Uber co-founder Travis Kalanick and HTC CEO Peter Chou resign from their positions.
Al Jazeera America interim-CEO Ehab Al Shihabi demoted to COO.
Founder and CEO of American Apparel Dov Charney ousted by the board.
These announcements, when they occurred, made headlines.
The reason? These leaders were known for abrasive leadership practices and the move aimed at repairing toxic workplace environments.
Toxic workplace environments are characterized by obsessive control and abusive behaviors, where leaders are motivated by self-interest, lack trust and concern for their employees, and focus only on visible short-term accomplishments rather than long-term goals.
Previous blogs have looked at some of the immediate effects of a toxic workplace on employees. However, employees are not the only victims here. Apart from poor employee morale, the impact of toxic workplaces extends towards other business aspects.
Toxicity and business growth
A study by LSA Global found that companies that have their culture and business strategy in alignment are likely to grow their revenue by 58% and are 72% more profitable. Another study by Wharton indicated that people who mentor were promoted six times more than people who didn’t, mentees were promoted five times more, and retention was 20% higher. The success factor here is high ‘people management practices’.
Daikin, the Japanese air conditioner manufacturing leader, summarizes the idea of ‘people management practices’ well, calling it “a line of thinking which draws out the enthusiasm and understanding of the people who work in an organization,” based on the concept that the source of a company’s competitiveness is its people.
The statement seems true considering studies that show that organizations with low people management practices have alarmingly lower profit margins, and lower profit and sales growth compared to those with high people management practices.
Here’s a table for quick comparison, based on 10-year averages.
|Financial Factors||High PMP (%)||Low PMP (%)|
|Total return (stock appreciation + dividends)||19||8.8|
Toxicity and company relations
The reasons for these are evident. Customers reward respect with loyalty. But when employees are not respected at the workplace, it reflects on their service, leaving customers unsatisfied. This also bleeds into partner relations as employees in a toxic workplace fail to build healthy and long-term relations with clients and collaborators. Eventually, companies may notice unfulfilled production requirements, poor product quality, and high employee attrition. Mid-level managers that have to balance irrational behavior from their superiors with company targets also struggle with deriving optimal output from their teams or delivering quality products.
Why should toxic leaders care about these outcomes?
Certainly, there are cases where toxic leaders feel the heat and are called out. But sometimes, the employees who complain tend to leave the organization, putting an end to the matter. With employee ratings of bosses and workplaces becoming important for applicants looking for opportunities, workplace toxicity is no longer being ignored. A company’s social persona is now easily accessible online through social media forums where employees can freely share information and post about incidents involving past managers. Online websites also promote anonymous company reviews and feedback to give potential candidates an honest view of the workplace.
With more and more ways for companies to track why performance dips, managers and leaders need to focus on building healthy leadership practices that align with organizational goals.
As Frederick Morgeson said, “People often quit their bosses, not their jobs.”