There’s a particularly illuminating paradox buried in International Workplace Group’s 2026 State of the C-Suite report: CFOs are slashing budgets by 10% while CHROs are being asked to simultaneously boost productivity, engagement, retention, and well-being. It’s the corporate equivalent of being told to throw a banquet on a grocery-store sandwich budget.
Welcome to a new year, where optimism and austerity have become uncomfortable bedfellows.
In the report, all CFOs surveyed reported financial impacts from economic uncertainties and nearly all (99.62%) reported impacts from policy changes. Yet 95% of CEOs are entering the year with what can only be described as aggressive optimism. They expect conditions to improve. They’re bullish on growth. They’re also obsessed with cost control, with 100% saying it’s essential to success in 2026.
For people leaders, this creates an interesting tension. The survey of 1,200 U.S. C-suite executives at hybrid companies reveals that 86% of CHROs, chief people officers, and chief talent officers will prioritize supporting employee well-being in 2026. Meanwhile, 84% are prioritizing both improving employee engagement and retaining talent among working mothers and caregivers. And 83% are prioritizing productivity, collaboration improvements, and talent attraction.
All while their CFO colleagues are moving to shared workspaces (37%), reviewing vendors for budget-friendly alternatives (34%), and in some cases, reducing headcount (28%).
So what’s a CHRO to do?
The flexibility play
The answer, according to this report data, is to lean hard into flexible work as infrastructure and not as a perk.
Consider: 95% of people leaders agree that flexible working is now the most in-demand benefit sought by prospective employees. And 94% believe that if their companies increased flexibility and eliminated lengthy daily commutes to central offices, it would positively impact the organization. The top anticipated benefits? Productivity (43%), profitability (41%), employee wellbeing (40%) and talent attraction (37%).
“By reducing daily, costly commutes to faraway offices and empowering people to spend more time working closer to where they live and want to be, leaders can cut costs, maximise productivity, increase employee satisfaction and retention, and drive better ROI,” said Mark Dixon, IWG’s founder and chief executive officer.
It’s worth noting what happens when you go the other direction. When asked what would occur if companies reduced flexibility and mandated return-to-office, 90% of CHROs predicted detrimental effects. Talent retention takes the biggest hit (40%), followed by profitability (39%), employee wellbeing (39%), employee trust (37%) and hiring capabilities (36%).
The trust gap
Perhaps the most intriguing finding is that 77% of all C-suite executives plan to take a “hushed hybrid” approach in 2026. They believe that this allows for greater flexibility than official company policy dictates.
When more than three-quarters of leadership is prepared to undermine stated corporate mandates quietly, that’s a remarkable vote of no confidence in rigid attendance requirements. It also suggests that people leaders understand something their policies don’t yet reflect: that talent retention in a tight market requires actual flexibility, not the illusion of it.
The same percentage (77%) agrees that abandoning hybrid work could mean losing top talent to competitors. The math here is simple. In an environment where CFOs are already concerned about rising costs, losing experienced employees and having to replace them is the kind of expense you can’t afford.
The burnout calculation
When CHROs were asked what factors most improve employee wellbeing and address burnout, their top answers were revealing: supporting personal and professional growth (33%), creating meaningful in-person collaboration moments (32%) and prioritizing output over attendance (31%).
Notice what’s not on that list: pizza parties, wellness apps or mandatory fun. People leaders seem to understand that burnout is a structural problem requiring structural solutions like flexible work arrangements that respect how humans actually function.
The report notes that 80% of CHROs will prioritize fostering or improving organizational culture in 2026. But here’s the issue: culture is built through trust, not mandates. And when 77% of executives are planning to quietly ignore official policies, that suggests current approaches might not be working.
The AI wildcard
There’s another variable in play: 82% of C-suite executives say investment in AI and automation will be prioritized in 2026. Previous IWG research found that 78% of workers report that AI saves them time, which works out to an average of 55 minutes per day.
For CHROs, this creates both opportunity and obligation. AI can handle routine tasks, theoretically freeing humans for higher-value work. But it also means people leaders need to rethink training, role definitions and how work itself is structured. Not coincidentally, 83% of people leaders say workforce training and upskilling will be prioritized.
The truth in numbers
Here’s what the data really says: In 2026, CHROs are being asked to deliver more with less while navigating a talent market where flexibility has moved from a nice-to-have to a non-negotiable. The solution isn’t to choose between cost control and talent investment. It’s to recognize that in the current environment, flexible work is cost control with improvements in retention, engagement, and well-being as side effects.
As Dixon puts it: “Productivity and performance come down to good management of people.” The CHROs who figure out how to make that work within tighter budgets will define what comes after.
Image credit: iStockphoto/ChrisGorgio
