The impact of toxic work culture on employee turnover, well-being

In the fast-paced, ever-competitive corporate world, the conversation surrounding the importance of having a positive, non-toxic, and healthy workplace continues to rise. However, healthy workplaces have been overlooked over the past few years, and workplace toxicity has emerged as a critical factor in driving employee departures.

According to MIT Sloan research, more than 24 million American employees quit their jobs between April and September 2021. The study used employee data to determine the top five predictors of attrition. Data revealed that workers are 10.4 times more likely to leave their jobs due to a toxic corporate culture. This is followed by job insecurity and reorganization (3.5), high levels of innovation (3.2), failure to recognize employee performance (2.9), and poor response to COVID-19 (1.8). 

The U.S. Bureau of Labor Statistics reports that 50.6 million people quit their jobs in 2022 across the country. A McKinsey Health Institute (MHI) report on employee burnout found that one out of four employees around the globe experiences toxic behavior in the workplace. 

This growing concern eventually caught the attention of major health organizations. The U.S. Surgeon General and World Health Organization identified toxic work environments as injurious to employee well-being and organizational success.

“Mental health in a workplace: It’s not a nice-to-have, it’s a must-have.”

- Office of U.S. Surgeon General

WHAT IS DRIVING ‘THE GREAT RESIGNATION’?

Survey data from the American Psychological Association reveals that 18% of workers report having a somewhat or very toxic workplace, while 30% have experienced abuse, violence, or harassment at work. 

MIT Sloan Management Review defines toxic workplace culture through several key characteristics that are driving employees to put down their papers:

• Lack of inclusivity

• Widespread disrespect toward workers

• Unethical behavior

• Abusive management practices

• Cutthroat competition

• Hostile work environment

HIDDEN COSTS OF WORKPLACE TOXICITY

Researchers have explored the relationship between toxic workplace cultures and their toll on mental health. Such environments can cause chronic issues like anxiety, depression, burnout, decreased job satisfaction, and even physical health problems. These issues are not limited to the four walls of the corporate world, they extend beyond the workplace, invading employees’ homes and impacting their personal lives.

“When a workplace becomes toxic, its poison spreads beyond its walls and into the lives of its workers and their families.” 

- Gary Chapman, Rising Above a Toxic Workplace.

However, the cost of workplace toxicity extends far beyond employee well-being. The Society for Human Resource Management (SHRM) reports that one in five American employees left their jobs in the past five years due to a bad company culture. The turnover due to negative work cultures has cost American businesses $223 billion during this period. The U.S. Surgeon General estimates that toxic work environments add up to $16 billion annually in employee healthcare costs.

Workplace toxicity can also affect employers due to higher employee turnover, reduced employee productivity, lower employee engagement, legal costs, and damaged reputation. 

Toxic workplaces tend to have higher employee turnover, which can be costly for a company. Replacing an employee is a costly business, given the amount shelled out to recruit, onboard, and train new employees. It can cost an organization at least two times the annual salary of a former employee to fill their position. 

Employees who are constantly stressed tend to be less productive, according to Lyra Health. Interpersonal conflicts and constant negativity or disrespect hamper a company’s overall efficiency. Studies show that happy employees are 20% more productive than unhappy employees. 

This also can lead to employees who are likely to not show up at work or suffer from ‘presenteeism’ - technically present but not functioning their best, leading to less employee engagement in the office. A Gallup poll reveals that only 36% of U.S. workers are engaged at work, with 50% disengaged and 15% actively disengaged. This disconnection costs the U.S. economy approximately $605 billion annually in lost productivity.

The average cost of defending a harassment lawsuit in the U.S. is $250,000. Lawsuits and legal battles are not only a monetary burden for organizations but also damage reputation in the marketplace. This can also lead to a damaged reputation, which makes it difficult for companies to attract top talent and drives employees away. Over one-third of employees said they would turn down their dream job if the work culture has bad reviews on online sites. 

IDENTIFYING & ADDRESSING A TOXIC WORKPLACE

Several red flags – like high turnover rates, psychological safety concerns, poor communication, low employee morale, poor core values, unethical behavior, physical and mental health consequences, unfair treatment, lack of recognition, and bad management – breed workplace toxicity. 

The Cambridge Dictionary defines employee turnover as “the rate at which employees leave a company and are replaced by new employees.” A consistent pattern of employee departures often signals underlying cultural issues. To retain or attract new employees, companies can promote a healthy work-life balance by giving frequent breaks, encouraging vacations, and monitoring workloads. 

Toxic companies typically do not create spaces for psychological safety. Workplace toxicity grows when employees fear failure and the negative consequences of sharing ideas or making mistakes. Leadership training can promote psychological safety and employee development. Creating a safe environment to acknowledge employees’ grievances can make them feel heard. 

Another clear sign that a workplace may be toxic is communication issues. Siloed teams, lack of clear role definitions, poor information sharing, and prevalence of gossip are indicators of a toxic workplace. Companies can implement clear communication channels like anonymous feedback systems, regular employee surveys, protected whistleblower programs, and open-door policies with management.

Employees working in toxic workspaces will often feel discouraged to work or pursue new ideas and unmotivated to participate in company activities. Research shows that negativity is contagious and can lead to high turnover and low productivity.  Organizations can allow employees to work in their preferred arrangement to be more engaged, efficient, and well-connected with colleagues. Employees with weekly check-ins with managers are also likely to trust them and see growth opportunities. 

Companies without a defined mission statement and core values can have inconsistencies. Strong values enable employees to work in a disciplined manner, build trust in the company, and ensure harmony. Companies can adopt a ‘people-first’ approach instead of ‘productivity-first’ approach. It encourages employees to reach out, work at their full potential and feel valued. 

There also tends to be a trend of unethical behavior when it comes to toxic workplaces. Acts of bullying, misleading, and making false promises by superiors or co-workers can make employees feel disrespected and inconsequential. Toxic workers generate enormous regulatory and legal fees and liabilities for the firm. Companies can establish a code of ethics for employees, monitor bad behavior, encourage open communication, and create a clear reporting process.

Toxic behaviors in the workplace can result in physical and mental health consequences for workers. ‘Stressed because of workload’ differs from ‘stressed because of the workplace.’ Toxic spaces can increase stress and anxiety, rate of burnout, physical health issues, impact sleep, and disrupt work-life balance. Companies can promote the importance of mental health by giving breaks when employees are overworked, not feeling up to the mark, or burnt out. 

Employees must be acknowledged and rewarded for their contributions and accomplishments. Salary alone is not enough, employees need to be appreciated for their contributions. Companies can conduct Rewards and Recognition programs that include monetary rewards, an extra day off, spotlights, or special recognitions for their staff. Employees who are recognized and appreciated are four times more likely to be engaged. 

Employees have often claimed they quit their bosses, not their jobs. A DDI study that collected data from over 1000 people showed 57% of people quit because of their bosses, and 37% considered quitting because of their manager. Companies can conduct leadership training for management and senior authorities on how to interact with their employees and maintain a healthy work environment.

MOVING FORWARD

Peter Drucker, a noted management consultant, observed that “culture eats strategy for breakfast,” highlighting how toxic workplace culture can undermine even the most sophisticated business strategies. Cultural health is as crucial as traditional business metrics.