HSBC says its talent marketplace was critical to its transformation into a digital-first bank. Unilever’s former CEO Alan Jope praised its revamped internal job market, Flex Experiences, for helping the company rearrange talent in a way that allowed it to weather the pandemic and become more agile. A few years ago Flex expanded into matching employees with learning opportunities on projects, particularly those with ESG objectives. Since 2018 Unilever has reallocated 500,000 employee hours toward more than 4,000 business-critical projects, improving overall productivity by 41% in the process. Seventy percent of the assignments in those projects were cross-functional, helping employees build skills that will make the organization even more agile.

Strengthen DEI Efforts

A final area where HR can take the lead is diversity, equity, and inclusion. The “equity and inclusion” components, which get less attention, are where HR advocacy for employee interests is especially needed. Improving equity involves making the treatment of employees and the distribution of opportunities fairer, offering opportunities on a clear and meritocratic basis, reducing favoritism, and tying rewards to actual performance in a straightforward way—all changes that reduce perceived injustices, which can create enormous stress for employees. Increasing inclusion comes down to creating an atmosphere of tolerance and helping employees with their individual challenges.

A work environment in which employees feel safe being who they are encourages people to speak up and inspires a sense of pride and belonging. Those positive feelings translate into hard work and increased employee loyalty. Employers who get DEI right are far more able to attract talent because it widens the pool they can access, particularly among younger people.

. . .

Responding to a long-term change like the shift from slack to tight labor markets usually takes a great deal of time. But no one wants to be at the end of the line of companies reacting to an important inflection point. The question is, Who will be at the front of the line? Over the past 40 years companies have built HR practices and operating cultures based on the notion that squeezing employment costs and HR resources had little downside. Some of the cost cutting was indirect—by not filling vacancies and letting the remaining employees figure out how to get additional work done—and some was direct, like shrinking training and development budgets. That model is no longer working, yet companies continue with it out of inertia and because costs like turnover, unstaffed positions, and disengaged employees have no line item in the financial accounting systems of enterprises in the United States and many other countries. (See “How Financial Accounting Screws Up HR,” HBR, January–February 2023.) To change harmful, outdated practices, HR will have to provide business leaders with that vital information.

A version of this article appeared in the May–June 2024 issue of Harvard Business Review.