Googling “new normal” the first week of 2023 reveals 54.8 million results for a term many business leaders quickly tired of in 2020. Surprising to some, the term was not created for the COVID-19 crisis, but rather has references going back to World War I and was employed during various crises since then.
As business leaders look forward in 2023, five trends reflect continued efforts of boards and senior management teams to create normalcy in an environment of abnormality. Paradoxically, while many challenges from the past three years become less intense, they also become permanent.
Performing amid perils becomes table stakes: Current risks subside as new ones appear. 2023 opens with the world again facing increasing cases of COVID-19, severe weather events, war, inflation, recession, talent shortages, cyber events, supply chain disruption, new viruses and ongoing geopolitical tension. As some of these risks subside, others do not, and new ones appear.
Effective leaders acknowledge risk as a key element in decision making and are prepared to act decisively when events happen. The frequency and simultaneous occurrence of high-impact risks require connecting and managing a portfolio of new and ongoing risks. Discussions of risk continue to increase in prominence among boards and senior management teams, with leaders addressing volatility across the organization to increase resilience and drive performance regardless of circumstance.
Inflation and recession concerns create ongoing tension between growth and caution: Inflation remains high while recession looms. Inflation remains high entering 2023 despite trending down from recent peaks in major economies around the world. Experts anticipate inflation in most countries declining further in the year ahead, but likely staying above pre-2020 levels. Concurrently, many boards and senior leaders remain concerned about recession.
Effective leaders are shifting to a greater focus on growth but now in the context of higher costs (including talent, raw materials and distribution) and wary customers. They also are mindful not to overinvest, being acutely aware of the need to avoid layoffs, supply chain limitations and the risk of raising prices beyond the reach of buyers.
Leaders move on from the great resignation and quiet quitting to even deeper challenges: Talent shortages ease but persist. At the outset of 2023, labor markets indicate greater stability: pandemic-related job shifts have slowed, labor participation rates have partially crawled back from their historic lows, immigration channels have reopened in some countries and industries that over-hired in recent years reduced their staffs. Yet the significant underlying causes of what many called the great resignation and quiet quitting remain.
Effective leaders recognize this and plan for how permanent demographic shifts and changes in worker preferences will manifest into talent shortages for certain jobs, skill areas and geographies that could persist for years. They also take an expansive view of organizational resilience, connecting employee wellbeing and the support of healthy, resilient employees to healthy, resilient organizations. They emphasize talent strategies that involve both offense and defense and create great places to work with unique cultures, transformed pay, benefit, and career programs and redefined employee experiences.
Companies rebalance remote, hybrid and in-person work, as well as developments in technology and reshoring: Employees crave both flexibility and security. Heading into 2023, boards and senior leaders add technology advances (such as recent developments in AI and robotics) and reshoring strategies (designed to address supply chain challenges) into their plans. Simultaneously, employees continue to desire remote and hybrid work arrangements, while acknowledging the benefits of in-person interaction as they re-engage with physical workplaces and people.
Effective leaders increase efforts to reach consensus on how to balance often conflicting needs while recognizing it could be years until they find a new equilibrium. For the new year, they assess different work arrangements, technologies and processes, and create flexibility wherever possible, aiming to drive greater stability, retention and performance.
Stewardship emerges as a broad, non-ideological business lens: ESG matures into its next stage. For 2023, investors increasingly are compelling boards and management teams to be more effective long-term stewards of the enterprises entrusted to them and more responsive to the constituents they serve. While debates on ESG are important, they focus on a limited range of topics that can be fraught with ideology (on multiple sides). Leaders of successful organizations are responsible for a much broader range of issues related to stewardship that focus on organization performance and protection priorities in addition to purpose, people and planet.
Effective leaders anticipate rethinking their ESG approaches in 2023 to create more value, impact and better alignment with their ESG motivations, be they regulatory compliance-driven, social responsibility-driven or business strategy-driven.
Looking ahead, successful leaders understand holistic stewardship is essential to fully capturing the business fundamentals needed for long-term resilience, viability and growth – in any environment.
A version of this article originally appeared on Forbes.com on January 5, 2023.
