Organisations around the world have collectively spent roughly $40 billion on AI enterprise investment. And according to a recent MIT study, 95% of those organisations have seen zero measurable impact on profits. An NBER survey of nearly 6,000 global executives found that 89% report no impact on labour productivity.
That is a significant return on investment problem. And the 2026 Gallup State of the Global Workplace report tells us exactly why it is happening.
The primary constraint is not the technology. It is the manager.
Gallup’s data shows that in organisations investing in AI, the strongest predictor of employee adoption, aside from technical integration, is whether the direct manager actively champions it. Employees whose manager actively supports their team’s use of AI are 8.7 times as likely to say AI has transformed how work gets done. Yet fewer than one in three employees in AI-implementing organisations say their manager actively supports it.
The same leader who holds the key to AI ROI is also the most disengaged cohort in the global workforce.
Manager engagement is now at 22%. Down from 27% in 2024. Down from 30% in 2022. Nine points in three years. And the people organisations are counting on to unlock performance and drive change are running on empty.
Everyone is calling this an engagement crisis. I would be more specific.
The Loop That Doesn’t Break
The standard response to declining engagement data is familiar. Run a survey. Analyse the results. Present findings to the leadership team. Build an action plan that usually involves some combination of recognition programmes, manager training, and a renewed focus on communication.
I have watched this cycle run in organisations for a long time. Sometimes it moves the number by a point or two. Often it doesn’t. And when it doesn’t, the response is another survey, another action plan, another presentation.
The problem is that organisations are treating engagement as a root cause when it is a symptom. Engagement is the output of something. What produces it is the quality of leadership, specifically the quality of the manager who sits between a person and the organisation they work for.
Gallup’s own data has said this for years: 70% of team engagement is attributable to the manager. Not strategy. Not culture programmes. Not the CEO’s town hall. The direct manager. The person who runs the weekly meeting, sets the expectations, has the hard conversations, and shapes the daily experience of work.
When that person doesn’t have the capacity to lead well, everything downstream reflects it. Engagement. AI adoption. Performance. All of it.
What Three Years of Gallup Data Actually Shows
The 2026 Gallup report isn’t just reporting another bad year for engagement. It is showing a sustained structural deterioration in the layer of leadership that holds organisations together.
Global employee engagement has fallen to 20%, its lowest point since 2020, costing the world economy approximately $10 trillion in lost productivity – roughly 9% of global GDP. Manager engagement dropped nine points in three years, with the largest single-year fall occurring between 2024 and 2025, when it fell five points. No other worker category comes close to that rate of decline.
The 2026 report adds a detail that should concern every executive team: compared with individual contributors, leaders are substantially more likely to report experiencing a lot of stress (+7 percentage points), anger (+12), sadness (+11) and loneliness (+10) on any given day.
The people being asked to carry culture, drive performance and now champion AI adoption are, by Gallup’s own measurement, the most emotionally depleted cohort in the organisation.
In Australia and New Zealand, engagement sits at 21%, marginally above the global average. But AU/NZ recorded the sharpest decline in job market optimism of any region in 2025, falling 12 percentage points to 60%. Daily stress is running at 49%, nine points above the global average. The surface metrics look reasonable. The underlying indicators do not.
That is not a communication problem. It is not a culture programme problem. It is a capacity problem. And solving it requires a different diagnosis.
The Gap Is Not Knowledge. It’s Capacity.
There is a distinction I come back to constantly in this work, because it changes everything about how you respond.
Capability is knowing what to do. Most managers have been through enough development to understand what good leadership looks like. They can describe it. They can recognise it in others.
Capacity is the ability to do it consistently, under sustained pressure, while managing their own energy, focus and psychological state at the same time.
The gap in most organisations is not a knowledge gap. It is a capacity gap.
When you properly assess a management cohort – not with a personality quiz or a 360 survey, but with a diagnostic that measures the actual variables behind sustained performance – a pattern emerges consistently. Managers who are cognitively depleted, chronically under-recovered, running on instinct rather than design, and carrying workload that should sit with their teams; they are not poor leaders. They are leaders operating without the capacity to lead as well as they know how.
The PQ Index gives us objective data on this. It measures four domains: Energy Management, Mental Agility, Strategic Recovery and Biological Age. Across the management cohorts we assess, the pattern is consistent: the managers with the lowest recovery and energy scores have the lowest-engagement teams and are the least effective champions of change. It is not a coincidence. Depleted managers cannot build capacity in others, and they cannot lead through disruption.
What changes outcomes is not another workshop. It is a leader-led coaching system: a structured approach that identifies the specific behaviours that create engaged, high-performing teams, embeds them into the manager’s actual working environment, and reinforces them over time through the operating rhythm of the team. Behaviour becomes habitual. That is what builds sustainable capacity.
Gallup’s own research supports this. A Gallup internal study found that managers who received training in effective coaching saw their performance metrics improve by 20 to 28%, and the teams they led saw engagement rise by up to 18%. These results were measured nine to eighteen months after training, suggesting the effect is durable, not just an initial response to something new.
It is also worth noting what best-practice organisations demonstrate is possible. In 2025, Gallup found that within world-class workplaces, 79% of managers were engaged at work – nearly four times the global average of 22%. The engagement crisis is not inevitable. It is the result of what organisations choose to prioritise.
The Leadership Capacity Index extends this to the team and organisational level, identifying where the capacity risks sit and which interventions will have the most leverage. It is a diagnostic, not a development programme. But it is the right starting point.
The Right Question Changes the Answer
If your organisation is looking at engagement data and planning another survey or recognition initiative, consider a different first question.
Not “why aren’t our people more engaged?” but “what is the actual capacity of our managers to build and sustain engaged teams – and to lead through real disruption?”
That question has more specific, more actionable answers. And in my experience, it is the question most organisations are not yet asking.
The 2026 Gallup data is not a reason for another engagement programme. It is a reason to take a serious look at whether your management cohort has what it needs to lead well, not just next quarter, but across a sustained period under real pressure. In a world where AI ROI depends on manager behaviour, the stakes of getting this wrong are higher than they have ever been.
If you want to understand where your leadership team’s capacity actually sits, start with a Discovery Call. We will tell you what we would measure, what we would expect to find, and what it would realistically take to address it.
About the Author
Andrew May is founder and CEO of Performance Intelligence, a human performance consultancy working with senior leaders and executive teams across Australia. He is a mental skills coach, bestselling author, keynote speaker and host of the Performance Intelligence Podcast. For more than 25 years, Andrew has helped leaders build the capacity to perform consistently under sustained pressure through evidence-based diagnostics, coaching and behavioural reinforcement.
REFERENCES
[1] Gallup (2026). State of the Global Workplace: 2026 Report. Gallup, Inc. https://www.gallup.com/workplace/349484/state-of-the-global-workplace.aspx
Challapally, A., Pease, C., Raskar, R., & Chari, P. (2025). The GenAI divide: State of AI in business 2025. MIT Project NANDA.
NBER survey cited in Gallup (2026). State of the Global Workplace: 2026 Report. Gallup, Inc.
