The first half of the year, marked by political uncertainty, economic fluctuations, and the ongoing war in Ukraine, is drawing to a close with some signs of support. The labor market remains robust and generally positive. Against this backdrop, Spanish managers and directors are planning recruitment in 2023, pondering which new profiles to include, what salary policies to implement, and how to balance the effects of the last labor reform one year on.
This book’s first installment aims to clear up these questions. IV LHH Executive Barometer on Management Leadership in Spain gathers responses from more than 500 executives to illuminate the challenges business leaders face today. The LHH Manager, a signature Adecco Group operation focused on director and manager selection, consultancy, and evaluation, continues to analyze the keys to managerial leadership in Spain.
The first section centers on two critical aspects of the current environment: the recruitment forecasts provided by surveyed executives for the coming months and the analysis of ongoing issues such as labor reform and wage policies.
Regarding the labor reform that took effect last year, Rémi Diennet, Managing Director of LHH Executive Spain, notes that a year has passed since its enactment and its effects are worth assessing. The reform aimed to curb excessive temporary contracts in favor of permanent arrangements, a priority described as essential given the historically high rate of temporary employment in the Spanish labor market and its Brussels-driven push for reform. He adds that inflation remains high, the Ukraine conflict persists, and energy concerns persist into 2023. Leaders thus prioritize organizational aspects like operational impacts, hiring forecasts, workforce realignments, potential layoffs, salary adjustments, and strategic shifts tied to public measures—elements highlighted in this barometer’s insights.
Job Opportunities and Salaries
On the business side, eight in ten Spanish managers (81%) perceive job opportunities for their companies this year. About 40% are optimistic that business and revenue will grow, while 41% believe opportunities will exist but require realignments of the company or its business model. The remaining 19% hold negative forecasts for the year.
Additionally, nearly half of respondents (46%) expect no rise in demand for services or products this year, either because demand will be flat (34%) or because it will drop (11%). By contrast, 54% anticipate higher demand and sales, with 15% expecting gains above 33% of their products or services and 20% anticipating increases above 20%.
Regarding wages, more than half of those surveyed do not plan salary increases in the current year (55%), while 45% anticipate increases.
On the policy front, respondents request measures from public institutions to sustain wealth and job creation in Spain: reduce corporate taxes and fees (49%), and a regulatory framework that ensures political and regulatory stability and a favorable investment climate (45%). Another 38% seek support for enterprise formation, 37% call for flexible approaches to contractual models, and 34% desire training assistance in business digitization and new technologies. Fewer respondents push for greater access to public investment (29%).
The Balance of Labor Reform
When leaders are asked to assess the latest workforce reform and the new hiring models it enables, 40% of managers, directors, and mid-level executives view the reform as helping reduce excessive temporary work (40%) and encourage permanent contracts (39%). A similar share regards reform as contributing to employment creation (31%), while concerns about over-regulation and limited flexibility for companies hover around 29%.
Challenges and Strategic Priorities
Among the main strategic priorities for 2023, more than 40% of executives highlight measures to curb inflation and rising costs (44%), boost sales (43%), and attract and retain talent (43%). Digital transformation (36%) and sustainability (32%) also drive these priorities.
In terms of the obstacles facing firms, employee productivity and performance top the list (43%), followed by digital transformation (39%), mounting employee expectations around work-life balance and flexibility (36%), and sustainability (34%). Other challenges include potential drops in sales (27%), equity and inclusion (24%), and workforce mental health (23%).
When identifying focus areas likely to impact the company most, 43% of respondents point to inflation, rising costs, and volatility as the leading concern, followed by political and economic uncertainty (19%), rising interest rates (17%), the energy crisis (13%), and the consequences of the Ukraine war (7%).
Hiring Plans
Asked about plans to expand or shrink staff in the coming years, Spanish executives show cautious optimism. Seventy-one percent of respondents plan to hire someone this year, 20% plan not to hire, and 18% are unsure. Of those planning to hire in 2023, 20% will recruit one-time or 1% to 5% more than the previous year, 14% will recruit 5% to 10% more, and 8% will exceed 10% growth compared with 2022.
Notably, those currently employed tend to come from larger companies, with more than 50 employees planning to recruit more actively this year.
On the other hand, regarding whether respondents foresee hiring in the coming years, 32% expect to hire, with 21% planning to do so in 2024 and 11% in 2025. A 47% share says hiring will depend on the economic situation, while 20% anticipate no hires at all.
Among business decision-makers planning to hire in the future, 48% target middle managers and 47% technicians. Fewer aim for base staff (28%), managers (23%), or directors (7%). Compared with July 2022, technician hiring has fallen, while the share of managers has risen slightly.
In terms of anticipated layoffs, half of respondents (51%) say they do not plan to lay off staff this year, but 49% do plan layoffs, including temporary layoffs (16%) or 1% to 5% more than last year (17%). The main reasons cited include inflation and rising costs (31%), declining sales or weak demand (31%), and reduced productivity (28%).
The profiles most likely to be trimmed include basic staff (around 45%), followed by middle managers (34%), technicians (27%), managers (27%), and directors (10%). For layoff projections in the coming years, 21% admit plans to reduce staff, with 44% stating it will depend on the current economic situation and 35% expecting no layoffs in the foreseeable future.