Why your best people are leaving (and what HR must do about it)

Most large companies treat employee disengagement the same way they’ve treated it for the past fifteen years: identify the symptom, buy a program, measure the result, wonder why nothing changed, and repeat. 

The scale of this cycle is remarkable. American companies spend over $100 billion per year on employee engagement initiatives, from wellness programs and pulse surveys to recognition platforms and employer branding campaigns. 

And according to Gallup’s 2025 State of the Global Workplace report, global employee engagement just fell to 21%, a drop that matches the decline during COVID-19 lockdowns. The cost of that disengagement: $438 billion in lost productivity.

Something about this HR approach has been fundamentally broken for a long time.

HR keeps solving a culture problem with culture tools

The standard playbook for declining engagement has barely changed. Scores drop, so companies introduce a new perk, launch a listening initiative, or redesign the office kitchen.

Jacob Morgan wrote about this pattern in Harvard Business Review back in 2017, describing most engagement programs as “an adrenaline shot” that provides a short-term boost before scores drift back down.

Eight years later, the cycle continues.

The programs themselves are fine. Recognition matters, listening matters, wellness support matters. The issue is that these are all interventions aimed at how people feel about their work, while the org chart determines what their work is.

When someone needs three levels of sign-off to make a decision they’re perfectly qualified to make, a better wellness app doesn’t address the root cause of their frustration.

Most large organizations carry somewhere between eight and twelve management layers, and each one adds friction to decisions, distance from outcomes, and a subtle but persistent message to the people below: your judgment alone is insufficient.

Over time, talented people spend more of their day managing the process of getting work approved than doing the work itself.

The freelance economy is structural feedback

The rapid growth of freelance and independent work is often framed as a lifestyle preference, particularly among younger workers. This framing misses the point.

Upwork’s 2025 Future Workforce Index found that 28% of skilled knowledge workers in the US now operate as freelancers or independent professionals, collectively generating $1.5 trillion in earnings in 2024.

Full-time freelancers earned a median income of $85,000, outpacing the $80,000 median for full-time employees.

And 53% of Gen Z freelancers are now working full-time hours on freelance projects, making a clear trade: less security in exchange for more agency over how, when, and on what they work.

That trade only makes sense if the corporate environment isn’t offering enough of what they value.

HR leaders should be reading this as a signal about organizational design.

When companies see their best people leave for independent work, the reflexive response is to adjust compensation packages or improve employer branding.

A more honest assessment might start by asking how many approval steps sit between an employee and a meaningful decision.

Companies that are redesigning from the inside

A handful of large organizations have started to take this seriously.

In November, I spoke with Bayer’s CEO Bill Anderson. When he joined the life sciences giant in 2023, he found twelve layers of management across an 87,000-person workforce.

He collapsed them to six, reduced management positions from 15,000 to 5,000, and pushed 95% of decisions down to the people closest to the work.

Bayer’s model, which draws on Gary Hamel and Michele Zanini’s Humanocracy framework, now runs on 90-day cycles with 10% to 15% of the workforce changing assignments each quarter.

Bayer is on track to cut €2 billion in costs, which matters. But the more interesting outcome is what happened to the people who lost their management titles. Most stayed. They stopped administrating and started using their expertise, coaching others, getting consulted on projects, doing work that drew on their skills rather than burying them in approvals.

Anderson has said publicly that the gig economy is a side effect of corporate mindlessness, and that offering people meaningful, low-bureaucracy work brings many of them back from the edge.

Bayer is the most radical example, but the direction is spreading.

Citibank has announced plans to reduce management layers. Haier, the Chinese appliance manufacturer, has organized its 80,000 employees into thousands of self-managing microenterprises.

These companies are arriving at a similar conclusion from different starting points: hierarchy built for industrial-era consistency creates friction in a knowledge economy that demands speed and judgment.

Where HR should focus next

The most useful thing HR can do right now is shift attention from sentiment to structure.

Engagement surveys measure how people feel, but they rarely capture whether people can do their work without wading through layers of process.

A few specific areas deserve attention.

First, audit decision-making speed. Map how long it takes for a routine decision to move from the person who knows the answer to the person authorized to approve it. That gap is one of the most reliable predictors of frustration and, eventually, attrition.

Second, rethink what gets measured. Most performance management systems track activity and output, but very few measure whether someone has the autonomy to do their job well. Start asking employees a simpler question: can you see the impact of your work?

Gallup’s data consistently shows that clarity around impact and expectations is one of the strongest drivers of engagement, far more powerful than perks or benefits.

Third, build for internal mobility. When 10% to 15% of Bayer’s workforce shifts assignments every 90 days, it creates a talent marketplace inside the company where people can move toward work that interests them.

Compare this with the average large organization, where changing roles requires navigating internal politics and often feels like a career risk.

And finally, hire for judgment. If the direction of travel is toward fewer layers and more distributed decision-making, the hiring profile changes.

Organizations need people who can operate without constant oversight, who are comfortable with ambiguity, and who can collaborate across teams without formal structures forcing them to.

The real HR test

The question for HR leaders is straightforward: are the organizations they support designed for the way people work now, or are they still optimizing an industrial-era model with modern window dressing?

Plenty of companies announce flatter structures and empowered teams while keeping every approval process intact.

The real test is whether individual employees have more agency this year than they did last year, and whether they can see the connection between their work and the outcomes it produces.

The companies that get this right will keep their best people.

The ones that continue treating engagement as a problem you can spend your way out of will keep spending, and the numbers will keep doing exactly what they’ve done for the past fifteen years.