Companies will likely invest less in employee experiences in 2024


Forecasters are warning that it’s going to be a chilly 2024, at least when it comes to employee experience investments, sometimes abbreviated to “EX.” 

According to a new report from Forrester, organizations are likely to freeze or reduce their EX budgets next year—which can include employee perks; training; workplace flexibility; and diversity, equity, and inclusion initiatives.

“All the signs point toward economic turbulence for next year, which could loosen the labor market,” says J. P. Gownder, vice president and principal analyst on Forrester’s Future of Work team. “The things we’re seeing from employers have been rather less EX-centric and more finance-centric.”

Gownder adds that an “EX Winter” will see disinvestment in employee experience functions, which will cause further declines in employee engagement and company culture. Forrester predicts that the proportion of workers who indicate they are satisfied with their overall work experience in employee surveys will drop from 41% in 2022 to 34% next year, and the proportion of staff reporting strong workplace culture will decline from 63% in 2022 to 55% in 2024. The proportion of companies that fund DEI investments, meanwhile, is expected to fall from 33% in 2022 to 20% next year.

“We saw that the employee numbers crested and started to decline last year in terms of how they rate their level of engagement, and we predict that it’s going to go down next year,” Gownder says. “There will be something of a vicious cycle, because on the employer side, they will pull back some of the programs they had been investing in.”

The Gold Standard Lost its Glitter

Gownder adds that engagement and culture metrics have been on the decline since interest rate hikes dried up venture capital funding, causing many major technology, finance, and media companies to make spending cuts and layoffs. Prior to those cuts, he says many in other sectors looked to those industries to set the tone, and sought to maintain comparable employee experience standards to compete for the same talent.

“Even though we have a really low unemployment rate, the labor market has become a bit looser, specifically in Big Tech, media, and finance,” he says. “They are held up as the models for other companies to follow.”

As a result, Gownder anticipates that many organizations will reduce their emphasis on areas that were recently in sharp focus, like empathy and leadership training, DEI initiatives, even workplace flexibility policies. “None of this is universal—companies will differ—but employees may feel that the proactive catering to their needs may retreat a bit,” he says.

Expectations Realign

The anticipated freeze that is expected in 2024 will be even more noticeable after consecutive years when employers sought to put their EX practices front and center. For example, many advertised big investments in mental health, empathy training, and workplace flexibility at the start of the pandemic and followed these up with a major emphasis on DEI initiatives in the wake of George Floyd’s murder in 2021.

Efforts to showcase a strong employee experience were largely maintained through a period of unprecedented staffing shortages that followed, but now employers’ commitments are waning in the face of higher interest rates and a more challenging economic outlook. 

“Employees’ expectations have shot up very highly, and that doesn’t always jive with a tight economic environment,” says Benjamin Granger, the chief workplace psychologist for customer and employee experience management platform Qualtrics. 

A Few Pockets of Growth 

Though pauses and cuts are in the forecast, Granger agrees with Gownder’s suggestion that the pullback won’t be spread evenly. In fact, Granger says there are some areas where he anticipates improvements in 2024. 

“I fully expect what you’re going to see is a lot of organizations actually ramping up their [employee experience] investment because they realize that it’s critical to maintain their talent and this is a time when they can really differentiate themselves,” he says. “Others will, for good reason, say we need to shut off quote-unquote ‘nonessential’ things, and their definition of ‘nonessential’ might be certain [employee] perks.”

Specifically, Granger anticipates investments in EX to increase in emerging markets. “Because there’s so much variance in those regions in terms of how their competition for talent is engaging, they’ll see a huge benefit in terms of their ability to attract and retain talent,” he says, also suggesting that investments in EX will increase among frontline workers, where staffing shortages remain significant.

“Those are the ‘essential workers’ as we used to call them in the pandemic, and that’s still true today; they’re essential, they’re directly dealing with the consumers who allow our organization to survive,” he says. “So I do think one place we might see some increased investment, out of necessity, is around customer-facing populations.” 

Doing More With Less

Though most organizations will see a pause in employee-experience-related spending, Granger says there is still a lot that managers and human resources teams can do with a more limited budget.

“You don’t need to invest more and more money to improve the employee experience,” he says. “A lot of companies will go back to basics, they’ll focus on soft skill development, they’re going to train their managers, they’re going to focus on reskilling and career development—things they can already do today with existing resources.”

What’s important is for teams to find ways to mitigate the whiplash that employees might feel after years of increases in EX spending, says KeyAnna Schmiedl, chief human experience officer for Workhuman, a human capital management software provider. 

“The current state of employee experience is, what the heck just happened to us over the last three years?” she says. “It’s going to be an interesting time of what feels like boomeranging between where we were three years ago, where we could be in the future, and not getting there.”

Schmiedl says navigating the next phase will require organizations to lean on data to gain a deeper understanding of what employees prioritize, what initiatives they value, and which ones aren’t providing enough of a return on investment.

“What’s keeping them? What are they interested in in terms of growth and development?” she says. “So with whatever budget you have you can say, ‘This is why we believe we should put our dollars here.’” 

The Dangers of Dropping DEI

While she acknowledges that many organizations will need to find cuts, Schmiedl warns that it’s perhaps the worst time to start pulling back on DEI spending. 

“As we think about progress gains and how hard fought some of these have been, you have to think about how exponentially more quickly we can undo all of that work with AI,” she warns. “If it can make good things happen faster, it can exacerbate bad things happening faster.”

Schmiedl also contends that deprioritizing DEI spending when the going gets tough will make it difficult for organizations to regain credibility. 

“This is where you show who you are and what you value,” she says. “The companies that hold on to this progress, who say ‘This feels important, we should continue to invest in it,’ are the ones we’ll be looking to in the future as leaders.”


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