A toxic environment is different than one that's less-than-ideal.
We’ve all heard the term “The Great Resignation.” It describes the recent sharp uptick in resignations as the COVID pandemic ended. In 2021, according to the U.S. Bureau of Labor Statistics, over 47 million Americans voluntarily quit their jobs — an unprecedented mass exit from the workforce. Gas stations, dentist offices, and manufacturing plants alike have reduced their hours of operation because they can’t find new employees to replace those who have quit. The Great Resignation, we’re told, has upended the relationship between workers and the labor market. While there’s evidence that the Great Resignation might be slowing a bit, employees are still quitting at high rates.
Actually, the “Great Resignation” has been gaining steam for over a decade. Resignations during much of that time can probably be explained by the good economy that sustained during those years. But the recent sharp jump, greater than would be expected by any economic factors, has caught the attention of media outlets—which have published dozens of articles on the phenomenon—and employers, who are doing everything they can to fill open positions.
The cause of these resignations is no mystery. Researchers at MIT analyzed 34 million online profiles of workers who had quit their jobs between April and September 2021 (when the Great Resignation was most intense). They found that the strongest predictor of attrition was the state of the organization’s culture. Workers who found themselves in toxic cultures were 10 times more likely to quit their jobs than were workers who were unhappy with their compensation.
Just what makes a culture toxic? First, it’s not simply the absence of elements that make up a strong, positive culture. A company’s culture can be less than ideal without being toxic. Employees often stay with such organizations, however unhappily.
Nor can an organization’s culture be said to be toxic simply because its managers make bad decisions. In his book "Better Business: Breaking Down the Walls of the Purchasing Silo," Paul Ericksen tells the story of a new boss who demands that the purchasing function reduce supplier costs by 5% annually. Paul told him that such a target was impractical at best and would be harmful to the organization at worst. His new boss demoted Paul, claiming he wasn’t being a team player. (Paul’s insights turned out to be correct.) As frustrated as we can be sure Paul was at the time over this turn of events, the fact that he was the victim of his own boss’ incompetence wasn’t evidence of a toxic culture.
Compare Paul’s story to circumstances co-author Ron experienced a number of years ago. He found himself managing the operations of a metal plating firm that provided its employees with neither proper PPE nor safety training. When Ron asked for a budget to meet these needs, he was told that the organization couldn’t be expected to make such “luxuries” (as management described them) available to the operators. The firm did have the resources to fund offices and showrooms in downtown Manhattan, though.
In another instance, Ron had a boss who ordered him to transport hazardous materials in a vehicle that was not certified to safely carry such material. Ron did so at the risk of his own safety and creating liability for the company. After Ron reported the incident to the CEO, the manager called him to his office and shouted insults at him for “ratting him out”.
The most evident characteristic of a toxic culture is disrespect for employees, and we see this in both of Ron’s examples. We also see unethical decisions and abusive behavior, two other important indicators of toxic culture.
Last year, Rick was engaged by a company that showed evidence of such toxicity. During a plant walk-around, a production superintendent angrily grabbed several vise grips that were holding a piece of equipment together and threw them across the plant floor, cursing about the failure of operators to fill out maintenance work orders. At the same company, another manager began shouting at members of a planning team that was simply considering methods to make a possible clean-up day more engaging. Rick’s efforts to change the culture of this company met with failure. That company continues to suffer from poor customer performance as a result of high worker attrition.
Toxic corporate cultures aren’t just bad for employees. A study by Society for Human Resource Management (SHRM) found that toxic cultures cost businesses $230B dollars between 2014 and 2019.
Toxic cultures take hold when managers don’t take affirmative steps to prevent them. A laissez-faire leadership approach can result in a toxic culture even when senior leaders don’t intend such. When Ron reported to the CEO that he had been ordered to take unsafe actions on behalf of the company, the CEO was empathetic. But that didn’t prevent the subsequent abuse that Ron experienced.
The leaders at one of Rick's early lean clients let a toxic culture grow on their company’s shop floor. Department managers refused to talk with each other. Supervisors regularly berated operators loudly in front of their peers. Everyone complained about the high levels of outright animosity among supervisors and operators. They also pointed to the seeming disinterest in the state of affairs on the part of senior leadership who never took the time to walk onto the shop floor. The senior leaders themselves were cordial and approachable, but they hadn’t taken affirmative steps to assure that those values were put into action by other managers and supervisors. A toxic culture had grown without their fully realizing it. Nonetheless, they were culpable for its presence because of their own complacency.
Capable leaders take affirmative action to assure that cultural toxicity has no ground to grow on in their organizations. Two years ago, I interviewed Robert Pasin, CEO of Radio Flyer, the well-known toy company, about how he had gone about creating a strong, positive culture for his organization. He and his fellow managers engage in a variety of initiatives to sustain a good culture, and important among them is the organization-wide rule, “No Sarcasm.” It seems like a small thing, but Pasin noted that sarcasm, unaddressed, undercuts communications, teamwork, problem-solving, decision-making, and innovation. He and his fellow leaders are diligent about spreading and reinforcing the message that jokes, sarcasm, and teasing at another’s expense have no place at Radio Flyer.
The vice president of operations at another client used the budgeting process in his efforts to sustain a strong, positive culture. When his plant managers proposed budget increases, his response was, “Fine. But balance that increase with productivity improvements from the employee teams.” His plant managers knew that he expected them to engage employees in solving problems and identifying improvements. A strong, positive culture wasn’t just a “nice thing to have” in his view; it was central to how he expected the plants to be managed.
A toxic culture, then, isn’t something that leaders should just hope to avoid. Rather, it’s something that leaders must take affirming actions to prevent. Everyone in the company must understand that leadership expects to see certain behaviors (e.g., engaging employees in problem-solving) while other behaviors (e.g., sarcasm) won’t be tolerated.
Written by: Rick Bohan, principal, Chagrin River Consulting LLC, for Industry Week.