Preparing Your Workplace Strategy for Possibly Tighter 2023 Budgets

Call it what you will – an economic downturn, a recession, or a vibecession. But whatever you call it, the recent troubling economic news is creating challenges across the business world. For those in workplace strategy and leadership, these economic challenges can not only impact them on a personal level but also create obstacles to fulfilling their task of building the workplace of the future.

 

For one, professionals who are tasked to create these workplaces of the future often find themselves now stuck between a rock (fewer people because of layoffs) and a hard place (recruitment challenges due to demands for remote work and the Great Resignation, etc.) when it comes to actually finding the people to do the work. Additionally, slower economic times mean that budgets are tightening across the board, which can mean that workplace strategists and leaders don’t have the resources to invest in the technology, amenities, and physical spaces that they need to provide that robust employee experience.

 

So, as we wrap up 2022, workplace strategists and leaders need to not only look at all that they hope to accomplish in the new year, but they should also take time to assess what budget cuts could mean for their vision of the future of work in the new year.

 

On the technology side, it appears that spending should see modest increases, though declining from recent years. Analyst firm Gartner projects that global IT spending will reach $4.6 trillion in 2023, increasing by 5.1% year-over-year. Tech areas where Gartner anticipates growth include software at 11.30%, IT services at 7.9%, data center systems at 3.4%, and communications services at 2.4%. The only category expected to see declines is devices (-0.6%), which has been plagued by supply chain issues.

 

In the report press release, John-David Lovelock, VP analyst at Gartner, noted:

However, not everyone is quite as bullish in their claims of IT spending. In a survey of over 100 CIOs in the third quarter of 2022, Citi Research found that IT spending is only expected to grow by 1.8% in the next 12 months with the highest priorities being cybersecurity, data/analytics, infrastructure as a service (IaaS) and digital transformation.

 

While both these reports highlight increases in IT spending, the kicker is likely to be inflation, as noted in a recent Vox article that covered the Gartner report and discussed the topic of budget cuts. Inflation was 7.7% in the last year, which is higher than the increase in IT spending that both Gartner and Citi Group predicted for the year ahead, as Vox pointed out. This means companies will have to be choosier about what software they rely on, Vox added.

 

On the other side of the workplace equation – amenities and physical office spaces – the budgetary outlook is less optimistic. At the CoreNet Global Summit last month, commercial real estate professionals discussed the reality that many workplaces will adopt a leaner approach to their real estate holdings.

 

In the earlier-referenced Vox article, the author pointed to a separate Gartner survey, which found that 72% of CFOs wanted to trim their real estate by end of 2022 – a trend likely to continue into 2023. In 2022, we have seen many large companies, especially in the tech industry, make moves toward divesting their real estate holdings. For a brief recap, Lyft, Meta, Salesforce (and Slack), Box, Pinterest, Uber, and many others announced plans to downsize their real estate holdings.

 

In a WorkSpace Connect article from earlier this year, I posed the idea that a recession might lead to more workplaces mandating more in-person working, however Rebecca Kehoe, a professor of human resources studies at Cornell University, suggested the opposite in the Vox article, stating that: “This might actually be the push that organizations need to be open to a more remote approach.” She argued that remote work has the benefit of retaining employees while softening the blow of not getting a raise due to economic factors. Effectively, executive leadership and managers who worked to get rid of remote work in 2022 might now see it as a useful tool for retaining talent in a tight job market.

 

Lastly, workplace amenities, including office furniture, workplace services (dry cleaning, daycare, etc.), and team-building activities like free-beer Fridays could be on the chopping block. We should also anticipate that many workplaces will be more cautious about buying new amenities like furniture or equipping office spaces with niceties like coffee bars, juice bars, etc.

 

Budget cuts are often handed down to workplace strategists and HR, IT, and real estate professionals from higher up the corporate ladder, but by preparing for them, these enterprise leaders can devise a plan to best use the money available. We know real estate/office space investments are going to be a hard sell for 2023, but technology investments should see some growth. By reading the tea leaves of what’s going on at a larger spending scale, workplace strategists can focus on projects that have a greater chance of receiving budget approval and actually happen.