Davos 2023: What’s the impact on HR?

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This week more than 2,500 global leaders from business, academia, and government convened for an annual meeting in Davos, Switzerland, to discuss the most pressing issues facing capitalism, business, the planet, and society at large.

Convened by the World Economic Forum (WEF) — an international not-for-profit organization that aims to address global issues and shape the governmental industry and social agenda — each year panels, keynotes and discussions are cohered around an overall conference theme: this year being ‘Cooperation in a Fragmented World’.

This theme resulted in a week of discussion on uncertainty and volatility — of the social, economic, geopolitical, and planetary kind — as well as what Klaus Schwab, founder of the WEF, kicked off the conference by calling “unprecedented multiple crises” and the need to meet them head on.

The ‘polycrisis’ is already impacting day-to-day HR practice

It is these “unprecedented multiple crises”, or a polycrisis — a word for a complex set of interlocking and simultaneous crises; the Financial Times used it as their word for 2022 — that Davos bosses not only used to create their run-through of sessions but used to indicate to business leaders where their focus should be in the coming weeks, months, and years.

As laid out in both a pre-Davos media briefing and a WEF report — unpacked and analyzed by UNLEASH, here — these biggest crises, or top risks, are:

• The cost of living crisis
• Natural disasters
• Geoeconomic confrontation
• Climate change
• Societal polarization

But this list, even thought it makes for scary reading, shouldn’t surprise anyone in HR.

Clear-eyed practitioners can see that these crises are playing out every day, affecting everything from how businesses choose (or don’t choose) to support workers with the impact of inflation or choose to action (or just talk about) the green agenda as part of wider business initiatives.

In fact, in countless ways, these crises are already dictating the reactions of business and HR leaders — often as they lurch from firefighting in one area to another. What the function has to do is make sure that action follows any communication around these challenges.

To get insight into the why and how to get started, UNLEASH’s reflections on COP26 could be a good reminder of why it’s always important to deliver against big agenda items.

Moving from reaction to long-term sustainable action

Yet, being reactive isn’t always useful and, in the face of planet-and-society-changing challenges can be counterproductive. This is the Davos takeaway number two for HR.

Even if being reactive has, over the last few years at least, driven effective responses from leadership teams in the face of COVID-19, supply chain issues, the very real impact of climate change, as well as the multiple-pronged challenge of keeping the business’ lights on whilst keeping staff and customers safe.

However, Schwab kicked off Davos by saying: “Short-term decision-making may have long-term unintended damaging consequences. [Leaders] need to put on varifocal lenses that enable us to clearly assess and address the short-term situation and allow us to see further ahead.”

“We shouldn’t remain trapped in this crisis perspective but aim for a longer-term constructive perspective that is the more sustainable, more inclusive, and more resilient way.”

Whilst HR teams’ ears may have been pricked by the words it recognizes well as part of its daily practice — sustainability, inclusivity, resilience — it is the strategic thinking and understanding why a sticking plaster approach might not always be the best solution to today’s big issues that was the incumbent lesson within Schwab’s first Davos comments.

This isn’t just the misty-eyed hope of a world-renown economist, though. Whilst problems with long-term consequences, such as climate change, need long-term solutions, it is long-term thinking that also makes most businesses, and people, sense.

2017 McKinsey research found that businesses focusing on the long term outperformed peers in crisis moments and, in the long term, had profits that were a huge 81% higher than their peers. It’s also, as Rhonda Spencer’s CPO previously told UNLEASH, the best way to retain talent — something that will be desperately needed as this polycrisis unravels further.

But what is clear from Davos is that long-termism isn’t just a financial imperative: which is why HR leaders, and not just traditional business and finance leaders, should be taking note.

HR will have to drive true stakeholder capitalism

Those who follow WEF’s reports and Davis closely will know that stakeholder capitalism has been a central focus in recent years.

Whilst many in HR might recognize it as one of the buzzwords of the moment, for others, it may be new: but it essentially refers to the idea that business should deliver not just for shareholders but for employees, the communities it operates in, and the planet as a whole.

This approach, if not even more radical departures, is clearly needed. WEF’s 2023 Global Risk Report finds that the top ten crises mostly crop up in areas stakeholder capitalism should be delivering on.

There’s the cost of living crisis (delivering for people), natural disasters (delivering for the planet), and erosion of social cohesion (delivering for communities).

Yet, there is still some way for businesses to go on the stakeholder front. In a separate 2022 report on stakeholder capitalism, WEF concluded on business efforts: “The organization could improve.”

However, room for improvement means room for action and this is where HR can step in. As the bridging function between the business and its people, it is employees, as well as the obvious crises, that are driving demand for businesses to deliver value outside of the balance books. 2022 Gartner research found that over half want purpose-based employers — the people function must make good on delivering.

In some instances, it already is: delivering cost of living payments; clarifying the ESG agenda; and expansion of schemes which means working closely with the state and local areas to deliver skills and insights.

Yet, what HR needs to do is to ensure that this will-to-action always goes beyond words.

As Janet Dalziell, consultant and ex-international director of people and culture at Greenpeace tells UNLEASH: “We’re saying all the right words but we have to ask ‘What is the gap with our action?’”

“We know what to do now, we know what the technical solutions are, and we know what needs to happen.”

Co-operation in a fragmented world

Returning to the conference’s over-arching theme and it is clear that as the prime convener of people and talent, HR is well placed to take a leading role in building cooperation in the face of the problems we all face.

This won’t just be about fostering intra-business connectivity — as HR helps organizations re-understand what skills it has access to in order to solve big-ticket issues (the result of new approaches to skills matrixing, internal mobility, total talent, and new frameworks focused on connection-first approaches)— and about improving connections between different workforce cohorts (based on gender, ethnicity, social background et al) but about connectivity outside the business, too.

What that means is a new approach to working with competitors, engaging with membership bodies, and with the HR community at large will be needed.

As Monica McCoy, CEO of a global consultancy and D,E,&I expert, notes: “Davos shows the need to cooperate with stakeholders in pursuit of larger, more socially conscious goals and the value of tapping into a wider range of perspectives.”

“The collective effort and responsibility will drive businesses forward in these challenging times.”

Leadership, leadership, leadership

It’s not just the society-at-large aspect of these multiple challenges that are huge, though. It is pressure on businesses tasked with dealing with them — often as the state shrinks from view.

As Accenture’s 2023 Accelerating Europe’s path to reinvention report stated: “Executives face unprecedented challenges” and they’re going to have to accelerate rapidly to meet them, as changing energy markets, climate risk, talent gaps, supply chain disruption, political fragmentation and changing consumer behavior all have an impact.

As such, Accenture concludes: “A range of external forces — particularly the pace of innovation, shifting consumer preferences, and climate change — have accelerated the need for [business] reinvention.”

Whilst businesses might be thinking about these risks in terms of operational impact, HR should be present to remind the executive that all this change, and the role of business within it, demands leadership.

Especially when considered in the light of the latest Edelman Trust Barometer findings, revealed at Davos, which found that business is the only institution seen as competent and ethical.

What this does is create extra pressure on businesses to deliver against how their customers, communities, and people see them — and not just because 68% surveyed by Edelman said that having a societal impact is a large part of applying for, or staying in, a job.

In fact, it means businesses are in a unique position to deliver both people and financial value, even in the face of mounting crises.

As Dr John Blakey, founder of The Trusted Executive, explains: HR can find a leadership role by acting as the function that acts on behalf of all stakeholders and ensuring business keeps all stakeholders in mind.

He tells UNLEASH: “What do these Edelman findings mean for HR and business leaders? In a more challenging economic environment, responding responsibly to commercial realities needs to be balanced with continuing to treat people with dignity and respect.

“Those businesses that keep the trust in the coming months will find a way to make tough decisions whilst still demonstrating care”

In doing so, it will be delivering on key elements of the WEF’s new good leadership paradigm, meeting complexities with a balance of positivity, compassion, and clarity.

The central importance of HR in building resilience

In her first address at Davos, Saadia Zahidi, managing director at the WEF, reinforced the idea that the pressure on HR leaders is huge — linking the HR agenda too, well, the societal survival agenda.

She said: “The human capital agenda, without adequate investments in skilling and education, means no opportunities can play out nor will we have societal resilience for future shocks.”

Of course, HR knows this. It means the pressure is on to make the argument to business leaders; utilizing the ‘seat at the table’ many in the function won during the pandemic.

And what that argument should include, added Zahidi, is the need to focus on the right kinds of protections and standards in jobs, the delivery of living wages and the D,E&I agenda.

It’s everything that earnest HR practitioners have been talking about, or attempting to implement, for years but what the last week in Davos has made clear if it wasn’t already, is the clear link between the conditions of work (which underpin the conditions of life) and the HR day job.

Reinforcing the message further still is the front-and-center focus that the HR agenda got at Davos — with a look at how to balance transformation, technology, and inclusivity, greenifying jobs, and making new working patterns productive.

What that should mean is business and political leaders are now aware of the importance of what HR does. No pressure there, then.

HR after Davos

It would be folly to suggest that the main reason for global leaders to convene at Davos was to discuss the importance of the HR agenda. It wasn’t.

It is clear that the problems facing business and political leaders — and all of us — right now go well outside typical people function activity.

There are record heatwaves, mass migration, societal fracturing, the ongoing (and very disruptive) fourth industrial revolution, and ongoing discussions around

However, it is clear that large parts of the HR agenda overlap with the agenda being created by those at the very top to tackle these global issues. It means, quite obviously, HR has a role to play — perhaps as a guide to, and expert in, the areas it is very clear leaders are now focusing on.

Of course, with a focus on HR’s agenda, there will be added responsibility and the path forward will require bravery. As Dalziell tells UNLEASH: “Doesn’t mean it’s easy but what leaders now need to do is turn their attention to the doing the hard work properly.”

For HR, a clear sign to start looking forward and stepping up — as the function has done so many times before.

UNLEASH America is another date for your diary that gathers business leaders of the world to solve future of work challenges – and you can find the UNLEASH America speaker agenda here.