help address the labor shortage in sectors like infrastructure and manufacturing.

    For instance, states in the U.S. are systematically reviewing their requirements and considering where they may be able to eliminate the necessity of a college degree. This will put pressure on organizations to dedicate attention, time, and resources to learning and development, including apprenticeship programs.

    On that note, we’re also seeing a marked shift toward shaping talent rather than hiring externally to address a need. Organizations are re-evaluating their approach to internal hires, driving the importance of strong upskilling and reskilling programs to help fill critical but difficult to hire roles. Organizations that are getting reskilling right are building a culture of teaching and learner agency that starts with letting go of the antiquated notion that domain skills are tied to tenure or seniority. This requires trust, social connection, and purposeful technology.

  • Demographic shifts will impact needs of the workforce

    We’ll continue to see demographic shifts in the composition of the workforce, as a recent report from Glassdoor suggests that 2024 will be the first year that Gen Z outnumbers baby boomers in the workplace. Although workers generally have similar expectations and needs regardless of generation, this demographic shift will have a significant impact on organizations, nonetheless.

    Meanwhile, we’re also likely to see more 70-plus workers in the workforce, considering the current economic landscape and the simple desire to keep working longer. Recent research suggests that working longer can improve a person’s health. Organizations will need to evaluate their benefits and ways of working to create meaningful roles for a larger percentage of older workers than may have been represented previously.

  • Belonging will become an elevated organizational priority

    We’re seeing a change in how organizations are approaching diversity, equity, and inclusion—with greater emphasis placed on the belonging aspect. Many are asking, “How do I make everybody feel like they belong and we support them?”

    Also, broadly speaking, the world is likely to be an interesting place in 2024, and many unknowns and tensions may weigh on employees. Business leaders should consider how the organization recognizes these difficulties while creating an environment that brings employees together. Even if things are challenging, how can the organization create purpose and connection?

For more reflections and trends to monitor, listen to our McKinsey Talks Talent podcast episode “The shape of talent in 2023 and 2024.”

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