Lattice, the leading provider of people success software that empowers business leaders to build engaged and high-performing teams and inspire winning cultures, today released its annual State of People Strategy report. Over 800 HR leaders from companies around the world weighed in this year, shedding light on where HR priorities have shifted, the trends behind high-performing teams, and the biggest challenges facing People teams as they work to retain and engage top talent amid economic uncertainty.

The past year brought new and continuing challenges for HR professionals: Even as many companies found some sense of stability within hybrid or remote working models, turbulent market conditions meant budget cuts across HR teams – and in some industries, mass layoffs. Through it all, employees continued to reassess their relationships with their work as work-life balance and managing burnout remained top priorities. HR teams were at the center of addressing the ripple effects of these trends in the workplace and helping ensure employees and businesses are set up to succeed.

As organizations brace for more change, Lattice’s report provides business leaders and People teams with insight into how to address some of the bigger challenges facing HR today while remaining focused on employee engagement and retention.

Key findings from Lattice’s 2023 State of People Strategy Report include:

Room for improvement in pay transparency practices

As pay transparency regulation gains momentum globally, HR leaders acknowledge current levels of compensation transparency are low:

• 54% report that pay bands are known only by finance and HR
• 25% of employees know the pay band for their job level, while only 9% have access to the pay band for the next level up

There will be increasing pressure on companies to change this, and quickly: Previous research from Lattice revealed that 67% of US employees and 64% of UK-based employees want more transparency from their companies about pay practices, while over half of employees across the US and the UK said that they want to know what everyone as their organization is paid.

Hybrid work is here to stay – and going better than we think

While headlines might highlight the continued push and pull between employees and organizations around returning to offices, our research underscored that hybrid and remote working policies will continue to dominate into 2023:

• Half of respondents expect to maintain a remote workforce of 50% or more over the next 12 months;
• Nearly one in four expect to maintain a 90-100% remote workforce.

And there is evidence that hybrid work is working: Companies with a 90% remote workforce reported being just as happy with manager-employee facetime as those with a 10% remote workforce. Of those with facetime concerns, engagement and culture, not productivity, emerged as the primary challenge.

Connecting compensation & performance

With pay transparency on the rise and financial security top-of-mind for employees, clearly linking employee performance to their compensation has never been more important. HR leaders agree, but admit they aren’t doing enough:

• 83% of HR professionals believe compensation should be linked to performance;
• Yet, 72% acknowledge they could improve efforts to link the two in employee evaluations, and 27% admit they need to do a lot more.

Putting in work here is worth it: Two-thirds of companies who reported a good or great connection between performance and compensation had more engaged workforces, while only 11% of companies with a weak or no comp-performance connection said the same.

DEIB is a top priority, with bias in performance reviews taking center stage

DEIB surged in priority after a dip in 2021, rising from #6 to #4 on the priority list for People teams – with addressing bias in performance reviews emerging as a top concern.

Employee sentiment validates the urgency here: 51% of US employees felt there was bias in performance/compensation reviews, and nearly a third said their organizations weren’t taking adequate steps to address it.

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