Personnel problems will become a higher economic risk than material bottlenecks
While the economy was still characterized by material shortages in the past (crisis) years, a paradigm shift has now taken place: Availability and costs – not only of skilled labor, but of labor in general, have become decisive competitive factors for companies. For 2023 as a whole, companies expect costs of raw materials and materials to increase by only 4.5 percent, according to a recent Horváth study. Personnel costs, on the other hand, will rise by an average of 7.5 percent, the companies forecast. More than 400 companies focusing on Europe and German-speaking countries were surveyed for the Horváth study. The automotive, energy, telecommunications, and oil and chemical industries expect particularly high personnel cost increases, with 11 to 16 percent growth rates.
Personnel is becoming a decisive location factor
“Costs are only one side of the coin,” says Heiko Fink, study director and partner at management consultancy Horváth. “As we can see from current relocation trends, companies are not only increasingly aligning themselves in those regions where labor is cheap, but above all: available for the long term. This means that structurally good conditions must be in place locally, such as the easy integration of foreign workers or retraining or continuing education.”
HR beats digitization and sustainability
The current ranking of management priorities also shows that HR strategy issues are increasingly dominating discussions in boardrooms. For the first time since 2020, people-driven topics are the most important management issues, followed by cyber security and digital transformation. Across all industries, 58 percent assign very high importance to HR topics, and another 34 percent assign high importance. Sustainability issues are moving into the background. The company’s focus on ecological sustainability only reaches 4th place, still behind the topic of “optimizing cost structures”.
“In the so-called ‘people-driven topics’, topics are clustered that are currently also developing enormous relevance, such as models for flexible working or handling and demands in relation to Gen Z,” says Horváth expert Heiko Fink. “Automation topics also follow on from this, such as the potential of AI applications to replace or support skilled workers, especially in the service sector.” However, Fink warns against exaggerated expectations when it comes to potential savings. “New digital possibilities bring efficiency, of course, but also new business potential. And they raise new data protection issues. There will be a growing need for specialists in these fields, who will grow up with the digital natives.”
Personnel recruitment and retention still often unsystematic or too small in scale
A look at the strategies and measures used by companies to recruit and retain specialists shows that there is still “room for improvement” in terms of maturity in “people topics.” When asked how they are countering staffing problems, the most frequently cited measure by companies is the offer of flexible working models. Top 2 is further development in the area of “culture and employer branding”. Engagement in the area of “leadership” comes in third place, with a larger gap. From here on, the measures become more fragmented – some focus on further training, others on digitization or an extensive benefits program.
“Reskilling, i.e., the retraining of existing personnel, should actually be among the top three measures, especially in view of the personnel bottlenecks and cost increases. But in this country we have a large gap in comprehensive solutions and best practices,” says Horváth’s Heiko Fink. According to the expert, projects in the area of culture or leadership are also often underestimated and planned with too little time and budget. “Yet what is at stake here is nothing less than securing the resource of personnel for the future, on which business will depend more than ever,” says Fink.
About the study
The present results are part of a special analysis on HR topics as part of the annual “CxO Priorities” study by management consultants Horváth. For the study, personal in-depth interviews were conducted in spring/summer 2023 with more than 400 top managers from international companies, with a focus on Europe and German-speaking countries. The majority of the companies studied generate annual sales of one billion euros or more and employ more than 1,000 people.
Horváth is an international, independent management consultancy with more than 1,300 employees at locations in Europe, the USA and other global markets. As a top consultancy for transformation, performance management and digitalization, we lead companies and public organizations to sustainable success and long-term high value creation. Horváth is characterized by sound, innovative approaches and solutions – based on our roots and values, shaped by our founder Professor Péter Horváth. Clients, from executive to technical level, especially appreciate the focus on efficiency and effectiveness as well as the trustful cooperation. Horváth has received many awards for its high level of satisfaction with project results.