The Impact of Leadership on Employee Engagement

Summary

The impact of leadership on employee engagement comes down to how leaders communicate, build trust, coach, recognize contributions, and support well-being. Yet with only 9% of leaders fully engaged, organizations face a growing challenge: helping leaders sustain their own motivation while creating positive employee experiences. Developing these five leadership skills can strengthen engagement, performance, and retention.

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 struggle with rising stress and diminishing trust in leadership.

These pressures make it more difficult for leaders to create the positive employee experiences that sustain engagement. According to DDI's Global Leadership Forecast 2027, only 9% of leaders are fully engaged in their roles. When leaders themselves feel disconnected from their work, it becomes harder to build the trust, motivation, and commitment their teams need to thrive.

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 their work matters and how it contributes to the 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 offer appropriate flexibility and show genuine concern for employee well-being are better positioned to engage and retain talent.

Engaged leaders are also better positioned to bring out the best in others. According to DDI's research, fully engaged leaders are 8.8X more likely to say they consistently bring out the best in their team members than somewhat engaged leaders. This underscores why organizations must focus on leadership engagement alongside employee engagement.

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 more frequent disruptions, many HR teams are watching engagement more closely at a more granular level.

Gallup has been researching the current state of global employee engagement for decades. Its State of the Global Workplace 2026 report found that global employee engagement fell to just 20% in 2025, its second consecutive annual decline and the lowest level since 2020. In other words, four out of five employees worldwide are not engaged at work.

The decline is particularly concerning among managers. Gallup found that manager engagement dropped from 27% to 22% in just one year, accounting for much of the recent decline in global employee engagement. This reinforces the critical role leaders play in shaping the employee experience.

DDI's Global Leadership Forecast 2027 reveals a similar challenge among leaders themselves. With so few fully engaged in their roles, organizations face an important question: How can they expect leaders to engage their teams when leaders are struggling to sustain their own engagement?

The impact extends far beyond morale. Gallup estimates that low employee engagement cost the global economy approximately $10 trillion in lost productivity in 2025, equivalent to 9% of global GDP. Organizations with disengaged employees often struggle with lower productivity, higher turnover, and greater difficulty achieving strategic goals.

Leaders themselves are also feeling the strain. Nearly one in five leaders frequently feel "used up" at the end of the workday, a key warning sign of burnout. As workloads grow and change accelerates, this depletion can make it harder for leaders to remain focused, support their teams, and maintain performance.

Improving employee engagement requires addressing these pressures on leaders while also strengthening their leadership capabilities. 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. To do that effectively, they need support from their organizations, too.

The Relationship Between Employee Engagement and Retention  

Beyond productivity loss, disengagement can also cost organizations valuable talent. As employees disconnect from work, they may begin considering other employment opportunities.

DDI's research reinforces the connection between development, engagement, and retention. Leaders who are highly concerned that their skills are becoming obsolete are 5.1X more likely to report a definite intention to leave their organization. Yet only 25% of leaders understand their future career path within their organization, highlighting the importance of helping leaders see opportunities to grow and develop.

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 strengthen engagement and long-term commitment.

Retention conversations are one way leaders can put this into practice. By asking employees what they value in their roles, what motivates them, and where they want to grow, leaders can identify opportunities to strengthen engagement and address concerns before employees decide to leave. These conversations also show employees that their perspectives matter and that their leaders care about their growth and success.

Just 25% of leaders understand their future career path within their organization.

Global Leadership Forecast 2027, DDI

Of course, retaining everyone isn't the goal. Some turnover is healthy and expected, and employees who stay aren't necessarily engaged. The priority is creating an environment where people want to contribute, grow, and remain with the organization.

But many departures are preventable. Gallup found that 42% of employees who voluntarily left their organization believed their manager or organization could have done something to prevent their departure. Yet 45% said no manager or leader proactively discussed their job satisfaction, performance, or future with them in the three months before they left. 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.

Each skill contributes to employee engagement in a different way, from helping employees feel heard and valued to creating growth opportunities. Here's how leaders can develop and apply each one: 

These five skills work together to create the everyday experiences that strengthen employee engagement. Let's take a closer look:

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.

Everyday leadership behaviors play an important role in building trust. Listening to employees' concerns, communicating transparently, and explaining the reasoning behind decisions help employees feel included, informed, 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 demonstrate authenticity and encourage 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. Employees whose managers strongly support their development are 4.8X more likely to strongly trust their manager. Leaders who believe their managers coach them effectively are also 9X more likely to trust them than those who do not. These results reinforce how everyday development and coaching behaviors can strengthen workplace trust.

Everyday leadership behaviors play an important role in building trust. Listening to employees' concerns, communicating transparently, and explaining the reasoning behind decisions help employees feel included, informed, and valued.

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 becomes even more important when employees are uncertain about their future career opportunities. Yet only one in four leaders believe their manager is an effective coach. This creates an opportunity for organizations to strengthen coaching capabilities and help managers provide the ongoing feedback, guidance, and development support employees need to grow.

Effective coaching goes beyond addressing immediate performance challenges. It helps employees recognize their strengths, identify development opportunities, and build the confidence to take on new responsibilities. By making coaching part of everyday leadership, managers can strengthen engagement while helping talented employees see a future within the organization.

4. Recognizing Contributions

Employees want to feel valued for their contributions, and leaders play a critical role in making that happen. Encourage leaders to recognize employees regularly rather than waiting for formal performance reviews or annual recognition events.

Remember: Effective recognition is specific, timely, and connected to an employee's contributions. By showing employees how their work supports team goals, customer outcomes, or the organization's mission, leaders reinforce their sense of purpose and help them see why 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.

Effective coaching goes beyond addressing immediate performance challenges. By making coaching part of everyday leadership, managers can strengthen engagement while helping talented employees see a future within the organization.

The same principle applies to leaders themselves. DDI's research shows that only 17% of leaders feel well prepared to anticipate and respond to change. Leaders who feel unprepared to navigate constant change may struggle to maintain their own energy while supporting their teams.

Organizations can help by equipping leaders to manage change, prioritize effectively, and recognize signs of overload. When leaders receive the support they need to manage their own well-being, they're better positioned to create a work environment where employees can thrive.

Measuring the Impact of Leadership Development on Engagement 

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 strengthening leaders' communication, coaching, and relationship-building capabilities, they can improve not only how leaders perform but also how engaged they feel in their roles.

DDI's impact evaluation research demonstrates the value of developing these capabilities. After participating in DDI leadership development programs, 88% of leaders reported increased engagement in their roles.

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.

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 employees' everyday experiences 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.