The Exhaustion system in D&D 5th Edition is terrible.
That's not a hot take, and is in fact a pretty generally accepted opinion, but today I thought I'd take a look at why it's so bad, and what could be done to fix it. So: what's wrong with exhaustion?
1. The penalties are weird
As much as I love raw mechanical systems, flavour tie-in and things making intuitive sense is essential, particularly in a RP game like D&D. The penalties levied at different exhaustion levels aren't really related to each other. Levels 2 & 5 are movement-related, 4 & 6 are HP-related, and 1 & 3 only seem similar to each other until you note that ability checks are mostly non-combat while attacks and saves are almost exclusively combat-related. These penalties being so distinct means that at any point, one more level of exhaustion could be either crippling or irrelevant, dependent on the task at hand.
2. Penalties scale differently for each class
The penalties affect each class very differently. For example, most wizards really won't care at all about the first two exhaustion levels—ability check disadvantage & halved movement—and can work around the third without too much trouble by using spells that target an enemy's saves rather than requiring an attack roll. Meanwhile, one exhaustion level can seriously affect a skill monkey's ability to do things outside of combat, or a grappler's ability to do things in combat, and two exhaustion levels may cripple a Barbarian or Paladin, classes that are only effective at close range.
3. It's part of the very half-baked mechanical support for exploration
On page 8 of the Player's Handbook, the three pillars of D&D are listed as Exploration, Social Interaction & Combat. Of those three, the mechanics of 5e are very heavily combat-centric, and while there is some mechanical framework for social interaction, exploration for some reason got completely shafted. Now, my problems with this are numerous, and I'm sure I'll have a proper gripe about 5e's lack of exploration support at some point, but for now my point is that exhaustion is a mechanic largely built for exploration/survival, but without any actual exploration/survival systems it just sits there unused, orphaned by pretty much the entire rest of the book.
Between the PHB and the Dungeon Master's Guide, exhaustion is given as a penalty for extreme temperatures, frigid water, starvation, dehydration, and travelling at a forced march. Xanathar's Guide to Everything adds exhaustion from long periods without a long rest, and temporary exhaustion from the spell Sickening Radiance. There's a single enemy from Princes of the Apocalypse, and to my knowledge that's pretty much it. No other spells, no monsters, no abilities... except for the PHB's first Barbarian subclass: the Berserker.
Berserkers can take a level of exhaustion to make attacks with their bonus action for the duration of a single combat. Cool, fitting, powerful. However, in additon to the fact that the other subclass is the famed Totem Warrior, who can extend your resistance from physical to all damage, the Berserker really isn't an appealing subclass because exhaustion is so punishing. If you're gaining a level of exhaustion each time you use that ability in combat... that leads us to Number Four.
4. Exhaustion can only be removed by a long rest, and only one level at a time
(or by the 5th-level spell Greater Restoration, which you can't get until 9th level, is only available to three classes, and is a pretty expensive trade for the Berserker ability). That's it. Those are the only ways to remove exhaustion, which means for practical purposes a Berserker can only gain their extra attack in one combat per long rest, is a mediocre grappler at best, and usually has disadvantage on ability checks, discouraging the player from participating in half the game.
So, how would I change exhaustion?
Exhaustion is one of the most frequently house-ruled or hand-waved parts of 5e. I've seen a number of house-rules, most of which seem to focus on adding things that cause exhaustion or changing the Berserker penalty. Here's my rework, redefining exhaustion with hit dice—another underused mechanic in 5e, directly tied to a character's endurance.
These changes still function in line with the original design goals, creating pressure to rest, while impeding a character's abilities in a clear, understandable way that affects all classes in a similar manner.