Fragile Founders: How a Toxic Work Culture Can Destroy your Business

February 1, 2023 

Written by TSHRC

Toxic workplace culture costs the UK economy £20.2 billion per year — and it could be costing your business, too.  

We see high-profile examples of this all the time — just look at cases such as Volkswagen or BrewDog. Yet toxic workplace culture is something small business owners sometimes overlook, believing it doesn’t affect smaller teams.  

Toxic workplace cultures can develop in businesses of all sizes, across all industries, and in any location around the globe unless leaders intentionally invest the time and resources to create and develop a positive culture from the beginning.  

Many employers learned this the hard way during the Great Resignation — twenty-one per cent of British employees say they quit their job due to a toxic workplace culture.  

But what exactly is toxic company culture, and how does it impact your employees and your business?  

Workplace culture is a complex amalgamation of all the attributes, behaviours, and processes that characterise a company. Simply put, culture is an organisation’s DNA. A healthy company culture ensures greater productivity, improves employee engagement, and reduces employee churn.  

A toxic culture is a little trickier to define. Although no one wants to work in a toxic environment, everyone seems to have a different opinion about what makes a culture toxic as opposed to merely annoying or inconvenient.  

Researchers from MIT decided to answer the question the scientific way. They analysed 1.4 million Glassdoor reviews from nearly 600 major companies and identified that toxic workplace cultures share the following five attributes — known as the Toxic Five. The results of this study were eye-opening not just for American companies but across major corporations in leading economies such as the UK, China, Japan, and India. Here are the Toxic Five traits:  

• Non-inclusive: Team members from diverse backgrounds don’t feel they are treated fairly, welcomed, or included in key decisions.  

• Disrespectful: There’s a lack of courtesy, consideration, and respect for others.  

• Unethical: This could include dishonesty, inappropriate behaviour, a lack of transparency, or failure to comply with regulations — such as standards that protect worker safety or people’s sensitive data.  

• Cutthroat: Ruthless competition and backstabbing behaviour.  

• Abusive management: Including harassment, bullying, and hostility.  

So what is a positive culture? It isn’t about pizza Fridays or free breakfasts, but fundamentally one that fosters an environment that allows its people to thrive. This might include:  

• An inclusive environment: Where team members from diverse backgrounds feel they are treated fairly, welcomed, and included in key decisions.  

• Respectful working practices: Where courtesy, consideration and respect for others are valued.  

• Transparent communication: This could be anything from clearly explaining role expectations to announcing big decisions the company is taking. A clear dialogue creates connection, clarity and trust.  

• Authentic values: clearly stating company values and holding employees at all levels to the same standard to drive aligned behaviours.  

• Growth leadership: Leaders who are interested and invested in the growth and improvement of their people and trust this flows through the business.  

In a toxic work environment, employees are stressed out, frustrated, and disengaged. This is when quiet quitting happens — employees do the bare minimum required of them instead of going the extra mile, hindering innovation and productivity.  

On top of the stress and frustration they might be feeling, in a toxic culture, employees may be afraid to express their opinions or question management decisions. When this happens, business leaders miss out on the valuable insights they might have to share.  

In addition to quiet quitting, you can expect to see high levels of employee absenteeism in a toxic workplace. The psychological stress employees sustain over time can cause burnout, as well as both physical and mental health problems.  

Burnt-out team members take more sick days and produce lower-quality work, costing businesses $340 (£290) per day for full-time employees and $170 (£140) per day for part-time employees, according to Gallup.  

The adverse effects of toxicity at work don’t stop at employee well-being and engagement, though. It also affects interpersonal relationships between employees, making it harder for them to cooperate successfully.  

Trust is the cornerstone of a successful company, and it’s essential for a healthy work environment. Without trust, it’s impossible to cultivate respect and collaboration — two elements that are crucial for business growth.  

When there’s a lack of trust, employees start conversations with, “Don’t let anyone hear about this…” and the environment creates room for cliques, gossip, and rumours, all of which can bring a company down from the inside.  

Finally, if you’re running a toxic workplace, you can forget about attracting or keeping the best talent. These days, it’s easy for people to research their prospective employers — whether by talking to past or current employees or reading reviews on sites like Glassdoor.  

The anonymity Glassdoor provides leads to some brutally honest reviews that can harm a business’s reputation and drive away top talent.  

In short, a toxic company culture can erode a business from the core by diminishing its productivity and ability to innovate. Failing to nip this problem in the bud can be disastrous for an otherwise promising and profitable business — which is why it’s crucial for small business owners to foster a positive work culture.