Toxic cultures lead to increased costs due to staff turnover, increased sick leave and mental health leave, increased presenteeism so that things take longer to get done, increased frustration between coworkers, lack of trust, lack of accountability causing things to take longer, lack of psychological safety, extra re-work from lack of clarity and the list goes on.
And of course all the extra drama (or in professional speak we call that “meetings”) that comes with all of the above.
And then of course you have lost revenue from what could have been earned instead of being…well…toxic…
Broadly these above costs can be categorised into two main categories:
- Cost of salaries of people doing things they shouldn’t be; and
- Opportunity cost of what the organisation could earn if everyone was doing what they actually should be doing.
So let’s do some calculations with some live examples…
As part of discovery, we like to help organisations understand where they are at, and what’s possible if they invested in their culture and leadership. This is all part of helping people to realise that this is something that it makes sense to invest in.
Personally, I don’t invest in anything unless I can understand the potential ROI, so we can hardly expect our clients to hire us without understanding the potential upside of having a high performance culture.
Of course, if there is a toxic culture, this is very easy to quantify the cost of the current problem.
One such business has 70 people in the Australian operation and 3 toxic leaders.
Using the above variables, the cost just in salaries of dealing with the fallout from these three bad apples (not including the opportunity cost of that time) was…
$700,000.
The company didn’t even need to calculate the opportunity cost of the time to see that this was a problem that was worth fixing. If they did calculate the opportunity cost, the total cost would have been well above $1,000,000. And that’s just 70 people and three bad apples.
Another example is part of a global company I’ve been working with for many years – well actually – not all of it – just in certain states. In the state I’ve been working with the longest their staff turnover is virtually non-existent. In other states it’s around 20%. At 2.5 times a person’s average salary, that’s hundreds of thousands of dollars difference between the states, just in staff turnover.
The engagement of leaders in the other states is around 20 percentage points lower than the leaders in the states I have been working with.
Energy and wellbeing levels are also significantly lower in the staff engagement surveys in the other states.
What’s the root cause of a toxic culture?
People are wired for survival, so blaming others to make ourselves feel safe is totally normal. Accountability is actually quite abnormal!
People hate “difficult” conversations – and no wonder when you know the neuroscience. People spend so much cognitive energy having a difficult conversation and they go through the same neural process and energy spend just anticipating the conversation and then of course ruminating on it afterwards.
And thanks to more people growing up online instead of in the playground, many people are lacking real life social skills and conflict resolution skills. It’s far easier just to block someone online than to have an actual disagreement and come to resolution if you aren’t practiced at this.
People are tired of being tired and it’s draining profits.
So what to do?
- Invest in developing your “culture on a page” and include this as part of your performance assessment criteria. What gets measured gets managed.
- Use the above and any other suitable resources to remove ambiguity. Toxicity occurs over time due to a mismatch of expectations. The ambiguity you remove where possible, the less toxicity is likely to build up.
- Coach your team to improve their energy and psychological capital. Studies show that mental health is on a serious decline. Tired and stressed people are just getting better at getting even more tired and stressed. Start with the neuroscience and then help everyone to take responsibility to build increase their energy and psychological capital.
- Remove toxic people who don’t want to change quickly – and the culture on a page will make it super easy to do this. In so many cases, people will actually lift when the culture is clearly articulated right there in front of them. But for those who just don’t get it, they should be given opportunities to go and do something they love somewhere else.
Why should this be a priority?
If your organisation doesn’t mind losing hundreds of thousands, to potentially millions, of dollars in lost productivity – then great news – no need to invest in culture.
But if you are looking to avoid the above, and improve your bottom line, then fixing a toxic culture, or future proofing so that you never get a toxic culture, then investing in your culture will yield an excellent ROI.
A culture going bad doesn’t happen overnight. So you might not get the big jolt to fix it until you realise it’s already cost you a lot of money.
And being totally honest – we will charge you a lot more to fix a broken culture, than to amplify and lock in a great culture, and prevent it from a downturn. That will be petty cash in comparison to the alternative. You’re welcome J
A toxic culture isn’t fun for anyone, even the toxic people!
Invest in your culture
At NEP we are all about helping companies to build a culture of sustained high performance. We love it when people come to us when they already have a great culture. In reality, more people are coming to us when something has gone awry, or is going awry.
When we ask people about how much this problem is costing them, most people haven’t thought it through. As part of discovery we help them to get connected with that first. And in most cases they are mortified by how much this is costing their organisation.
Invest in your people to lead themselves, and others, to high performance – not toxicity. Your financials will thank you for it.
Of course, if you’d like to find out more about how to create, articulate and implement a sustainable high performance culture in your organisation, why not book a Performance Call or sign up for our next 20/20 session or one of our open workshops here?