Toxic workplaces have costs businesses $223 billion over the last 5 years

Toxic workplace cultures are everywhere in America. With one in five Americans having left a job in the past five years due to unhealthy work culture, and with 49% of employees have thought about leaving their current organization, it all adds up to a poisonous churn, according to a new report from the Society for Human Resource Management (SHRM) examining workplace culture and how it impacted the cost of doing business.

Toxic workplace culture costs businesses billions in employee turnover: $223 billion over the last five years. Some of those turnover costs can be broken down into employee overtime to fill in the gaps, costs for temporary employees, recruiting costs, hiring manager time, recruiter time, and advertising costs.

What does a toxic workplace culture look like? There are overt signs like discrimination – by sex and by age – but the most common sign is a breakdown in communication.

Sean Sullivan, Chief Human Resources Officer at SHRM, describes a toxic culture as “any workplace where there is a disconnect between what an organization says it may believe in.”

What exactly is being communicated, how people treat each other, and consequences for when those things go badly are other things to look for, Sullivan says.

“The kind of communication that occurs, and the way people treat each other. And oftentimes we look to leadership and say, ‘What kinds of behaviors are modeled and rewarded?’ And if there’s no consequence to bad behavior, then that just has kind of a force multiplier effect in the workforce of what’s accepted,” he said.

Manager mayhem

Trust in managers is at a low, according to those surveyed for the report. Yet, employees attribute them with a high amount of power. The vast majority – 76% – say that their manager sets the culture of their workplace.

  • Still, over a third (36%) of workers say their manager doesn’t know how to lead a team
  • Managers are the reason 60% of employees want to leave their organization.
  • Four in 10 workers say their managers do not frequently engage them in honest conversations about work matters.

Sullivan attributes this divide to a lack of proper training and the inability of some managers to bridge the gap between their previous role as an individual contributor and their current role as manager.

More importantly, many managers haven’t been trained to work with people, Sullivan said.

“Many organizations aren’t prepared to really orient, train and develop managers for the people part of the job when they come on board,” he said. While managers are often trained on the financial and technical aspects of their jobs, and how to lead their teams towards those goals, “oftentimes there’s just not a lot of support or time or resources to say, ‘And by the way, as someone who’s responsible for people, here’s what we expect of you,'” said Sullivan.

2/3 of Americans have worked in a toxic workplace

About two-thirds of working Americans say they have worked in a toxic workplace, with 26% reporting they have worked in more than one. It’s an environment that seemingly drags a significant portion of a workplace’s workers down:

  • A quarter dread going to work
  • A quarter don’t feel safe or secure voicing their opinions on work-related matters
  • A quarter don’t feel respected or valued on the job

This environment bleeds into their home life: nearly a third of Americans say their toxic workplace makes them feel stressed and irritable at home.

In fact, they’re so stressed about their work-life that many would rather play hooky: about one in four dread going to work, and one in five calls in sick when they just can’t face work that day.

Of course, unhappy workers feigning sick costs money: at companies in the U.S., the cost of productivity loss due to unplanned absences costs approximately $431 billion per year. And up to $86 billion of this lost productivity can be attributed to employees calling in sick when they don’t feel like going to work.

How to build a strong workplace culture?

Choose the right managers, and training them right. “What organizations can do is absolutely focus on how they are identifying, selecting and training the people that they want to lead the rest of the organization,” says Sullivan. “And make sure that there is some training and development of leadership skills, communication skills, awareness of emotional intelligence – and really making that investment.”

Such an investment would pay off. “If we back up and we look at what the cost is over a several year period of turnover, almost 60% of the workforce is saying the number one reason why they leave is because of their manager. And you roll that cost up to $223 billion, roughly, you can make a pretty compelling business case for why organizations ought to invest in training of their people managers.”

Organizations must define their purpose. As well as figure out what’s acceptable and unacceptable within their organization. “I think organizations can have much clearer conversations about what they believe in,” said Sullivan. “What is their purpose? And what are the behaviors and the principles that they hold absolutely dear as fundamental to the organization?  And also [create] examples of, “Here’s what we don’t value in the workplace and won’t accept.”

The organization’s leadership is responsible for building good workplace culture. “[SHRM] really absolutely believes that it is a partnership among the leadership of an organization,” says Sullivan. “The executive leadership [including the C-suite], the human resources team and people managers.”

The same group of people who is responsible for building the workplace culture is also responsible for sustaining it – as well as “adapting it to how the business may be changing” over time, says Sullivan.

As soon as you place the culture – a living, fragile, thing – into the hands of a single group of people, be it the CEO or HR, Sullivan says, “you start to silo the culture into kind of a one-dimensional thing that really doesn’t correlate to how culture really manifests itself in the workplace, and what is required to shape and sustain it.”