- Personnel problems are becoming a greater economic risk than material bottlenecks
- Savings potential of artificial intelligence not to be overestimated
While the economy was characterized by a shortage of materials in the past (crisis-hit) 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 (raw) material costs to increase by only 4.5 percent, according to a recent Horváth study. The companies forecast that personnel costs, on the other hand, will rise by an average of 7.5 percent. More than 400 companies were surveyed for the Horváth study, with a focus on Europe and German-speaking countries. The automotive, energy, telecommunications, and oil and chemical sectors expect significant personnel cost increases of 11 to 16 percent.
Personnel is becoming a decisive location factor
"Costs are only one side of the coin here," says Heiko Fink, study director and partner at the management consultancy Horváth. "As we can see from current relocation trends, companies are not only increasingly positioning themselves in regions where labor is cheap, but above all ensuring long-term availability. This means that structurally sound conditions must be present locally, such as the easy integration of foreign workers as well as retraining or professional development opportunities."
Personnel beats digitalization and sustainability
The current ranking of management priorities also shows that HR strategy issues are increasingly dominating boardroom discussions. For the first time since 2020, personnel-driven topics are the most important management issues, followed by cybersecurity and digital transformation. Across all industries, 58 percent of respondents assign very high importance to HR topics, and another 34 percent assign them high importance. Sustainability issues are moving into the background. Aligning the company with ecological sustainability targets only comes in fifth place, behind the topic of "optimizing cost structures".
"The so-called 'people-driven topics' include issues that are currently of enormous relevance, such as models for flexible working or the handling and demands of Gen Z," says Horváth's 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. The need for specialists in these fields, who have grown up as digital natives, will increase."
Recruitment and retention of personnel is often still unsystematic or too small in scale
A look at the strategies and measures used by companies to attract and retain skilled workers shows that there is still "room for improvement" in terms of maturity when it comes to "people issues". When asked how they are countering staffing problems, the most frequently cited measure by companies is the offer of flexible working models. In second place 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 digitalization 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 terms of 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 personnel as a resource for the future, on which businesses 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 the management consultancy Horváth. For the study, personal in-depth interviews were conducted in spring/summer 2023 with over 400 top managers from international companies, with a focus on Europe and German-speaking countries. The majority of the surveyed companies generate annual sales of one billion euros or more and employ more than 1,000 people.
