Effective leaders were agile navigators and enterprise stewards in an environment of uncertainty that likely will last for the foreseeable future. Following are key leadership lessons learned during 2022:
Connections between risk and performance were further elevated. Risk continued as a key driver of business decision making throughout 2022. The frequency and simultaneous occurrence of high-impact risks (such as economic, geopolitical, social and climate-related exposures) resulted in severe weather events, population health challenges, war, cyberattacks, productivity loss, talent shortages, supply chain disruption and financial volatility.
Effective leaders connected and managed a portfolio of risks at the enterprise level, as boards and senior management teams dug deeper into human capital, risk and climate stewardship across the governance dimensions of performance, protection, planet, people and purpose. Accordingly, the role of the chief risk officer increased in prominence at the board and senior management levels.
Inflation and recession concerns were not mutually exclusive. Inflation remained high at the end of 2022, despite trending down from the decades-long highs experienced midyear in major economies such as the U.S., the U.K. and the Eurozone. Simultaneously, many leaders remain concerned about recession.
Effective leaders balanced often conflicting needs: how to grow while managing costs, how to invest in talent without further ratcheting up pay and risking layoffs, and how to address supply chain and raw material challenges without raising prices beyond the reach of customers.
The Great Resignation indicated permanent talent shortages in many areas. Late 2022 job reports added evidence that the Great Resignation is not a short-term phenomenon but rather an indication that talent shortages and new levels of structural employee turnover could remain long term. While pandemic-related job changes may subside, demographic shifts have resulted in ongoing talent shortages for certain jobs, skill areas and geographies. Effective leaders continued to emphasize talent strategies balancing offense and defense and created great places to work despite the challenges.
“Quiet quitting” put a new label on an old problem. The phenomenon of quiet quitting, made viral by a TikTok video this summer, was not new: Low employee engagement and reduced discretionary effort have existed for decades. With labor productivity falling during Q2 – the largest year-over-year decline since the U.S. Labor Department began tracking in 1948 – the impact on business was real.
The issue was amplified due to labor market disruption combined with employee exhaustion from severe staffing shortages, economic and geopolitical uncertainty, isolation from remote work, anxiety from returning to workplaces, reduced employee purchasing power and dependent care challenges. Effective leaders decisively confronted the causes and created more compelling employee experiences.
Employee experience and culture rose in importance as employees remained dissatisfied despite increases in pay and benefit costs. In Q2 of 2022, unit labor costs experienced their largest four-quarter increase since 1982 due to undersupply of workers plus high inflation. Many countries’ overall salaries are forecasted to rise further in 2023, and global healthcare benefit costs are projected to increase at their highest level in almost 15 years. Effective leaders focused on improving the employee experience to address inflationary pressures and improve retention: Two-thirds of companies provided more workplace flexibility, while almost as many strengthened diversity, equity and inclusion efforts.
Remote and hybrid work models continued to stabilize, but equilibrium remains years away. Throughout 2022, effective leaders attempted to find balance in work models. They restored in-person work arrangements where appropriate and refined remote and hybrid work models where applicable. Employees desired more remote and hybrid work arrangements than companies offered, though many people recognized the benefits of in-person interaction when they returned. Few companies reached consensus on how to balance often conflicting needs.
Debate helped mature ESG and sustainability. In 2022, ESG’s shift to the mainstream sparked significant debate among parties with varying ideologies and interests, in many cases creating significant pushback. The opposition yielded productive conversation about where ESG approaches were and were not appropriate, as well as how to make ESG efforts more consistently tangible, meaningful and measurable.
Effective leaders used the critique of ESG programs to rethink their approaches and governance, creating more value and impact. The debate clarified varied leadership motivations for ESG actions, ranging from regulatory compliance-driven to social responsibility-driven, to business strategy-driven, necessitating a wide range of approaches.
Employee wellbeing and organizational resilience created competitive advantage. During 2022, effective leaders promoted employee wellbeing, connecting the support of healthy, resilient employees to healthy, resilient organizations. They also took an expansive view of resilience by focusing on financial, operational and workforce dimensions. They understood that workers were struggling financially, having difficulty meeting basic needs and feeling burned out from work.
Effective leaders met workers’ unique physical, emotional, financial and social wellbeing needs by creating a common sense of purpose and an inclusive culture, as well as fostering physical and psychological safety, in order to enable employees and organizations to thrive under the most trying conditions.
These challenges are likely to continue through this year, but with the right people, risk and capital strategies and a focus on stewardship, effective leaders will find opportunity amid the uncertainty.
A version of this article originally appeared on Forbes.com on December 28, 2022.