The cost of toxic cultures

October 30, 2019 John Rossheim

7-minute read

Bullying. Radio silence from management. Abrasive performance feedback. Discrimination and harassment.

These toxic behaviors are all too well known in American workplace culture. What’s less understood is the cost of a toxic work environment – in organizational and human terms, as well as in dollars and cents.

So let’s delve into the nature and extent of these costs – and what employers can do to provide their workers with a better place to work.

The elements of workplace toxicity

No doubt, people can have a variety of negative experiences at work. But what exactly do we mean when we say toxic workplace culture?

“A culture is typically considered toxic when trust, psychological safety, and employee morale degrade to psychologically unhealthy levels,” says Greg Barnett, senior vice president of science at The Predictive Index. In such a milieu, employees suffer from high levels of stress. “And just like a disease, it becomes contagious if not treated right away.”

What kinds of bosses create or perpetuate a toxic workplace? “It’s bullying, abusive managers – the shouter, the thrower,” says Michael O’Malley, managing director at consulting firm Pearl Meyer and a lecturer in psychiatry at Yale University School of Medicine. “It’s micromanagers who always intervene to do a task the way they would do it, and managers who take credit for everything that goes right – and blame others for all that goes wrong.”

Indeed, the manager relationship is central to each worker’s experience of company culture. Three-quarters of American workers say their manager is the chief agent of culture, according to “Toxic Workplace Cultures Hurt Workers and Company Profits,” a recent SHRM report. And 58% of those who quit a job due to culture say people managers are the main reason they left.

But if culture makes your company a bad place to work, you can’t blame it all on your own boss.

“While it’s true that an employee will leave a toxic manager, it is also true that entire employee populations will exit when they have a toxic culture,” says Greg.

More specifically, top executives have the ultimate responsibility for a company’s culture, whether they acknowledge it or not. “Toxicity usually starts at the top,” says Greg. “Senior leaders set the tone for what behaviors are expected. They create those expectations through their own actions and decisions, and through what they reward and punish.”

What are the manifestations of workplace toxicity? Here are the top ten:

  • Insufficient or dishonest communication
  • Failure of managers to listen
  • Lack of recognition of subordinates’ and coworkers’ good works
  • Performance appraisals that are too negative
  • Rampant office politics
  • Bullying
  • Discrimination, whether by age, race, gender or another dimension of identity
  • Sexual harassment
  • Expectations that employees will take ethically or legally questionable actions
  • Disrespect for work/life balance

The costs of a toxic workplace

“The costs of toxicity are extreme,” says Michael. That’s not hyperbole. In fact, toxicity is a major cost of doing business for thousands of organizations. “The most obvious work-related costs are productivity and business performance,” Greg says.

Averaged over the last 5 years, the annual cost of culture-related turnover is $44.6 billion, according to the SHRM report. One fifth of workers have left a job due to workplace culture. According to the Workhuman report “The Future of Work Is Human,” three out of five employees who have been with their company for eight years or less say they’d change employers for a more positive culture.

But the total costs of toxicity easily top $100 billion. Up to $86 billion worth of unplanned absences can be attributed to workers calling in sick when they don’t feel like going to work, the SHRM study says.

Beyond that, the constant stress of a toxic workplace takes a toll on employee health and increases employers’ medical costs.

Toxicity takes a broad and deep toll. “High-performing employees leave, dragged down by underperformers,” says Drew Fortin, a vice president at Predictive Index. “Toxic culture takes an emotional toll on employees. At the end of the day, employees in these cultures go home to families drained, exhausted, and negative.”

“If you consider all the costs resulting from toxic work environments, for a given organization they can add up to a million- or billion-dollar problem depending on the company and industry,” says Ryan Lahti, managing principal of consulting firm OrgLeader and author of “The Finesse Factor: How to Build Exceptional Leaders in STEM Organizations.

Combatting toxic culture

How can an organization curb the terrible costs of a toxic culture? It all starts with values.

A strong workplace culture must be based on “widely shared beliefs that are supported by strategy and structure,” says the SHRM report. In healthy workplaces, civility and gratitude for collaboration and good work are key.

“The organization can establish core values that are rewarded, recognized, and enforced,” says Drew. “But if policies, processes, and recognition aren't built around core values, then the values won't stick.”

Although the foundation of a healthy workplace culture is humane values, number crunching may be required to get there. “Organizations need to gather data, to do assessments and surveys on organizational culture,” says Ryan. “But they also need to do more than ‘surveying just to survey.’ They need to take action based on the data.”

For senior leadership at toxic organizations, human resources departments should provide feedback, executive coaching, and guidance, bringing in independent experts when necessary, Ryan says.

Communications and recognition can counteract toxicity.

“Poor managerial communication hurts employee engagement by making team members feel removed from decisions and devoid of any sense of ownership,” says Carlos Castelán, managing director of consulting firm The Navio Group. “In many ways, a boss’s poor communication – or lack of communication – is worse than conflict itself, because it signals to someone that they’re not valued enough to be included.”

That’s why healthy communication – and specifically recognition and thanks – should be key elements of performance management. Discussions of performance should predominantly be informal, continuous, and conducted with a positive attitude.

The payoff in improved culture can be huge. Workers who check in with their manager at least weekly are five times less likely to be disengaged than those who never have check-ins, says the Workhuman report. Among workers who never have informal check-ins, only 57% say they are highly engaged or mostly engaged. By contrast, 85% of workers who have at least weekly check-ins say they are highly or mostly engaged.

“Praise and recognition should be a key component of your management strategy,” says Susan Kuczmarski, a management consultant and author of “Lifting People Up: The Power of Recognition.”

“Personalize praise – match the right kind and amount of praise to each recipient. Use written and other tangible forms of recognition, not just verbal praise. Praise both the effort and the outcome.”

In addition, “a culture of praise is essential for innovation,” says Susan. In a healthy workplace culture, “people are excited about what’s next, they’re coming in with ideas, they’re willing to share their success stories and failures.”

Healthy communication is not just about bosses recognizing the accomplishments of their subordinates. Peer recognition is critical to many employees’ sense of belonging. When an organization enables everyone to give recognition, 87% of workers feel they belong, the Workhuman report says. But when managers are the only ones empowered to give recognition, just 72% of employees feel like part of the organization.

And never forget: When it comes to workplace culture, the buck stops at the door of the C-suite. “All of these remedies and measures are only going to work if the leaders themselves can handle the truth,” says Greg. “The reality is that in many instances, the leadership is directly or indirectly responsible for the formation of a toxic culture.”

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About the Author

John Rossheim

John Rossheim writes about healthcare, diversity, recruiting and human resources.

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