The Financial Cost Of Toxic Workplace Cultures

What do we mean by toxic workplace culture?

Toxic cultures permeate through every industry, of every size. Some make the news, most notably within large investment banks, but toxic environments of various types are pervasive. We can’t blame specific employees or leaders for this – this in itself would emphasise blame culture. The way we work, that is to say the structures and systems underlying the modern workplace, aren’t suited for optimal mental and physical health.

The 5 types of toxic workplace cultures, according to Forbes, are:

• Hustle culture
• Blame and ‘every worker for themselves’ culture
• Clique culture
• Authoritative culture
• Fear culture

Workplaces may exhibit one of these cultures, or several. They are not mutually exclusive. So, what does this look like? It could be overt – repeated bullying and harassment are obvious and clear indicators that your organisation is operating in a toxic way. Signs your people may exhibit that could signify a less than ideal company culture are:

1. Employees feeling uncomfortable taking a full hour for lunch
2. Little conversation surrounding mental health
3. People being unable to say ‘no’ and taking on too much work
4. Low levels of calculated risk taking

 

Who suffers the most from toxic workplace cultures?

• Women are more likely to leave a job due to culture than men.
• Technology sector has the most people quitting due to toxic culture.
• Gen Z and millennials experienced the highest percentage of culture-related resignations.

The financial implications of toxic cultures are particularly important for HR and L&D professionals who are trying to implement wellbeing initiatives, but face the barrier of making a business case for budget allocation. When presenting to CFO’s, we need to talk numbers. That is – the return on investment from proposed initiatives, and exactly how these initiatives are going to save the business money.

 

What is the financial cost of toxic workplace cultures?

Financial cost estimates vary, but a recent report from HR software provider Breathe, puts the figure at £15.7 billion per year in the UK. In terms of overt toxicity, legal fees, and payouts are likely to reach great heights, with average pay-outs totalling at £381,350. However, these aren’t the only financial implications, and are often not the most costly.

Attrition is a huge factor. Randstad UK surveyed 6000 employees and found that 69% of them were confident they’d move to a different company in the next few months. When compared to expected attrition of 11% per year, it’s clear the modern workplace is at crisis level. 21% of SME employees quit their job due to poor workplace culture last year. The cost of replacing an employee is substantial, averaging at £11,000 per person – with this figure being much more for senior positions. In a company of 200 people, that’s 42 people quitting, with replacement costs nearly reaching £500,000.

Harder to measure, but perhaps making up the largest proportion of the financial drain, is bottom-line lost costs. Employees who don’t feel comfortable at work are likely to find it difficult to concentrate, resulting in reduced productivity. The resultant stress often leads to burnout, potentially resulting in sick leave, incurring costs such as paying temporary staff to cover the workload. Over half of employees experiencing significant toxic environments have had to take a period of long-term leave. On the other hand, in toxic cultures, employees are likely to feel unable to take sick leave. Presenteeism costs employers up to 29 billion annually through lost productivity.

Does your organisation get backing from investors? Workplace toxicity can impact investment decisions. Nearly 9 in 10 investors would quickly remove funding from an organisation they were invested in that was involved in a bullying or harassment case.

 

What benefits do healthy workplace cultures have?

The financial implications of ‘good’ cultures, with low levels of toxicity are considerable. Highly engaged teams are 21% more profitable, with the top fifth experiencing a 41% reduction in absenteeism, and 59% less attrition. It’s clear – good cultures make organisations money, while toxic cultures are a massive financial burden. So, how do we create cultures like this?

 

What can you do to reduce toxicity in the workplace?

1. Consider a culture audit
   This is the best way to understand the root cause of toxic cultures. Enlisting the support of an external organisation provides a completely objective view of the pressure points leading to toxic cultures. Only then, can you be sure your initiatives are targeted and most likely to elicit behaviour change.
2. Implement a leadership training programme
   The role of the leader is getting broader with time and leaders have a lot to deal with. This level of responsibility and stress has the potential to lead to toxic behaviours and an emphasis on toxic culture.  Consider implementing a leadership training programme aimed at creating a culture of positive mental health in teams, while showing leaders how to care for themselves in the process. Leaders who are open and courageous surrounding conversations around mental health are likely to elicit the same in their people, all helping to dispel toxicity in the workplace.
3. Coaching
   Coaching can benefit in two ways. Firstly, it will help you get to the root cause of toxicity in the workplace, by giving your people a safe space to discuss grievances. Secondly, the act of talking through concerns with a coach can help to facilitate action plans to dispel toxic behaviours. Coaching works well alongside leadership training.

 

What can you do to build a business case?

Data, data, data. Arm yourself with facts and figures surrounding the costs of toxicity in the workplace in general, as well as in your specific industry. Build a business case that incorporates case studies showing how initiatives have saved other organisations money, and how the same can be done within your own.

To tackle toxicity, you need to know the root causes for surface level problems. For example – are employees burnt out? Instead of giving a workshop on stress management, find out the root cause – perhaps line managers aren’t listening to employee grievances about workloads. Don’t make assumptions – anything from conducting pulse surveys all the way to full-scale wellbeing audits will give you an insight into what is causing the toxicity within your culture. Use this information to find targeted solutions, so the problem can begin to be solved.

Looking for more information, guidance, and to hear how other organisations are dispelling toxicity in their workplace? Check out our upcoming panel, on 29th March at 10am.

Register here.