Measuring the Impact of Leadership on Employee Engagement 

Summary

Leadership impacts employee engagement by shaping employees’ sense of purpose, trust, growth, and connection at work. Leaders who communicate with empathy, coach effectively, recognize contributions, and support employee well-being create the conditions for people to contribute their best work and remain committed to the organization.

Employee engagement is on fragile ground. Employees are navigating constant change, heavier workloads, evolving workplace expectations, and growing uncertainty about how technology will affect their roles. At the same time, many leaders are struggling with their own rising stress and diminishing trust in leadership.

These pressures make it more difficult for leaders to create the positive employee experiences that sustain engagement. DDI’s Global Leadership Forecast found that only 29% of leaders trust their immediate manager, down from 46% two years earlier. Trust in senior leaders also remains low at 32%. When trust erodes, employees are less likely to embrace feedback, coaching, or development opportunities.

Measuring the impact of leadership engagement on employee engagement can also be challenging. Employee visibility is not the same as engagement, particularly when teams work across different locations, schedules, and working arrangements. Leaders need to look beyond attendance or activity and understand whether employees feel connected to their work, supported by their manager, and motivated to contribute.

How Leadership Engagement Impacts Employee Engagement

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 by creating: 

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. 

As the workplace has evolved, employees have also placed greater emphasis on flexibility, well-being, growth, and a sense of purpose. Leaders need to respond by taking a more comprehensive approach to supporting employees and creating an inclusive environment where individual contributions are valued.

That includes recognizing that employees may need different forms of support. Leaders who provide appropriate flexibility and demonstrate genuine concern for employee well-being are better positioned to engage and retain their 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, 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. Its latest State of the Global Workplace report found that global employee engagement fell to 21%, its second consecutive annual decline and the lowest level since 2021. In other words, nearly four out of five employees are not engaged at work. Gallup also found that declining manager engagement is driving much of that drop, reinforcing the critical role leaders play in shaping the employee experience.

71% of leaders report increased stress since stepping into their current role.

Global Leadership Forecast 2025, DDI

The impact extends far beyond morale. The Gallup report estimates that low employee engagement costs the global economy $438 billion in lost productivity each year. Organizations with disengaged employees often struggle with lower productivity, higher turnover, and greater difficulty achieving strategic goals.

Leaders themselves are also feeling the strain. DDI's Global Leadership Forecast found that 71% of leaders report increased stress since stepping into their current role, and 54% are concerned about burnout. When leaders are overwhelmed or disengaged, it becomes even more difficult to create the trust, coaching, communication, and support employees need to stay engaged.

Engagement challenges also vary around the world. According to Gallup, Europe continues to report the lowest employee engagement of any region, with just 12% of employees engaged, compared with the global average of 21%.

Why is engaging employees such a big challenge? Leaders worldwide need to do more than manage their teams' workloads. They must build trust, coach employees, communicate with empathy, and guide their teams through constant change. Gallup's research found that declining manager engagement accounts for most of the recent downturn in employee engagement, reinforcing the critical role leaders play in shaping the employee experience.

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.  

DDI’s latest research reinforces the connection between purpose, development, trust, and retention. High-potential employees are 4.8X more likely to plan to leave within the next year when they lack a sense of purpose in their role. They are also 3.8X more likely to leave when they do not trust senior leaders and 3.7X more likely to leave when their manager does not regularly provide opportunities for growth and development.

Employees are more likely to stay when their work feels meaningful, and they can see that their manager is invested in their future. Growth opportunities, effective coaching, trust in leadership, and a clear path forward all help turn engagement into long-term commitment.

In addition to demonstrating care and instilling a strong purpose-driven work ethic, leaders should have retention conversations with their team members to better understand what they value in their roles. Retention conversations allow leaders to understand what changes can be made or what they should continue doing to retain team members.

Retention conversations also help signal to team members that their leader appreciates their input and perspectives. When organizations strengthen purpose for frontline leaders, those leaders are 17X more likely to feel energized by their work and 3X more likely to intend to stay with the organization for the next year.

High-potential employees are 3.7X more likely to plan to leave when their manager does not regularly provide opportunities for growth and development.

Global Leadership Forecast 2025, DDI

But while retention conversations are valuable, retaining everyone is not the goal. Some turnover is healthy and expected. 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, otherwise known as “quiet quitting.”

While some turnover is inevitable, much of it is preventable. Gallup found that 42% of employees who voluntarily left their organization believed their manager or organization could have done something to prevent them from leaving. Rather than focusing solely on reducing turnover, organizations should equip leaders to build trust, create meaningful work, support employee development, and have proactive conversations that encourage top talent to stay.

5 Leadership Engagement Skills That Help Employees Thrive

A core set of skills enables leaders to engage their teams. These five leadership engagement skills help leaders build trust, strengthen connection, and create an environment where employees can do their best work.

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 they aren’t confused or surprised.

But frequency alone is not enough. Leaders need to listen carefully, acknowledge employees’ concerns, and explain the reasoning behind decisions. Clear, empathetic communication helps employees understand what is changing, what it means for them, and how they can move forward.

DDI’s latest research identifies listening and responding with genuine empathy as one of four critical behaviors leaders can use to rebuild trust. Transparently sharing thoughts and the rationale behind decisions also helps employees feel included and valued. 

2. Building trust.

Leaders who build trust with their employees are more likely to engage their team members by sharing credit, providing development opportunities, communicating transparently, and taking accountability. Emotionally intelligent leaders also recognize when appropriate vulnerability can strengthen relationships. Acknowledging mistakes, asking for input, and admitting when they don't have all the answers demonstrates authenticity and encourages employees to do the same. These behaviors help create psychological safety and reinforce trust over time.

Trust is essential because employees are less likely to embrace feedback, coaching, or development opportunities without it. DDI’s Global Leadership Forecast found that employees whose managers actively support their development are 11X more likely to trust their manager. Employees who receive feedback from their manager are 9X more likely to trust them, as are employees whose managers are effective coaches.

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. Recognizing contributions.

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. It should be specific, timely, and connected to the employee’s contribution, so they understand how their work supports the team and the organization.

Recognition also strengthens purpose. When leaders connect an employee’s contribution to a customer outcome, team goal, or organizational mission, they help employees see that their work matters.

5. Supporting well-being.

A manager’s role in supporting well-being has become more important as workloads and leadership demands intensify. Supporting well-being does not mean leaders need to solve every personal challenge. It means creating realistic expectations, making resources available, encouraging open conversations, and ensuring employees feel supported rather than depleted by their work.

The same principle applies to leaders. DDI found that leaders in supportive work environments are 10X more likely to excel in their role, 3X less likely to experience chronic stress, and 2X more likely to have energy at the end of the workday. Key factors include work-life balance, organizational support, trust in managers, and access to learning resources.

Measuring the Impact of Leadership Development on Engagement 

Recent leadership research suggests that transparency alone isn't enough to engage employees. Leaders also need narrative clarity, or the ability to explain why decisions are being made, what they mean for employees, and how individual work connects to broader organizational goals. When leaders provide context alongside communication, they help employees find meaning in change rather than simply informing them about it.

These are learnable leadership skills. When organizations invest in developing leaders' communication, coaching, and relationship-building capabilities, the benefits extend beyond the leaders themselves.

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. Eighty-eight percent of leaders reported increased engagement in their roles after participating in DDI programs.

The benefits also extend to their teams. Eighty-five percent of direct reports indicated their teams became more productive as a result of their leader's participation in DDI training. In addition, 90% of leaders reported applying their new skills on the job, demonstrating that leadership development translates into meaningful behavior change.

The Global Leadership Forecast reinforces the value of sustained leadership development. Organizations that use five or more leadership development approaches are 4.9X more likely to report improved leadership capabilities than those relying on fewer methods. Combining approaches such as manager coaching, internal coaching, self-paced learning, assessments, and AI-enabled practice experiences helps organizations build leaders who are better equipped to engage their teams.

Employee Engagement Starts with Leadership Engagement

Employee engagement doesn't happen by accident. It reflects the everyday experiences employees have with their leaders.

Organizations that want to improve engagement must invest in leaders first. Leadership has become a competitive advantage, influencing not only employee engagement and retention but also an organization's ability to adapt, innovate, and achieve business results.

HR plays a critical role by giving leaders the tools, coaching, and development they need to succeed. When leaders feel supported and equipped to communicate effectively, build trust, coach employees, and create meaningful work, they're better prepared to engage their teams and help people perform at their best.

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