Why Every Leader Needs to Worry About Toxic Culture
Toxic culture, as we reported in a recent article, was the single best predictor of attrition during the first six months of the Great Resignation — 10 times more powerful than how employees viewed their compensation in predicting employee turnover. The link between toxicity and attrition is not new: By one estimate, employee turnover triggered by a toxic culture cost U.S. employers nearly $50 billion per year before the Great Resignation began.
While most everyone agrees that toxic workplaces are bad news, there is much less consensus on what makes a culture toxic as opposed to merely annoying. Scholars have proposed multiple, sometimes conflicting definitions of toxic culture, and a quick review of blog posts and managerial articles surfaces dozens of warning signals of toxic culture with little overlap across them. In Glassdoor reviews, employees criticize their corporate cultures for hundreds of flaws — including risk aversion, excess bureaucracy, insularity, and an impersonal feel, to mention just a few.
Employees grumble about a lot of things, but which elements of culture are so awful that they qualify as toxic? You might gripe about an old-school or bureaucratic culture, but is that enough to knot your stomach as you pull into the parking lot in the morning? How can we distinguish between a culture so awful that it qualifies as toxic versus one that’s merely irritating?
Pinpointing the elements that make a culture toxic is the first step to improving it. Leaders will dissipate their effort and attention if they try to improve every aspect of corporate culture that some employees find irritating. Instead, they should focus on addressing the core issues that cause employees the most pain and lead them to disengage, bad-mouth their employer, and quit.
To understand what makes a culture toxic, we analyzed the language employees use to describe their organization. When workers write a Glassdoor review, they rate corporate culture on a 5-point scale and also describe their employer’s pros and cons. The topics they choose to write about reveal which factors are most relevant to them. By analyzing the relationship between how they describe their employer and how they rate its culture, we were able to shed light on the cultural factors that best predict a toxic culture. We studied more than 1.3 million Glassdoor reviews from U.S. employees of Culture 500 companies, a sample of large organizations from 40 industries.
In an earlier analysis of the Culture 500 data, we focused on the topics that best predict a company’s overall culture rating based on the average of all employee reviews in that organization. Measuring company-level culture is an excellent way to identify factors that matter to many employees, such as benefits, perks, and job security. Focusing on company-level averages, however, might miss elements of toxic culture that are highly significant for a small percentage of the workforce. Therefore, for this study, we analyzed culture at the individual level.
To home in on what makes a culture toxic for employees, we focused on their negative comments. We used the text analytics platform developed by CultureX to identify which topics each employee discussed negatively. (We measured 128 topics in total.) We then analyzed which of the topics mentioned had the largest negative impact on how employees rated corporate culture on a 5-point scale.
The Toxic Five Culture Attributes
We grouped closely related elements into broader topics and identified what we call the Toxic Five attributes — disrespectful, noninclusive, unethical, cutthroat, and abusive — that poison corporate culture in the eyes of employees. (See “The Toxic Five.”) While organizational culture can disappoint employees in many ways, these five elements have by far the largest negative impact on how employees rate their corporate culture and have contributed most to employee attrition throughout the Great Resignation.
The Toxic Five
Five attributes — disrespectful, noninclusive, unethical, cutthroat, and abusive — have by far the largest negative impact on how employees rate their company’s culture in Glassdoor reviews. Each bar represents the marginal impact a negative mention of a topic had on an employee’s rating of their organization’s culture. If an employee says they feel disrespected in their review, for example, their culture rating will be 0.66 lower on a five-point scale on average, all else being equal.
Noninclusive
Seven of the 20 most powerful predictors of a negative culture rating relate to how well Culture 500 companies encourage the representation of diverse groups of employees and whether they are treated fairly, made to feel welcome, and included in key decisions. Collectively, this cluster of topics is the most powerful predictor of whether employees view their organization’s culture as toxic.
The CultureX platform’s assessment of whether organizations provide a fair and inclusive environment for specific demographic groups includes five topics: gender, race, sexual identity and orientation, disability, and age. All of these identity-related topics rank in the top decile of strongest predictors of a toxic culture. If an employee speaks negatively in a review about how members of the LGBTQ community are treated, for example, their culture rating will be 0.65 lower on a 5-point scale on average.
Two other topics capture comments about exclusion that may or may not be linked to an individual’s demographics or identity. The topic cronyism includes comments about nepotism and managers playing favorites — for example, by promoting their buddies or graduates from the same college rather than the most qualified candidates. The topic general noninclusive culture includes reviews containing terms like “cliques,” “clubby,” or “in crowd” that indicate that some employees are being excluded without specifying why.
None of the diversity, equity, and inclusion topics emerged among the top predictors of a company’s overall culture in our previous analysis using collective employee ratings. This absence highlights the danger of measuring corporate culture exclusively in aggregate terms. If leaders focus on the average review of corporate culture among employees, they may miss issues that affect a small number of employees in profound ways. Respect, for example, is mentioned 30 times more frequently in employee reviews than LGBTQ equity is, but both topics have the same impact on an employee’s view of culture when they are discussed negatively in a review.
Disrespectful
Feeling disrespected at work has the largest negative impact on an employee’s overall rating of their corporate culture of any single topic. Surprisingly, mentioning disrespect has a slightly stronger negative impact on the culture rating than when an employee comes right out and describes their culture as toxic (or uses other extremely negative terms, like “dystopian,” “dumpster fire,” or “soul-crushing”).
In our previous research, we found that respect — or the lack thereof — was the single strongest predictor of how employees as a whole rated the corporate culture. This further analysis demonstrates that whether you analyze culture at the level of the individual employee or aggregate to the organization as a whole, respect toward employees rises to the top of the list of cultural elements that matter most.
Unethical
Ethics, like respect, is a fundamental aspect of culture that matters at both the organizational and individual levels. The topic unethical behavior captures general comments about integrity and ethics within an organization. The most common terms in reviews classified under this topic include “ethics,” “integrity,” “unethical,” “shady,” and “cheat.” Under a related topic — dishonesty — employees described dishonest behavior in dozens of ways, including “lie,” “mislead,” “deceive,” and “make false promises,” as well as adjacent terms that suggest shading the truth, such as “smoke and mirrors” and “sugarcoating.”
The topic regulatory compliance includes comments in which employees explicitly discussed their employer’s failure to comply with applicable regulations. Frequently mentioned regulations include the Occupational Safety and Health Administration standards, which protect workers’ safety on the job, and the Health Insurance Portability and Accountability Act, which safeguards sensitive patient information.
Cutthroat
Nearly 10% of employees in our sample made a comment related to teamwork or collaboration in their Glassdoor review. Employees frequently grumbled about uncooperative teammates or the lack of coordination across organizational silos. Comments about friction in coordination, while common, have a very modest impact on how employees rate their corporate culture. These run-of-the-mill frustrations are not clear warning signs of toxic culture.
In contrast, when employees talked about colleagues actively undermining one another, their comments strongly predicted a negative culture score. The 1% of employees who cited a cutthroat culture employed a vivid lexicon to describe their workplace, including “dog-eat-dog” and “Darwinian” and talked about coworkers who “throw one another under the bus,” “stab each other in the back,” or “sabotage one another.”
Abusive
We define abusive management as sustained hostile behavior toward employees, as opposed to a boss who has a bad day and takes it out on team members.6 The most frequently mentioned hostile behaviors in our sample are bullying, yelling, or shouting at employees, belittling or demeaning subordinates, verbally abusing people, and condescending or talking down to employees.
Nearly one-third of employees said something about management in their review, but just 0.8% described their manager as abusive. When employees did mention abusive managers, however, it depressed their culture rating by an additional 0.50 on average.
When employees join a company, they expect to find a culture that is inclusive, respectful, ethical, collaborative, and free from abuse by those in positions of power. Not only are these baseline elements of a healthy corporate culture, they are also what companies typically promise in their official core values. In an earlier study, we found that “integrity” — mentioned by nearly two-thirds of companies — was the attribute most frequently listed among companies’ core values, while collaboration ranked second, respect fourth, and diversity and inclusion ninth. When corporate culture fails to deliver on these fundamental commitments, employees understandably react with something stronger than annoyance or disappointment.
The High Costs of a Toxic Culture
By identifying the core elements of a toxic culture, we can synthesize existing research on closely related topics, including discrimination, abusive managers, unethical organizational behavior, workplace injustice, and incivility. This research allows us to tally the full cost of a toxic culture to individuals and organizations. And the toll, in human suffering and financial expenses, is staggering.
A large body of research shows that working in a toxic atmosphere is associated with elevated levels of stress, burnout, and mental health issues.8 Toxicity also translates into physical illness. When employees experience injustice in the workplace, their odds of suffering a major disease (including coronary disease, asthma, diabetes, and arthritis) increase by 35% to 55%
In addition to the pain imposed on employees, a toxic culture also imposes costs that flow directly to the organization’s bottom line. When a toxic atmosphere makes workers sick, for example, their employer typically foots the bill. Among U.S. workers with health benefits, two-thirds have their health care expenses paid directly by their employer. By one estimate, toxic workplaces added an incremental $16 billion in employee health care costs in 2008. The figure below summarizes some of the costs of a toxic culture for organizations. (See “The Organizational Costs of Toxic Culture.”)
According to a study from the Society for Human Resource Management, 1 in 5 employees left a job at some point in their career because of its toxic culture. That survey, conducted before the pandemic, is consistent with our findings that a toxic culture is the best predictor of a company experiencing higher employee attrition than its industry overall during the first six months of the Great Resignation. Gallup estimates that the cost of replacing an employee who quits can total up to two times their annual salary when all direct and indirect expenses are accounted for.
Companies with a toxic culture will not only lose employees — they’ll also struggle to replace workers who jump ship. Over three-quarters of job seekers research an employer’s culture before applying for a job. In an age of online employee reviews, companies cannot keep their culture problems a secret for long, and a toxic culture, as we showed above, is by far the strongest predictor of a low review on Glassdoor. Having a toxic employer brand makes it harder to attract candidates.
Other costs of a toxic culture are harder to quantify but can still add up. Extremely disengaged employees are nearly 20% less productive than their engaged counterparts because they put in less effort and miss more days on the job. Nearly half of employees who felt disrespected at work admitted to decreasing their effort and time spent at work.
Then there’s the reputational risk. Among U.S. CEOs and CFOs surveyed, 85% agreed that an unhealthy corporate culture could lead to unethical or illegal behavior. For example, after fraudulent sales practices at Wells Fargo were exposed in 2016, the bank paid billions of dollars in fines and lawsuits and saw its corporate reputation suffer the largest single-year drop in Harris Poll history.
Why Every Leader Needs to Worry About Toxic Culture
You might think that toxic culture is somebody else’s problem, limited to a handful of high-profile flameouts like Wells Fargo or The Weinstein Company and not something your organization needs to worry about.
Unfortunately, cultural toxicity is widespread. On average, 10% of American employees in large companies mentioned one or more elements of a toxic culture in their Glassdoor reviews in the five years between 2016 to 2020. This translates into more than 6,000 miserable workers for the average large American company. There is a wide spread around that average: Culture 500 companies ranged from 2% to 22% of employees discussing toxicity in their Glassdoor reviews. When 1 out of every 4 employees mentions toxicity, it’s fair to say that the corporate culture as a whole is toxic.
Even at companies with the highest Glassdoor ratings, hundreds or thousands of employees might experience the culture as toxic. Women, underrepresented minorities, or older employees, for example, might have a much more negative view of the culture than other employees. In most large organizations, distinctive microcultures coexist within the same company, often across business units, functions, geographies, or acquired companies. Individual leaders also create subcultures within their extended team. Whatever their origin, microcultures can diverge from the broader corporate culture, which means that even the best cultures can contain pockets of cultural toxicity.
In a forthcoming article, we will lay out concrete steps that leaders can take to detox their corporate culture. The first step, however, is acknowledging that pockets of toxicity exist even in the healthiest corporate cultures. Leaders must dig beneath the rough segmentations (like functions or countries) to assess culture at the level of individual leaders who create — for better or worse — microcultures within the organization as a whole. When measuring corporate culture, averages obscure as much as they illuminate.