Measuring the Impact of Leadership on Employee Engagement 

In today’s dynamic and fast-changing work landscape, employee engagement has been on fragile ground. Disengagement has become so pervasive that it has soared in traditional and social media attention. In the past year, trends about employees’ lack of engagement (aka “Quiet Quitting”) emerged on Google Trends more than any other work topic in the past five years. 

Much of this is about the climate at work right now. Employee attrition is at an all-time high at many companies, and fractured teams have left leaders struggling to create connections and positive employee experiences. Many companies have also laid off employees, often leaving a distrustful and disengaged workforce in their wake. 

Because of these factors, measuring the impact of leadership on employee engagement has become challenging. Leaders who could once get a read on engagement and productivity based on time spent in the office have had to confront the challenges of driving engagement across dispersed teams. Newly onboarded employees may not have had any connection with their leaders or others on their teams outside of a Zoom call.  

Companies need to evaluate their approach to improving employee engagement now. In a strong job market, where turnover has been a constant challenge, companies must consider how their efforts translate to creating better workplace experiences that will attract, grow, and retain top talent. How well you engage employees hinges on leaders’ abilities to navigate these challenges and inspire their teams. 

The Leader’s Big Role in Engagement Today 

Employee engagement is more than employees being happy at work. It’s how people show up at work and how committed they are to their role and team. 

DDI defines employee engagement as people’s emotional and intellectual commitment to an organization. Engaged employees believe in what they do and feel valued for doing it. As a result, they put discretionary effort into their work and are enthusiastic about achieving superior results. 

Leaders have a clear role to play in driving and maintaining engagement among their team members with: 

1. Meaningful work: Leaders help the team see that what they do matters and how they contribute to their company’s objectives and bigger goals. 
2. Individual value: Leaders show appreciation for team members and encourage them to grow. 
3. Positive environment: Leaders set the workplace tone to ensure that people feel enabled to do their best work. 

Alongside all the changes happening in the workplace, employee expectations have evolved. Employees today place a greater emphasis on flexibility, work-life balance, and having a sense of purpose at work. Leaders need to adapt to these changing expectations by taking a more comprehensive approach to how they view and support their employees while fostering an inclusive culture that values individual contributions.  

Recognizing the diverse needs of employees in this climate, it's become more important for leaders to offer flexibility in work arrangements and demonstrate a commitment to employee well-being to engage and retain talent.  

The State of Employee Engagement 

Employee engagement is an evergreen concern for leadership and HR teams alike. With the emergence of new employee listening platforms and increased frequency of disruption (e.g., shift to remote or hybrid work), many HR teams have been keeping a closer eye on engagement at a more granular level.  

Gallup has been researching the current state of global employee engagement for decades. The most recent results indicate that only 23% of employees are engaged. In other words, roughly 3 out of 4 employees are not wholly applying themselves to their work.

Signs of burnout are growing among leaders, with 72% reporting that they often feel used up at the end of the day, an increase from 60% in 2020.

Global Leadership Forecast 2023, DDI

In the United States, the percentage of the workforce reporting that they were engaged in their role increased from 2009 until January 2020, at which point it dramatically decreased. The U.S. has since failed to rebound to the levels reached in 2020. 

According to recent research, this shortage of engaged employees could cost the global economy approximately 7.8 trillion dollars annually. Further the article noted, it could contribute to productivity loss, often putting additional pressure on those who remain engaged to work harder to meet goals. The result? Companies could miss their opportunities to be competitive in their markets. High performers become burnt out and organizations struggle to meet strategic objectives. And the effect is noticeable amongst leaders: 72% report that they often feel used up at the end of the day, an increase from 60% in 2020, according to our 2023 Global Leadership Forecast. 

Other regions around the globe are also struggling. For example, Europe has the lowest regional percentage of engaged employees, hovering at only 13% in Gallup’s 2023 State of the Global Workplace report.  

Why is engaging employees such a big challenge? The answer is clear: Leaders worldwide need to do more than manage their teams’ workloads. The right leadership skills are paramount to being a successful leader today. According to Gallup, up to 70% of variance in an employee’s engagement depends on their leader. Additionally, leaders need to guide their team members through the unknown. Political, civil, health, and other challenges can arise and impact the global workforce without warning. Leaders must be able to act with agility and provide guidance.   

The Relationship Between Employee Engagement and Retention  

In addition to productivity loss, disengagement costs companies critical talent if it is not addressed before it’s too late. As employees disconnect from work, they may be considering other employment opportunities.  

We found that high-potential leaders are 2.4X more likely to report intentions to stay at their companies if they have career goals and development plans to help them achieve those goals. Further, leaders are less likely to report intending to leave if their manager helped instill a strong sense of purpose in their role.  Not only were leaders more than twice as likely to intend to stay with their company, but they were also 9X more likely to report feeling engaged in their roles. Put simply, employees worked hard when they had a purpose and felt valued, knowing their managers were investing in their development. 

In addition to demonstrating care and instilling strong purpose-driven work, leaders could have retention conversations with their team members to understand better what they value in their roles. Retention conversations allow leaders to understand what changes can be made—or what they should continue doing—in order to retain team members. Retention conversations also help signal to team members that their leader appreciates their input and perspectives.

When leaders feel a strong sense of purpose, they are 9X more likely to feel engaged in their role, and 2.4X more likely to intend to stay at the company for the next year.

Global Leadership Forecast 2023, DDI

But while retention conversations are valuable, retaining everyone is not the goal. An absence of turnover could result in employees continuing to be a part of their company even if they aren’t actively working. Disengaged employees can still show up without actually contributing to their organizations.  

So, what is a healthy turnover rate? Gallup suggests a turnover rate of around 10% is considered healthy. However, typical turnover rates vary dramatically by industry, geographic location, and even by the nature of the jobs themselves.  

For example, the latest research from the U.S. Bureau of Labor Statistics reports an average of 2.2% turnover for voluntary quits last month. This drop was due to slight decreases in turnover in the healthcare and social assistance industries, which continue to have elevated turnover rates compared to other industries.  

The Key Skills Leaders Need to Engage Their Teams 

A core set of key skills enables leaders to engage their teams. Based on our 2023 Global Leadership Forecast research, these five skills help leaders maintain and improve employee engagement:

1. Communicating with empathy: 

Leaders are an organization’s core system of communicators.  Especially in a rapidly changing work environment, it’s critical to keep employees well-informed about changes that affect them so that they aren’t confused or surprised. Frequent communication will not only keep employees well-informed but also allow them to make the best use of their time and resources. 

2. Building trust: 

Leaders who build trust with their employees are more likely to engage their team members through behaviors like sharing credit and opportunities for development and being vulnerable. Displaying vulnerability is especially important for gaining newer employees’ trust because they may view their leaders as more human if leaders acknowledge having difficulties. Our research showed that when leaders regularly display vulnerability, their employees are 5.3X more likely to trust them. And even better, when leaders genuinely acknowledged their failures or shortcomings, they were 7.5X more likely to maintain trust over those who did not.

3. Coaching for growth: 

Coaching is a crucial skill for leaders to drive engagement and provide the experiences that employees seek for their career development. By providing meaningful, supportive feedback that motivates team members and helps individuals improve their performance, leaders play an essential coaching role in their organizations. Coaching for growth is even more critical in a strong job market where individuals can more easily find new work.  Employees may be more tempted to look elsewhere and leave their jobs if they find better growth and development opportunities. Leaders can leverage coaching opportunities to identify and create new growth opportunities within and to help engage and retain talented team members. 

4. Recognition: 

Employees want to be recognized and rewarded for their contributions, and leaders are uniquely positioned to ensure that their team’s contributions are valued. Encourage leaders to own this role with a more regular cadence of recognition. Remember: Recognition should not be a once-a-year event but an ongoing occurrence to show appreciation for good work and to let employees know when they are doing well.     

 

5. Supporting well-being: 

A manager’s role in supporting well-being has become more crucial due to worldwide challenges and unrest. A commitment from leaders to employee well-being significantly impacts their team members’ engagement. In fact, employees whose leaders show concern for their well-being are 3X more likely to be engaged. Additionally, our research has shown that organizations, where managers demonstrate care for well-being, are 2.3X better prepared to prevent employee burnout and resulting turnover.  

Measuring the Impact of Leadership Development on Engagement 

At the end of the day, developing leaders with these critical leadership skills helps them build connections with their team members, creating a stronger foundation to weather disruptions. A recent article in Forbes reported that the most significant influence on a team’s engagement is their leader’s ability to show they genuinely care.  

We see similar results in our impact evaluation research after leaders undergo training to develop their skills. Leaders are more engaged in their roles after receiving quality training in core skills. Of those who participated in DDI’s training and completed a post-training evaluation on their experiences, 88% reported feeling more engaged in their leadership roles than before training. They also reported feeling more valued as a contributor to their organization and having a stronger interest in growing within the company. 

The benefits also expand to their teams. Eighty-five percent of leader participants reported increased team member engagement after training. What’s more, direct reports of leaders who received training said they were also highly engaged and productive. Eighty-nine percent of direct reports said they were engaged in their role on the team, and 82% reported increased team productivity. 

Learn more about how to improve employee engagement and retention through better leadership.     

Rosey Rhyne is a senior research manager on DDI’s Center for Analytics and Behavioral Research (CABER) team, where she applies her background in I/O psychology and people analytics to better understand how to improve the leadership and employee experience.  

Stephanie Neal leads DDI’s Center for Analytics and Behavioral Research (CABER), where she and her team manage strategic market research and trend studies on leadership in the workplace.