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Elizabeth T. 06.04.2021 6 min read

The Cost of a Toxic Culture and How to Fix It

We all experience bad days at work. It may be the project overload, a colleague having a bad day, or when everything seems to be “off”. A pre-employment assessment or a fancy talent management strategy can't prevent it. Negative experiences happen.

But a toxic workplace culture is not a one-off situation; it’s more than a bad day. It’s a serious issue that undermines all processes within a company.

What is a toxic work culture?

Greg Barnett, senior vice president of science at The Predictive Index, defines a toxic culture as when the “psychological safety and employee morale degrade to psychologically unhealthy levels”.

Barnett likens to a disease. It must be faced head-on. If not, it becomes contagious and lethal to a company’s goals. 

If you’re trying to spot the “symptoms'' of this pernicious company disease, you may look at two indicators. It becomes obvious in employee turnover and employee absenteeism. These are the biggest problems for companies; they are what costs companies millions of dollars every year.

To predict the likelihood of turnover and employees not showing up at work, look at the levels of discrimination and harassment within a company.

Toxic workplace cultures drive serious costs. In the US,  20% of employees leave within the past five years due to a sick culture; this turnover costs greater than $223 billion.

A great culture is in the details---and the details are often embodied in the manager, for better or worse. It’s the managers that are most responsible for culture. The research shows its managers that really can make or break a company culture---not executive leadership.

Some startling statistics about how deeply a toxic culture impacts the outputs of a company: 58% of employees who have left a job due to the culture cite that their managers were the ultimate reason.
20% of workers leaving a job part ways due to toxic workplace culture.

Hiring managers and talent management strategy programs may need to consider how to ensure great managing hires.

The Cost of a Toxic Culture and How to Fix It1

What does a toxic workplace culture *feel* like?

If turnover and absenteeism are the two biggest “outputs” of a toxic work environment, what does it feel like inside a toxic organization? One poll by the Society of Human Resources Management (SHRM) investigated American workers’ experiences in a toxic company. From their findings, it seems much of company culture is directed via leadership and management.

36% of employees believe their manager doesn’t know how to lead a team. They found that 25% of employees don’t feel secure in voicing their concerns or opinions about work-related issues.

For companies working towards innovation and efficiency, making employees uncomfortable on what could be critical issues is a huge loss in hedging competitiveness. A quarter of employees say they don’t feel respected and/or valued at their job.

Feeling appreciated and respected for your work is a cornerstone of a feel-good workplace. If it’s the opposite, this could be a sign that a workplace needs a serious culture to revamp.

Other signs of a not-so-great place to work:

  • Office politics is a huge focal point
  • Managers not listening to their team
  • Dishonest communication
  • Employees not feeling recognized or appreciated for good work
  • Performance reviews that are consistently negative
  • Workplace Bullying
  • Discrimination (based on age, gender, race, ethnicity, personal beliefs, etc.)
  • Sexual harassment
  • Unethical behavior 
  • Little respect for employees’ personal lives (little work-life balance)

The Cost of a Toxic Culture and How to Fix It4

How does a company “heal” a toxic workplace?

If it costs an annual $46.6 billion, where do companies start to combat a toxic work culture?

It starts by running a company and working based on values.

When a company has a widespread belief system that is aimed at creating structure and strategy, employees feel supported. They have a guiding light. The SHRM report highlights that having a good attitude and giving recognition are great ways to collaborate for stronger workplace culture. Executive leadership and employees alike can create and reinforce the values. Leadership must live by these values throughout their employee interactions. 

Once values are established, these values need to be reinforced by policies, processes, and forms of recognition. Actions speak louder than words, as they say. Therefore values must be seen in the hiring process, in the pre-employment assessment, in choosing the right AI recruiting software, to employee training and development. 

As managers seem to be the lynchpin in creating a healthier workplace, it’s vital that managers are trained in the values of the organization. You don’t have to specifically train on the values, but it’s about incorporating those values throughout an employee training and development course. 

Create examples within a course that relates to the core values. This can be scenario-planning. How can values be reinforced in a specific situation, like customer service? What are practical examples that have occurred at the company that can demonstrate success by following or not following the value system? You’ll want to provide examples. 

The Cost of a Toxic Culture and How to Fix It3

Another training and recruitment idea may be creating brainstorming activities around values. For your next company retreat or workshop, coordinate a session around implementing values. One example comes from Swati Karve and the Association for Talent Development; create a “deck” of values; have employees work in pairs, randomly drawing one of the value cards.

They are then tasked to figure out how an activity, a policy, or any sort of idea can be implemented in the company that shows this particular value.

A critical point of fixing toxic companies is training managers specifically. What may be most impactful is training managers’ soft skills abilities. They often lack the abilities in active listening, transparent communication, and leadership.

25% of Americans believe that an organization’s culture is a combination of employee attitudes, action, and behaviors.

This must be embodied by the person leading a team, the manager. For the biggest “bang for your buck”, investing in manager soft skill training may be one of the most game-changing decisions when healing a company culture. 

A toxic company culture may not be the easiest thing to remedy. It takes time and most importantly, commitment. It takes involvement and commitment from all levels, from executive leadership, management, and employees alike.

Creating a culture that lives out values brings immense direction and could mean financial rewards. Take the example of Ray Dalio, the founder of Bridgewater. Started out of his apartment in 1975, the company is the world's largest hedge fund with over $160 billion under management.

Bridgewater is known for "radical transparency," where employees give feedback about each other’s performance. Now while the Bridgewater model may not be for everyone, it does show that culture really does help in reaching company goals.

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What Makes Elon Musk, Elon Musk?Retorio is a video-based behavioral assessment powered by AI. It uses facial expression, language, gesture, and voice to create a Big 5 Personality profile.

Customer-centric companies like Happycar leverage Retorio to support their own talent management teams. Retorio's video-based AI was featured in TechCrunch, Spiegel, ARD, BBC and Süddeutsche Zeitung.

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