Most of us have likely had the misfortune to work in at least one highly toxic work environment throughout our career. A ‘toxic workplace culture” is one with low levels of trust, poor behaviour, and people working for themselves rather than the company.

Often, the level of awareness of the issue decreases as you move up the organizational hierarchy. In others, the behaviours are known but rationalized as ‘just business and not personal. In the worst cases, behaviours such as bullying, intimidation and harassment are supported, protected and perpetuated at the highest levels in the organization.

The Cost of Your Toxic Workplace Culture

But what is the true business cost to the company of these behaviours going unchecked? Here are five of them.

High level of staff turnover

Each time you lose someone, it comes with major re-hiring costs.

These include the costs of:

  • Recruitment
  • On-boarding
  • Training
  • Lost productivity as a new employee gets up to speed

Often overlooked are the costs to the organization’s culture and engagement as your remaining employees wonder if the grass truly is greener elsewhere, endure a higher workload, and then assimilate to a new team dynamic.

The calculation for the cost of turnover can vary greatly depending on the company and the level of the employee. However, many sources estimate that replacing senior employees in your organization can cost upwards of 200% of their salary. That’s a steep price to pay for not dealing with your organizational culture issues.

Decreased productivity

Depending on the level and spread of the toxicity in your organization, you could be losing up to 50% of your employees’ productive working time. A great deal of time at work is spent worrying about politics, gossip and negativity so the time to deliver on work is greatly reduced. People also fear taking a risk on trying something new in these environments.

Ultimately, the work produced is less creative and of lower quality.

Not only are your employees not able to drive your business forward, but the negative culture is also likely leaving you in a worse position. This is great news for your competitors.

Active disengagement

Toxic workplace environments often lead to actively disengaged employees. These are employees who are actually working against you to sabotage your company.

The good news is, this tends to be a small group since employees leave before they get to this level of disengagement. However, this small group can have a powerful impact on your reputation and your sales. They also will quickly drive out your remaining good employees as they spread negativity in workgroups and make your culture worse.

(Speaking of toxic workplace culture, did you know the CEO is often the driving force behind it? Click here to see what we mean)

Aon Hewitt coins these employees Workplace Prisoners. They tend to remain with the company for a few reasons:

  • Pending retirement
  • Long term incentive plans they don’t want to walk away from
  • Other ‘golden handcuffs’

Not only do these employees perpetuate a toxic workplace culture but they are often long-term employees at the top of your pay scale.

(Are your employees resisting change? Take a look at this post next for tips for engaging them)

Increased absenteeism and disability

A toxic workplace will increase your level of absenteeism due to both increased illness and leaves due to stress but also culpable absenteeism as your employees take more ‘sick’ days to avoid being in the office environment.

Harvard Business Review estimates health care costs at companies with a negative environment to be 50% higher than other organizations that promote a positive workplace culture. This is on top of the costs of having employees missing from the office such as lost productivity, overtime and work delays. When they are present, a stressed-out employee is 50% more likely to be involved in a workplace accident. And to top it off, 60% more prone to error.

Legal liability

The government and courts are starting to hold employers accountable for not providing a safe environment for employees to work. Past practices of ignoring or protecting negative behaviours that came from ‘high producing’ employees? This is now a potentially very costly error.

Employers can be forced to pay for punitive damages, pain and suffering, lost wages, and court costs. This can quickly become very costly to an organization. We see this in multiple public cases that have cost an organization millions of dollars in settlement.

Bill 132 in Ontario is now requiring that employers use an external investigator when investigating harassment concerns in an organization. In other areas where this isn’t a requirement, many employers are following this as a best practice to minimize any perception of bias or conflict with investigators.

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This article was first published in 2017 and was updated in 2021 just for you.