In recent months, America’s red-hot post-pandemic labor market has finally begun to cool, though substantial labor shortages remain as a long-feared recession failed to materialize for 2023. Under these more balanced conditions, a new survey of Chief Human Resources Officers finds CHROs are increasingly confident about expanding their companies’ workforces: 44% expect to increase their hiring over the next six months—up from 38% in Q3. Overall, The Conference Board CHRO Confidence Index fell to 53 in Q4 2023, down from 55 in Q3. (A reading of more than 50 points reflects more positive than negative responses.) Despite the improved outlook on hiring, expectations in the Index’s other two component areas—retention and employee engagement—continued to slide in Q4, driving down headline CHRO confidence.

“HR leaders’ optimism is waning as recession remains on the horizon to start 2024,” said Diana Scott, Leader of The Conference Board US Human Capital Center. “With a third of CHROs expecting employee engagement to decline, it is reassuring that CHROs plan to strengthen employee experience and organizational culture in 2024. And while the percentage of CHROs planning to hire workers ticked up after a steep drop last quarter, nearly a quarter expect to lose workers in the coming months. It follows that an overwhelming percentage of leaders say retaining existing workers will be a key part of their talent strategy next year.”

The Index, conducted quarterly, was launched in Q1 2023 and is comprised of three components—hiring, retention, and engagement—as well as special questions included in each quarter’s survey. A total of 194 CHROs participated in the Q4 survey, which included additional questions on 2024 priorities. Key findings include:

Hiring
 The CHRO Confidence Index: Hiring component rose to 55 in Q4 2023—up slightly from 53 in Q3.

On average, CHROs’ workforce expansion plans improved in Q4:

• 44% of CHROs expect to increase their hiring over the next six months—up from 38% in Q3.
• 19% expect to decrease their hiring over the next six months—down from 26% in Q3.

Retention 
The CHRO Confidence Index: Retention component ticked down to 51 in Q4 2023 from 54 in Q3.

The decline in CHRO expectations regarding employee retention has persisted into Q4:

• 22% of CHROs expect employee retention to decrease over the next six months, up from 18% in Q3.
• Only 28% of CHROs expect their employee retention levels to improve over the next six months—down from 34% in Q3.
• 51% of CHROs expect employee retention to hold steady—up slightly from 48% in Q3.

Engagement 
The CHRO Confidence Index: Engagement component dropped to 52 in Q4 2023 from 57 in Q3.

More CHROs expect declines in employee engagement in Q4:

• 31% expect engagement levels to decrease over the next six months—up from 25% in Q3.
• 37% expect engagement levels to increase—down from 48% in Q3.
• 32% expect engagement to hold steady—up slightly from 27% in Q3.

Special Questions for Q4: 2024 Priorities 
For Q4 2023, the Index also surveyed CHROs on their human capital management priorities for 2024.

Overall priorities: In 2024, CHROs are prioritizing strengthening employee experience and organizational culture.

• 75% plan to strengthen the employee experience and organizational culture.
• A close second, 74% of CHROs plan to develop leadership and workforce capabilities.
• Less important is addressing worker flexibility, with only 11% stating it as a priority.

Employee experience and culture: Engaging employees takes precedence over employee well-being.

• 70% will focus on improving employee engagement at all levels.
• Only 36% will focus on employee well-being initiatives.

Worker flexibility: CHROs are not putting an emphasis on bringing workers back to the office.

• Only 10% plan to bring workers back to the office full time.
• Instead, 52% plan to improve the productivity of hybrid work arrangements.

Talent strategy: Attracting and retaining workers will also be a priority for CHROs in 2024.

• 56% said attracting and retaining workers was a priority.
• CHROs’ talent strategy is overwhelmingly to retain existing workers (80%), rather than focus on internal mobility (46%) or adding full-time workers (20%).

Total rewards: CHROs are emphasizing adjusting wages to align with market rates.

• 62% plan to adjust wages to align with market rates.
• Only 35% plan to increase pay transparency.

Digital transformation: CHROs are investing in AI—but not for a competitive advantage.

• 61% are investing in AI to streamline HR processes.
• Only 21% are investing in AI to create a competitive advantage.

Diversity, equity, and inclusion: No CHROs plan to scale back their initiatives.

• No CHROs plan to scale back DEI initiatives, programs, and policies.
• 63% plan to focus on attracting a more diverse workforce.