2024 CEO Spring Update: Talent Outlook

The current business landscape reflects a sense of cautious optimism amidst the lingering challenges from the past year. 2023 was a challenge—for us, for our competitors, for our clients, and for many small—to medium-sized businesses in general.  

As I outlined in my 2024 predictions, small businesses will feel the brunt of the problems and unemployment across many private sectors will continue to climb.  Bankruptcies soared in 2023 and were up 40% on the prior year, which was already up significantly from the year before. You just need to walk down any main street in your local town and you’ll see the boarded-up shops and restaurants. Unemployment in Ontario is currently at 6.5% and rising, with our prediction of 7% in Q2 looking almost like a certainty with population growth outstripping job growth by a significant margin. In 2023, Ontario lost 300,000 full-time jobs and the only significant job creation has come from the public sector and through part-time roles. 

What we are watching:

Retirements

2024 looks like the year where we will see retirements causing significant problems for unprepared employers across multiple sectors. All levels of government are already facing massive succession planning challenges given their structured pension programs. The story seems to be different for our private sector clients, where many of our recent searches have been focused on the strategic replacement of retiring senior leaders.

What has become evident is the disconnect between the expectations of many organizations regarding the next generation of executives and the reality of what the current labour market can provide. The knowledge gap between the incumbent and the next leader is bigger than most have assumed and more impactful than most can manage. This is largely down to prior cash constraints and the inability to invest in learning and development in the last few years.

The fact is, many executives have been leading to solve immediate and critical problems, rather than having the luxury of planning for the future and creating sustainable succession plans. This has led to many external hiring processes being undertaken to find the ‘experience’ needed which is also having a knock-on effect to existing managers becoming disengaged as they are overlooked for promotions that they would naturally be in line for.

Wage Growth

We saw huge pay increases for permanent hires during the pandemic and while the market has backed off from the highs of 12-15% bumps, we still saw 5-7% increases in average compensation for jobs in 2023.

So far in 2024, with unemployment climbing and more competition for roles, that number continues to fall and we expect that trend to hold for the next few quarters. Oftentimes, candidates are making lateral moves or even accepting offers at a lower compensation rate, especially when the employer can offer job security or work conditions best suited to the candidate’s preferences.

Federal Procurement Scrutiny

Being a proud Ottawa business and the largest private, and locally owned search firm in the City, we are watching the situation regarding the ArriveCan fiasco with keen interest. 

I’ve called Ottawa home for 18 years and worked in recruitment the entire time. The Federal Government is the largest potential customer in our city and it’s one that I will not work with because I believe professional services procurement is truly broken. Any procurement system where you don’t win on merit, internal capabilities or overall value proposition is baffling to me. The ‘game’ professional services firms have to play to win Federal Government work is shameful. And the pervasiveness of ‘wired bids’ has become more evident as procurement processes are exposed by auditors and civilian watchdog services alike.  My hope, as a taxpayer and potential service provider, is that the ArriveCan debacle will finally shine a light on Federal procurement policies and ultimately lead to a fair, equitable process designed around success and fair value for all stakeholders and meaningful returns for taxpayers.

Return to Office

I am guessing this is not the last quarter where we need to pay significant attention to this but we are seeing a significant trend. One interesting trend that keeps cropping up is remote organizations discreetly looking at in-office models as a way to boost productivity while exploring the implications of dispersed remote teams.

Just as we saw the market-wide impact of switching to remote and hybrid work environments through the pandemic, we are poised for another shift that reverses many of those changes for many organizations in the coming quarters. 

Our Outlook 

Demand for professional services has surged in the last two months, with a lot of people finally able to make decisions on what to do next. The window for making fundamental changes to your work conditions is closing, as now is the time to settle into a new routine that works for you, your people and your customers. In order to thrive, leaders will need to think carefully about succession planning and balance the growth of internal resources with the chance to bring in fresh external perspectives. Where these businesses operate and how employees are accommodated will play a significant role in the success and viability of many organizations.

Unemployment will reach its peak and begin to resolve in the coming months, with retirements starting to outpace new workforce entrants. As interest rates stabilize and inflation cools, many employers will be back in a position to hire the talent they need. The decisions we are seeing now are strategic rather than reactionary, and this is where the entrepreneurs and visionary leaders who drive growth and innovation in our economy can shine.  

Overall, I expect 2024 to be an improvement over 2023—not a massive one, but enough to bring optimism and confidence back to businesses across the board. We should finally start to feel the positive impacts of a well-balanced labour market where there are opportunities for both employers and employees to get ahead.

Author: James Baker, CEO, Keynote Search