How HR Leaders Can Transform Engagement and Retention in 2025

HR leaders today are facing a lot of change, from new technologies like AI to shifting employee expectations when it comes to benefits, compensation and where work is done.  

Gallup’s State of the Global Workplace 2025 report gives a clear picture of how employees are feeling — and the news isn’t great. Engagement is low across the board, and employees aren’t feeling recognized or supported. The good news? There are clear, practical steps HR teams can take to turn things around. Here’s what you need to know to build stronger, more motivated teams.

1. Manager Engagement Is the Key to Team Success  

According to Gallup, 70% of team engagement is directly influenced by the manager. Yet, manager engagement has slipped from 30% to 27% globally. Young managers (under 35) and female managers have been especially affected, with engagement drops of 5 and 7 percentage points respectively.

Why it matters: When managers are disengaged, their teams follow. This trend threatens not just morale, but productivity, innovation, and retention. Investing in manager support isn't optional — it's essential.

What HR should do:

• Implement targeted manager engagement programs and campaigns.

• Ensure every new manager receives foundational training.

• Establish peer coaching and mentorship channels.

Resource to take action: Team Building Activities

2. Recognition Fuels Motivation and Retention  

Employee testimonials in the report clearly highlight that feeling appreciated and incentivized plays a huge role in job satisfaction. Recognition drives emotional connection, loyalty, and a desire to contribute.

“I am satisfied with my job because I receive appreciation and incentives from the management, and I am also satisfied with what I provide for the children.”
— Umm Muhammad O., Teacher, Saudi Arabia

Why it matters: Recognition is one of the most cost-effective drivers of engagement, especially when it's frequent, authentic, and aligned with company values.

What HR should do:

• Develop a culture of daily recognition using a program like Kudos.

• Train managers to give timely, specific recognition to their teams.

• Kudos recommends all employees send at least 5 recognition messages per month.

Resource to take action: The Importance of Employee Recognition  or The Leader’s Guide to Employee Recognition

3. The Engagement Decline Is Real and Costly  

Global engagement dropped to 21%, costing the global economy a staggering $438 billion in lost productivity. Only two other times in the past decade has engagement fallen this dramatically: during COVID lockdowns and now.

Why it matters: Disengaged employees are less productive, more likely to quit, and more prone to burnout. The implications are major costs and productivity disruptions.

What HR should do:

• Use pulse surveys and check-ins to monitor engagement.

• Quickly identify and respond to areas of disengagement.

• Integrate team engagement metrics into manager KPIs.

Resource to take action: Employee Engagement Strategy Guide

4. Train, Coach, Repeat  

Less than half of managers say they've received  formal training. Yet, even basic training significantly reduces disengagement and improves team outcomes. One Gallup study showed that trained managers saw performance boosts of 20-28%.

Why it matters: Untrained managers struggle to inspire, resolve conflicts, or guide their teams. Training turns them into coaches who can elevate individual and team performance.

What HR should do:

• Invest in scalable manager training programs.

• Include coaching, emotional intelligence, and feedback delivery.

• Offer continuous development opportunities, not just one-offs.

Resource to take action: Leaderships Role in Fostering Employee Engagement

5. Well-being and Engagement Are Interlinked  

Only one-third of employees report "thriving" in their overall lives. However, those who are engaged at work are significantly more likely to thrive outside of it. Manager burnout also correlates strongly with lower well-being scores.

Why it matters: Recognition, support, and development at work ripple into employees' personal lives. This holistic view of well-being should drive policy.

What HR should do:

• Normalize conversations about well-being.

• Recognize achievements that align with personal growth.

• Ensure managers are not only productive but also healthy and supported.

Resource to take action: A Manager’s Checklist for Employee Check-ins

6. Empower Purpose-Driven Work and Connection  

In a time of uncertainty and transformation, employees are looking for more than a paycheck — they want purpose and connection. When people feel like their work matters and they belong, engagement soars.

Why it matters: Purpose and belonging are powerful motivators. They give employees a reason to go above and beyond and stay.

What HR should do:

• Link individual goals to company mission.

• Encourage storytelling around impact and values.

• Create opportunities for cross-functional collaboration and shared wins.

Resource to take action: Kudos 2025 Celebrations Calendar

7. AI Readiness Hinges on Human Connection

As AI reshapes industries, Gallup warns that mishandling this transition could sever the human bonds that keep teams thriving — like trust, connection, and care.

Why it matters:
Technology alone won’t boost engagement. Without thoughtful leadership and strong relationships, AI may widen the gap between leaders and employees.

What HR should do:

• Provide managers with AI literacy and people-first training.

• Use AI to support — not replace — relationship-building and coaching.

• Reinvest in culture-building to preserve empathy in a digital-first workplace.

Resource to take action: AI Revolution at Work: How HR Will Lead the Way

8. Development Opportunities Are a Top Motivator

Gallup found that having opportunities to learn and grow is directly tied to motivation and retention. Employees who feel encouraged in their development report higher engagement and are more likely to thrive in life.

Why it matters:
Growth is more than a perk — it’s a core part of employee well-being and motivation.

What HR should do:

• Include “career pathing” in development plans.

• Offer microlearning and skill-building opportunities regularly.

• Recognize performance AND growth milestones​

Resource to take action: Career Planning Guide

HR's Call to Action

Gallup’s report is a wake-up call: Engagement cannot be improved with surface-level tactics. It requires strategic, sustained investment in recognition, manager training, and employee purpose. For HR leaders, this is both a challenge and an opportunity. By leading with empathy, structure, and science, we can build workplaces where people do more than survive — they thrive.