Recalibrate the value exchange

Leaders have access to a wealth of workforce signals, creating an opportunity to generate insight and drive meaningful outcomes through talent practices, converting workforce intelligence into performance at scale. And in a tough environment, the employer-employee value exchange comes under scrutiny: is it delivering maximum returns and driving the right outcomes? And if not, how can taking action on workforce insights help transform it?

In response, organizations are redefining the employer-employee relationship to ensure it both drives sustainable growth and enables them to compete for scarce talent. The employee value proposition (EVP) is no longer simply about improving employee experience or boosting engagement scores: it’s about ensuring both sides gain value from their investment.

Organizations tighten their focus on spend optimization, using insights to make smarter decisions and drive business outcomes, while employees get what they need to grow, flourish and deliver peak performance. The result: a virtuous cycle where both sides of the equation reap the rewards, and EVP delivers measurable ROI.

Optimize the employee experience

Employee anxiety over cost of living, geopolitical uncertainty and remaining relevant in the age of AI is undermining their ability to thrive at work, jeopardizing organizational performance. More employees than ever would like to leave their organization; some are actively planning to do so, while others feel they have no choice but to stay. Organizations face the twin challenge of a disengaged workforce and hemorrhaging talent once the job market picks up.

Employees are not thriving at work

It is perhaps no surprise that enhancing the EX and EVP is the top priority for HR leaders in 2026. Employee experience is HR’s bread and butter. More tellingly, over half of the C-suite believe enhancing EX and EVP is a people priority most likely to deliver ROI (ranked fourth, the highest ever position for executives). Investors, too, see the EX as a source of competitive advantage.

Driving value from the Employee Experience (EX)

of HR leaders say enhancing EX and EVP is a top priority for 2026

of the C-suite say enhancing EX and EVP is a people initiative that will drive ROI in 2026

of investors expect leading firms to be investing in enhancing EX and EVP to attract and retain top talent

HR has the mandate to prioritize building an impactful EX but must do so in a way that also leads to business outcomes, not just happier employees. In 2026, organizations seek to make more informed decisions to invest in the right EX initiatives at the right times, maximizing impact. The key word is not simply ‘enhance’; it’s ‘optimize.’

Using data-driven insights to maximize returns

A future-proof EX is one that meets the needs of both the organization (growth and performance) and the individual (personal growth, work-life balance, flexibility and rewards). Organizations can’t afford to layer more into their EX offering; they need results from the investment they are already making.

Optimizing EX with AI-driven insights ensures investments lead to measurable business outcomes, not just feel-good moments. Improved performance in the form of profits, reinvested back into EX and EVP, creates mutual benefit.

Investors support EVP optimization

of investors think optimizing the EVP for employee and business outcomes is very important in driving sustainable long-term value over the next five years

of investors say an uncompetitive value proposition would negatively impact their investment

To ensure EX delivers, organizations must go deep, drawing on utilization data, external market and competitor data, and employee sentiment. By synthesizing data from a range of sources and linking it to broader business data, HR leaders can continuously fine-tune EVP investment to ensure it is understood and valued by individuals and drives tangible outcomes.

With an increasingly diverse workforce, EX investments must be personalized and equitable. Personalization should not equal infinite choice and complexity, but AI-driven recommendations and curated total reward programs that are tailored to specific needs and objectives, creating an EX that resonates rather than adds cost.

EVP must be driven by work redesign. Work redesign identifies the shifting skills required to drive business success — informing decisions from where to focus hiring and development efforts, to where to invest in reward programs that resonate most with key talent.

Continuous, AI-powered employee listening enables organizations to personalize experiences and respond proactively to concerns. And with an agentic workforce able to gather, synthesize and evaluate real-time data from numerous sources, information can be collated without asking employees directly. Synthetic personas allow employers to test decisions, predicting the impact on employee sentiment.

However, annual engagement surveys remain the most common method for gathering insight on employees’ work experience. Only 20% of HR leaders are using always-on listening platforms. Tying feedback opportunities to conversations and moments that matter to employees (e.g., being interviewed by an AI avatar upon key work milestones) will help both enhance the EX and the quality of workforce insights.

HR: Employee engagement approaches that will become critical in the next two years

Personalization of the EX

Combining how people feel (sentiment data) with their work habits (behavioral data)

Always-on listening platforms

Using chatbots to understand the EX at moments that matter

Rethink rewards to drive impact

With employees globally feeling the pinch, rewards remain a critical motivator. The prospect of higher pay is the most common driver for people to leave their employer, while 52% of employees say their biggest concern about the future of work is compensation not keeping pace with cost of living.

Enhancing or modernizing pay and total reward practices is a 2026 priority for 39% of HR leaders, while half of investors expect organizations to be prioritizing this. But it’s vital to use data to ensure financial investment is targeted where it drives the most value. Rather than focusing on traditional tactics (adjusting pay structures to keep up with the market), innovative firms use performance data to inform pay decisions, developing insights to understand the impact of different pay strategies on business results, an insight executives are keen to have.

Rewards must follow work redesign, reflecting contribution, skills and impact, not solely tenure. Data can help organizations make more targeted decisions, identifying the most critical, in-demand (and costly) skills versus those which are easier to develop and in wide supply, adjusting strategy accordingly. A clearly articulated skills strategy is vital to ensuring the organization and employees understand which skills matter most, earning a premium for the individual and building business value.

54% of employees say the most important thing their organization could do for their compensation is to pay more for their unique or in-demand skills

Only 26% of HR say their organization has any form of skills-based pay in place

From performance ‘management’ to ‘enablement’

Performance management is a critical mechanism in the value exchange. However, only around half of HR leaders believe their organization’s performance management process is effective, while only half of employees see it as a valuable experience.

This is a significant waste of investment and effort. The focus must shift from enabling process to enabling performance. Without this shift, organizations risk misaligned efforts, rising disengagement and lost productivity. Performance management isn’t just an HR process; it must drive business results, connecting employee efforts to business outcomes. It’s time to move from performance management to performance enablement.

Performance management needs a reset

Only 52% of HR leaders believe their organization has an effective performance management process

39% of employees believe performance management helps them improve and grow, not just receive a rating

45% of employees believe performance management is embedded into culture and day-to-day work

49% of employees see the performance management process as a valuable experience

Poor manager-employee dynamics risk impeding the creation of a performance culture. Only 37% of employees have had a career conversation with their manager in the last 12 months, while only 38% get regular feedback on how their performance and skills impact their career prospects. Under half (43%) agree their manager helps their team focus on the work that matters most.

Managers must be able to effectively communicate what people need to do to help the organization succeed, and what’s in it for them (e.g., development, progression and EX enhancement). AI can do much of the heavy lifting: cascading goals, synthesizing feedback, and drafting personalized development plans for managers to fine-tune.