The Impact of Leadership and Organisational Purpose on Employee Engagement

The recognition of the growing impact of organisational purpose on employee engagement has not just risen significantly over the last few years but has become a key trend shaping the future of work. It is no longer new for Top Employers to have clear commitments to a ‘positive impact’ on the world. In our World of Work Trends Report 2023, we identified that the importance of a ‘lived’ purpose—one that comes straight from the heart of those within the organisation—would become a constant in everyday business decisions.

In our latest research, in our World of Work Trends 2024, we dived deeper into this trend as we recognised that organisations that provide opportunities for employees to reflect on their sense of purpose and connect this to that of the organisation enjoy higher engagement, revenue growth, and profitability. It’s not surprising that 2023 saw an eight-percentage point increase in adopting this practice among Top Employers.

The importance of organisational purpose and leadership

Looking at this year, we saw that this trend continues to evolve, especially as the world becomes increasingly unpredictable and trust in traditional institutions is declining. For example, trust in government and journalists is low (41%, 47%), while trust in CEOs currently sits at 64%.

This context is of interest to us in this article. The link between employee and organisational purpose is becoming more important and equally challenging as further disruption in the world affects the workplace and workplace values become increasingly diverse. In this changing environment, it will be the leaders within organisations who will be tasked with navigating this complex world and transforming company values into action.

We identified that organisations will only see employee engagement and financial benefits from a strong organisational purpose if they have the right leaders in place to bring it to life. Purpose-driven leadership will be critical to success in 2024 and beyond.

The impact of leadership and organisational purpose on employee engagement in numbers

We analysed the relationship between organisational strength and organisational purpose and collected information about employee engagement in 1 860 Top Employers. We found the following:

• Companies with strong organisational purpose and good leadership had employee engagement rates of 79%.
• Companies with strong organisational purpose without good leadership had employee engagement rates of 76%.
• Companies with weak organisational purpose and good leadership had employee engagement rates of 79%.
• Companies with weak organisational purpose without good leadership had employee engagement rates of 75%.

It is clear that leadership has a clear impact on how organisational purpose is felt and how that affects employee engagement rates. Therefore, we need to investigate what employees really want from their leaders. What makes employees trust their leaders?  

What makes a great leader?

People are different, and what they want from their leaders reflects this difference, but there are still similarities in what people now expect from them. On big-picture issues, they want leaders to have a perspective beyond immediate business concerns. 60% of employees are interested in hearing their CEO speak about controversial social and political issues that they care about. It is now common for employees to closely review the actions and opinions of their leaders to see how they align with organisational values.

But empathy is really at the heart of purpose-driven leadership. When employees were asked about the criteria they used to decide who to trust, 79% cited empathy as a deciding factor.

Empathy as the Key Factor

It is clear that empathy stands out as a critical leadership skill. Empathy is the ability to understand and share the feelings of another. For people wanting to become empathetic leaders, here are key strategies to aid in this transformation:

• Active Listening: Empathy starts with listening, and leaders who want to develop this skill need to take the time to proactively listen to their employees. That involves being fully present, understanding, responding, and remembering what employees say and share.
• Open Communication Channels: Leaders must create an environment where open communication is encouraged and valued. This work can be done with regular check-ins and multiple feedback channels.
• Recognition and Validation: Recognising employees’ hard efforts is a powerful tool for leaders to show empathy. Leaders should be trained to acknowledge both their team members' achievements and emotional states. This validation helps employees feel seen and appreciated, boosting morale and engagement.
• Conflict Resolution Skills: Empathetic leaders are skilled at resolving conflicts in a way that respects all parties involved. Training leaders in conflict resolution techniques can help them navigate disputes with sensitivity and fairness, ensuring that all voices are heard and considered.
• Feedback with Compassion: Providing constructive feedback is essential, but doing so with empathy makes a significant difference. Leaders should be trained to deliver feedback in a supportive way that focuses on growth rather than criticism. This involves balancing honesty with kindness and offering actionable suggestions for improvement.
• Leading by Example: Finally, leaders must lead by example. Demonstrating empathy in their interactions sets a standard for the entire organization. When leaders consistently act with empathy, it becomes a core part of the company culture, influencing the behaviour of employees at all levels.

Final Thoughts

Empathy in leadership is the cornerstone of an inclusive and effective workplace. Organisational purpose is an evolving, collaborative process that demands the lived commitment of every employee. Without authentic buy-in, neither the employee nor the organisation truly benefits. Once seen as a top-down process owned by the C-suite, strategy is facing a similar revolution. By prioritising this essential skill, HR professionals can help build a thriving, resilient organisation equipped to meet the challenges of the modern work environment.