As leaders, we need to constantly evolve to keep pace with changes in the business world. And 2025 is already shaping up to be a defining year.
From the rapid advancements in AI to the ongoing debate around return-to-office mandates, leaders must navigate a myriad of disruption, change and opportunity. In this article, Sam Bell, Institute of Managers and Leaders CEO, and Scott Martin, General Manager of Learning Development and Membership, explore the four major themes that will shape leadership over the next year and beyond.
1. Digital transformation and AI
Digital transformation, particularly the rise of AI, is the number one external factor expected to impact businesses in 2025. However, many organisations are struggling to move beyond the hype and effectively integrate AI in ways that enhance productivity.
The challenge is that there are a lot of unknown unknowns. It can seem like every week a new technology or AI application is coming out. For managers and leaders, it can be difficult to get a handle on the speed of change and following what competitors are doing.
Initially, there was a great deal of excitement surrounding the advent of AI. This ultimately led to inflated expectations, which has seen a level of scepticism emerge. Leaders are quickly realising that rather than replacing jobs, AI will instead augment roles – i.e. enhance roles without eliminating them – presenting new challenges in job design.
Rather than being distracted by AI as a new “shiny toy”, start with a focus on the business problems you need to solve. From there, you can look to AI for strategic solutions to support the need.
To effectively integrate AI, leaders need to embrace change management as an ongoing practice rather than a one-off project. This involves bringing the workforce on the journey, ensuring they are equipped to use AI tools productively.
The key takeaway? AI should be a tool that serves leadership, not a distraction that dictates it.
2. Productivity vs. flexibility in the return to-office debate
The return-to-office debate continues to be a major challenge for organisations worldwide. As companies enforce stricter in-office requirements, questions arise about productivity, employee engagement and talent retention.
Hybrid work models come with their challenges. For a start, it’s harder to induct new employees and support leaders of hybrid teams. But a strict and complete return to the office isn’t always the answer.
Research shows that rigid return-to-office policies can drive top talent – particularly high-performing, skilled and female employees – out of organisations. One-size-fits-all mandates are increasingly ineffective. Instead, leaders should look to balance collaboration, culture and flexibility, empowering team leaders to shape working arrangements that suit the specific needs of their team.
While the argument for measuring success based on outcomes rather than attendance is a strong one, this isn’t always easy. Many companies struggle to effectively measure outputs rather than inputs. This is particularly the case for certain job types.
Importantly, however your return-to-office policy is shaped, how you communicate any change will underpin how successful it is. You need to clearly communicate the benefits that the return to office will create. It’s also important to commit to a transition period as a business, to give your employees time to adjust to the new normal.
Effective return-to-office strategies require more than policy changes – they demand cultural shifts and leadership adaptability.
3. The role of empathy and emotional intelligence
Empathy has become a defining trait of effective leadership. Leaders are challenged to balance accountability with emotional intelligence, creating environments where employees feel supported and engaged.
However, there is a fine line between cognitive empathy – understanding others’ emotions – and affective empathy – absorbing those emotions. Leaders must learn to motivate and support employees without becoming emotionally overwhelmed. This is particularly relevant as employees navigate hybrid work models, where isolation and communication challenges can impact mental well-being and engagement.
Maria Ross, author of The Empathy Edge: Harnessing the Value of Compassion as an Engine for Success, says that empathy when practiced effectively can coexist with high standards of accountability. But this is often very difficult when your workforce is feeling the pressure of lots of change.
Building a culture of empathy requires intentional leadership practices, including regular check-ins, active listening and transparent communication. Leaders must create environments where employees feel safe to share challenges and concerns, fostering trust and loyalty. Emotional intelligence is not just about understanding others. It also involves managing one’s own emotions and maintaining resilience in the face of uncertainty.
As workplaces evolve, empathy must be balanced with decisiveness and clarity to maintain productivity and morale. Leaders who demonstrate empathy while maintaining accountability will inspire high performance and engagement, leading to stronger, more adaptable teams.
4. Burnout, training gaps and the future of leadership
Frontline and mid-level managers are facing significant stress and burnout, with many lacking formal training to support them in their roles. Recent research from Human Synergistics reveals that frontline managers report their ability to handle stress as lower than any other level of leadership. They also report poor job satisfaction, with only 44% feeling supported by their organisations.
When you consider that 70% of the variance in engagement is determined solely by the manager, this is concerning.
This leadership crisis is compounded by organisations flattening their management structures, increasing the already high workloads of their existing managers. The shift towards leaner teams means that managers are now responsible for more people, often without the necessary resources or guidance.
The trend of removing layers of management has coined a new term – ‘unbossing’. While ideally this would lead to improved agility and decision-making, it can also have the negative impact of leading to burnout and decreased job satisfaction. The crux of the issue is that we’re not supporting leaders on the way up, they’re not getting support once they get to leadership positions and we’re cutting some of the middle out of organisations.
What’s needed to build resilient leadership teams is a combination of continuous skills mapping, targeted development and a proactive approach to leadership training.
As leadership demands evolve, organisations must rethink traditional management hierarchies and embrace more flexible, collaborative structures. By fostering a culture of growth and resilience, businesses can empower their leaders to thrive in a rapidly changing environment.
The leadership imperative for 2025
One thing is clear: leadership in the coming year will require adaptability, strategic thinking, and a human-centred approach.
As we step into 2025, businesses that invest in strong, adaptable, and empathetic leaders will be the ones that thrive. The future of leadership isn’t just about technology or policy shifts – it’s about people. The question for organisations isn’t whether they can afford to develop their leaders. It’s whether they can afford not to.
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To learn more about the leadership outlook for 2025 and dive into the key themes discussed in the article, watch the recent webinar facilitated by Sam and Scott below.
