Navigating Leadership Challenges and Trends for 2026

What were the major leadership challenges and transformations that defined 2025? In this episode, hosts Stacey Caster & Tracy-Ann Palmer give their year in review.

Organizations increasingly adopted AI (approximately 78% of businesses implemented AI in some capacity), however, only a few restructured workflows to fully leverage this powerful tool. Throughout the conversation, Stacey and Tracy emphasize leadership agility in managing employee and manager engagement, which sank to new lows, and stress the importance of value-driven leadership. They highlight how cybersecurity threats and hybrid work dynamics pose fresh challenges and opportunities for leaders in maintaining productivity and engagement.

Key Takeaways:

Vision and Systems Integration: Effective leaders must seamlessly integrate vision, systems, and people to navigate economic and technological shifts.
AI Implementation: While 78% of organizations are using AI, only 15% have made comprehensive workflow changes to fully utilize its potential.
Manager Engagement Crisis: With manager engagement dropping below 30%, sustaining high productivity requires regular check-ins and recognition.
Cybersecurity as ESG: As ransomware incidents double, cyber resilience becomes just as essential as sustainability metrics.
Future Predictions: 2026 may herald a focus on empathetic leadership, AI as a team player, and the realignment of financial accountability and productivity metrics.

Notable Quotes:

*   "Real leaders who created value didn't ask, 'Where can we use AI?' What they asked was, 'Where are we wasting human capacity?'"
*   "If it doesn't challenge you, it doesn't change you."
*   "Engagement recovery depends on equipping leaders to lead with empathy and edge."
*   "Leadership isn't glamorous. It's truly gritty… Leaders had to grind through it, and they are better for it."
*   "Clarity is a form of kindness... Clear intent changes everything."

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Transcript

SPEAKER_02 0:01

You have to walk the talk. You have to be authentic as a leader. If you're not doing it, they see that.

SPEAKER_00 0:07

It is entirely universal. There's other people who are going through this.

SPEAKER_02 0:11

For me, a great leader needs to be able to marry three things: vision, systems, and people.

SPEAKER_00 0:21

Welcome to Leadership Moments if this is your first time. And if you are returning, thank you for your support.

SPEAKER_01 0:26

This show is about leaders from all walks of life, leadership tips, and maybe even a little of what you wouldn't expect to help you in leadership.

SPEAKER_00 0:35

We would appreciate it if you tell someone else about our podcast as we strive to support all leaders that want to just be better.

SPEAKER_01 0:41

Let's get on with the show. Welcome to Leadership Moments, the podcast where real leaders share the moments that define them. I'm Tracy Ann Palmer.

2025 Macro Trends And Impacts

SPEAKER_00 0:51

And I'm Stacey Kester. And as 2025 comes to a close, we're reflecting on what this year taught us about leadership, business, and the human side of transformation.

SPEAKER_01 1:03

And let me tell you, it's been a year of recalibration. You know, leaders faced economic uncertainty, shifting technology frontiers, and a workforce redefining what engagement really means.

SPEAKER_00 1:20

Yeah, and we're not just looking back, right? We're going to peer into 2026 as well. What it will take to thrive next year and what new rules are emerging for leadership in a world that's learned to live with constant change. Oh boy, has there been change this past year?

SPEAKER_01 1:37

No kidding. Uh, I think every every leader, every business uh would share that sentiment, Stacey, for sure. So let's start with what defined 2025. First of all, you know, economically, the US finished this year with inflation holding at 3%. Quite remarkable, right? Uh the Federal Reserve finally began easing those rates uh between 3.75 and 4%. And after three years of volatility for everybody, I think that just felt like a big sigh of relief.

SPEAKER_00 2:20

Yeah, it did for sure. And you know, but it also forced leaders to get sharper, right? Growth slowed, margins tightened, and strategy mattered more than ever, but in a different way, right? The IMF projects global growth for of about 3.2% for 2025 and a similar pace next year. Steady, but not spectacular either.

AI Adoption Versus Real Workflow Change

SPEAKER_01 2:45

Yeah, that's right. And yet, you know, the biggest transformation wasn't economic, it was actually operational. 78% of organizations now use AI in at least one business function. That is up from 72% just a year ago.

SPEAKER_00 3:09

Yeah, and I would argue that the way they're using AI is even more. So even though that percentage is not huge, it's how much they're using it and how they're leveraging it. So totally agree with you. But here's the catch, right? McKenzie found that only 15% of those organizations have actually redesigned the workflows around AI, which is what we were just talking about. Most are still layering it on top of these old processes.

SPEAKER_01 3:36

Yeah, and you know, I always keep thinking, like just remember, AI has been around for years. AI is not you, new, right? It's just that it's you know, we've now sort of on this trend of how do we leverage it? What are we gonna do? And it's showed up in different ways within our businesses. But you know, Stacey, I couldn't agree with you more. And leaders who created real value didn't ask where we can use AI. What they asked was, where are we wasting human capacity?

Engagement Slump And Manager Flywheel

SPEAKER_00 4:14

Yeah, yeah. And it's on the human side, right? So Gallagher reported that global employee engagement dropped again to 21%. And even more worrying, manager engagement is hovering below 30%. That's you know, the quiet crisis nobody's talking about.

SPEAKER_01 4:34

Yeah, and it's a big crisis, and you're right, nobody's talking about it. You know, when managers disengage, everything else unravels clarity, feedback, productivity, morale. The best companies responded with something surprisingly simple 15-minute weekly one-on-ones and relentless recognition.

Cybersecurity Shifts To Resilience

SPEAKER_00 5:01

Yeah, right. It's and we talk about this all the time in all of our episodes, right? It's about engaging the people, and you have to remember to engage your leaders too. So we as leaders remember that we have leaders reporting to us, and even going up the chain too, you have to make sure that you have that engagement both ways. So important. You know, and then there's also cybersecurity, ransomware incidents doubled this year, and it's you know, that's the trend, right? We only see it going up. And with an average payment of over one million dollars of this, when you think about what's going on, it's crazy. So the rise of data theft, first attacks, means prevention is now less important than resilience.

SPEAKER_01 5:42

Yeah, that's right. And as I say, it's not if, it's when.

unknown 5:48

Yeah.

The Tightrope Leader And Boardroom Metrics

SPEAKER_01 5:49

When are you gonna get attacked? And are you resilient enough to bounce back? Right. This is this is always the question we have to ask ourselves. So if we sum it up, 2025 was uh sort of this year of the tight rope leader, right? Balancing the cost and the growth, uh, AI, ethics, performance, and people.

SPEAKER_00 6:11

Yeah. So let's zoom in on the numbers driving boardroom decisions. US consumer confidence held around 94.6 in October, showing optimism, but not exuberance. CEO confidence stayed below 50, meaning more negative than positive sentiment is still going on.

SPEAKER_01 6:33

Yeah. And you know, the venture capital keep pouring into AI. So in Q3, more than half of global VC dollars went to AI-driven startups, especially those building a genetic or domain-specific models.

Hybrid Work’s New Normal

SPEAKER_00 6:52

Yeah, and meanwhile, we have you know hybrid work stabilized. The average employee now works home 2.3 days a week, and it's a rhythm that seems to have stuck post-pandemic. Now, I'm hearing some companies that in 2026 they're going to four days a week, they're going full-time, but the average is still this 2.3 days, and we do have some companies trying to push the one way, but we've seen companies trying to push that before, and then we've seen them pull back. So it'll be interesting on how we look into 2026 moving forward.

SPEAKER_01 7:23

Yeah, this is a big subject. Uh, you know, in our coaching clients, we hear about this, the challenges of this, Stacy. Uh, I think uh it's great to have people back to the office for the connection. I will tell you though, productivity goes down. There's no question that uh I still think the hybrid model, at least from my perspective, is the best, right? Because people got, they learned how to work. They learned how to be disciplined in an environment like that. Uh, but you know, we still got that hybrid equilibrium challenges, right? So managers have to lead distributed teams while they're protecting that connection. We know that's that's real. Uh, we we've seen a clear correlation between teams with a strong sense of belonging, outperforming disengaged ones by over 50% in productivity metrics. So again, you know, I think this is a bigger topic.

SPEAKER_00 8:19

Yeah, for sure.

What Worked: Playbooks That Delivered ROI

SPEAKER_01 8:23

Yeah, exactly. Yeah, that's right.

SPEAKER_00 8:25

Yeah, you know, so the data says that this technology is advancing faster than people are adapting, and leaders' biggest job is bridging that gap. That's what you have to focus on as leaders.

SPEAKER_01 8:38

Yeah. And that that that is uh that that's a big that's a big discussion, right? Let's talk about what actually worked this year. So this is you know, real leadership playbooks.

SPEAKER_00 8:52

Yeah, okay. So let's do number one rewire to ROI. Companies that delivered value from AI didn't run pilots. They redesigned one workflow at a time and they assigned ownership, tracking savings, and focused on measurable impact within 90 days. That was one of the changes.

SPEAKER_01 9:12

Uh, number two, the manager flywheel. Leaders doubled down on clarity, on progress, on recognition. The cadence was simple. Weekly check-ins, monthly growth conversations, quarterly resets, and it turned managers into multipliers again, which is where we want it to be. For sure.

SPEAKER_00 9:36

And number three, we got to bring up that cyber strategy again. Organizations ran quarterly simulations and implemented identity first security. Not glamorous, but it we know it's absolutely a such shell.

Predictions For 2026: The Year Of The Leader

SPEAKER_01 9:49

Yeah, and the big one uh that I saw and spent a lot of time discussing uh with different businesses was the FinOps for AI. You know, as machine learning spend sort of bloomed, CFO started treating ALI cloud, tracking the usage, the cost, the value through one dashboard. So it's now part of enterprise governance. And listen, I think FinOps is a big discussion uh just in general. I think that's gonna be a massive, you know, trend for a while. But specifically, we're talking about FinOps for AI here.

SPEAKER_00 10:24

Yeah, I think all of these points that we're bringing up can be their own episode, but we know you only have so much time in the car in your commute listening to this, and that's only 2.3 days of the week. So we want to we want to make sure we take care of that time. But we asked, what's the common thread with all of these? And it's really leaders who operationalize, have operationalized discipline, whether it's people, process, or protection, those are the leaders that win.

SPEAKER_01 10:51

So, Stacy, let's uh let's pull out that uh crystal ball. Uh, you know, what do you what do we think is coming in 2026?

SPEAKER_00 11:01

My first prediction for 2026 is it's gonna be the year of the leader. Engagement recovery depends on equipping these leaders to lead with empathy and edge. And organizations will certify and coach every people leader, not just assume they know how to lead. So, coaching, as we know, is so important. And of course, that's what we want to be able to do, but you really got to focus on that leadership development.

SPEAKER_01 11:27

Yeah, for sure. Uh, prediction two AI becomes a GenTech, not just a tool, but a teammate. And we hear this a lot. Gartner is already tracking the rise of multi-agent systems and AI security platforms. So by the end of next year, expect at least one business function in every Fortune 500 to run GenTech workflows.

GenTech, Cyber As ESG, And FinOps

SPEAKER_00 11:53

I like the idea of that one. Yeah. All right, I gotta go back to cyber again, right? So for my for my prediction three, cyber becomes the next ESG. Boards will report cyber resilience alongside sustainability metrics because trust is now currency.

SPEAKER_01 12:10

That's right. And I mentioned it earlier, prediction number four, FINAPS for everything. So we'll see financial accountability expand beyond cloud to include AI, SaaS, and even people productivity.

SPEAKER_00 12:27

Yeah. And I'm gonna say that, you know, hybrid work won't vanish. We kind of talked about this, right? It's gonna normalize, just continue to normalize. Two to three anchor days will become the standard, and flexibility will be the new talent contract.

SPEAKER_01 12:43

Prediction six kind leadership rises. Yes. And after years of volatility, employees are gravitating towards authentic, transparent leaders who pair performance with purpose. And this is definitely, I know you've seen it, Stacy, this is happening in the younger generations as well. This is very important to them. So as we see those multi-generational uh numbers change in the workforce, uh, as the young ones, the younger ones are coming up, this is something that's very important to them.

Hybrid Standards And Kind Leadership

SPEAKER_00 13:20

Yeah, totally agree. Totally agree. It is definitely something that people have to think about. We've been talking about it for years, um, but we still have a hard time doing it for some reason. So I I love that prediction and uh I hope that one becomes true.

SPEAKER_01 13:35

Yeah, and we still see a lot of bad leaders, right? I mean, uh yeah, yeah. It's still there. Uh you know, maybe that's not the term we're using, but you know, we're still not seeing that leadership mastery the way that we'd like to see.

SPEAKER_00 13:48

Yeah, yeah. And I think a lot of that is I mean, not getting feedback, not getting the development that they need. It's not that they're bad, it's that they don't know. No one's playing them, right?

SPEAKER_01 13:57

I think that's true. Yes. That yeah, there's just a lot of room for improvement. Absolutely.

SPEAKER_00 14:02

All right. My final prediction for 2026 will be to re um reward focus over frenzy. So the leaders who choose fewer, bolder bets and execute them brilliantly will separate them from the pack. It's not about how much you're doing, it's about what you're doing, even it even if it's one thing, right?

Lessons Learned: Clarity And Quiet Courage

SPEAKER_01 14:21

I love this one. Uh, I think this, you know, actually goes in line with a lot of our conversations, right? How do you get focused? Uh, you know, try to be, you know, one thing versus millions of things to different people. It doesn't work. Uh, and that's sort of a marketing 101. We know that, right? So as often as we say we're no longer in era of doing more, we are in an era of doing meaningfully.

SPEAKER_00 14:47

Yeah, I love that. Oh, that's great. I love that. So, Tracy Ann, what do you what's your biggest leadership lesson of 2025 for you?

SPEAKER_01 14:56

Uh, I think that clarity is a form of kindness. You know, whether it's with teams, strategy of yourself, uh, clear intent, it changes everything. And uh, I've never thought of it from the perspective of kindness. Uh, that was a big that was a big eye-opener for me this year.

SPEAKER_00 15:16

I love that.

SPEAKER_01 15:17

I love that.

SPEAKER_00 15:18

You know, mine was courage doesn't always have to roar, right? It often whispers. You can be super courageous and be the silent person in the room. So it's about staying the course. You know, leadership this year, it wasn't glamorous, it was truly gritty when I think about my clients and they really had to grind through it, um, and they are better for it, and they were very courageous through it.

SPEAKER_01 15:42

Yeah, you know, and another thing with that, uh, Stacey, is we learn more from our failures and the challenges than we learn from the things that are going great. And as leaders, we must never forget that.

SPEAKER_00 15:57

Uh, we don't ask for those hard times.

Challenge For 2026 And Closing CTA

SPEAKER_01 16:00

No, we don't, and we don't like them. We don't know. We don't like them. It's hard. Uh, and and it's uh it's uncomfortable. And in many cases, you know, you're faced with situations that you don't even know what to do. You know, it's the first time you might be encountering them uh and you don't have all the answers. But just remember those are the times uh that the challenging times are the ones where we learn and they're the ones that make us better. And at the time it's hard to to you know to think about that. You're not thinking about it, quite frankly. It's only when it's it's over that you think about it, right? And you realize, but uh just you know, grin and bear it uh and suck and suck it up out of cup is you know, sort of the the mantra, right?

SPEAKER_00 16:49

Which is on my wall that everyone sees if you're watching the video version is if it doesn't challenge you, it doesn't change you. And you know, when you're going through those hard times, find your mantra of what that is to help you move through it. So yeah, I love that, Tracy. I love that.

SPEAKER_01 17:04

Yeah. And for everyone listening, you know, here's our challenge. As you plan 2026, ask yourself, where will you bring focus? What will you stop doing to make room for your best work?

SPEAKER_00 17:19

Yeah. And if this conversation helped you reflect, share it with another leader who needs it, right? And subscribe on YouTube or your favorite podcast app to listen to us even further.

SPEAKER_01 17:31

So, from both of us, thank you for walking this leadership journey with us in 2025. And remember, lead boldly, be kind, and we will see you in 2026. If you enjoyed the show, please go to leadershipmomentspodcast.com to subscribe to the podcast or on your favorite player, as well as follow us on Instagram and LinkedIn.

SPEAKER_00 17:59

You can also send us a message on what you like and don't like or what guest you want us to have on the show. So until next time, this is Stacy Caster, and what doesn't challenge you won't change you.

SPEAKER_01 18:09

And I'm Tracy Ann Palmer. Be the change you wish to see in the world.