What does Toxic Culture Cost a Company?
The MIT Sloan Management Review on “The Great Resignation” surveyed the reasons 34 million people gave for resigning their jobs, and Toxic Management was 10.4 times more likely to cause voluntary attrition than salary.
I detailed this in my recent post, “There are weeks when decades happen”, and now I am expanding the analysis to quantify the estimated bottom line impact of running a business that employees consider to have a toxic work environment.
The data compares companies in similar market segments and specifically shows a 15% difference in attrition rates in Aerospace companies (Boeing and SpaceX), and an 8% difference in Media and entertainment companies (Warner Bros. and Netflix).
Let’s assume two companies in the sector you work in each have 10 thousand employees and a 15% difference in attrition rate due to toxic culture — this requires one company to hire 1500 more employees annually than their competitor in the sector. Assuming the loaded cost of an employee is $100k /pa and it takes 6 months until they achieve competence in their new roles it's reasonable to say the effective incremental cost is 50% of the annual salary cost or $75 million. If you only have 1 thousand employees it is still a $7.5 million avoidable cost that hits your bottom line.
I have found this to be the case in services, manufacturing, and telecom companies I have worked for in that savings due to technology improvements were less than reduced staff attrition savings.
Of course, the trick to executing effective culture change is to start with creating the capacity to accommodate change and this typically involves tactical process or technology changes, such as:-
- Effective communication aligns people, products, and processes with customer priorities.
- Implementing product life cycle management (PLCM) to agree on business and product priorities, reduce mid-cycle interruption, and improve effective operational capacity.
- Documenting functional roles and responsibilities to improve ownership and accountabilities by function, which reduced rework and conflict.
- Intelligent test strategies, based on expertise, rather than checklists, by hiring testers from customer care who had experienced the real problem the customers experienced.
- Tactical automation of workflows reduces manual processes and motivates staff to cooperate in business process reengineering, by making their jobs less stressful and more productive.
Creating capacity does not convert industry dinosaurs — some of who will still express no interest in profitability, process improvement, or employee satisfaction.
In these circumstances, the only effective approach is to play the long game where one country or function is shown to outshine the others, and eventually, the dinosaur manager’s chickens come home to roost — preserving the poultry metaphor, “their goose is cooked”.
From the above, it is preferable to have CEO support in executing change, but not essential, change can effectively infect an organization at any level and spread — top down is just faster.
I can think of many managers who have resisted change and failed as managers in the long or short term. However, none who drove culture change, and were seen as effective leaders by their business and staff, failed to progress in their careers in their company or industry.
What can you say about the bottom-line impact of your poultry enterprises?
