How a toxic culture threatens the future of organizations?

The cost of a toxic culture in organizations is not just the problems with losing one in three people. It cost the agility and innovation capacities, which undermine the ability to survive change. Let's look at how to highlight and prevent an culture that attracts "assholes"(*) but expels talents.

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Startups, unicorns, and technology companies are expected to be innovative and disruptive. Why, then, they have an average turnover between 25% and 30%?

Even with colorful workspaces, relax areas, snacks, and drinks at will, they lose one out of every three or one out of every four talents. The immediate consequence is the delayed time to market of products and services, not mentioning those that do not even get oof the ground. The least visible consequence is money thrown away by immature processes, costs overruns, rework, lack of compliance with good practices, technical debt.

Loss of talent also means loss of innovation. While some companies lose human capital, others take advantage of them to innovate, incubating startups. The most famous case is the PayPal, led by Peter Thiel. ?From there were born companies such as Facebook, Tesla, Linkedin, YouTube. This group of innovators is called "the Paypal mafia", with innovators such as Elon Musk, Steve Chen (YouTube) and Yishan Wing (Facebook, Reedit). In Latin America we have the case of the Colombian Rappi, which incubated 110 companies have already left. ?Have you hear about ChatGPT by ?OpenAI? Well, a competitor is on the way. That would be normal if this competitor weren’t created by their former employees.

?The loses are not limited to the company, it also has a cost for society. It's not because employees are no longer part of the economy, because these skilled professionals can find alternative income sources: from an Uber driver to an investment consultant.?Society loss by having idle talents, individuals which in some cases, has more patents than many universities combined. These are minds that could create new products and technologies, could create entire industries, but who opted for a simpler life.

Would you like to have flying cars that artists depict in their movies? or to detect diseases in advance? Perhaps the talent and passion to do it already exists, but they prefer to stay at home. AI-based products could become a fever as they were?web pages in the 2000s. But no, our society is moving slower than it could be.

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The right solution to the wrong problem

Some common responses from human resources executives to a high turnover are "retention" actions: improving wages, benefits, development opportunities.?But this is as efficient as retention actions for a customer who wants to get rid of bad service. In this approach they mistakenly apply Herzberg's theory on satisfaction and motivation, which, by the way, has been proved as insufficient and which requires to be complemented with the concepts of Pink and Rogers (1). It's the right solution to the wrong problem.

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The elephant in the room: toxic culture

From the professionals who resign, 40% prefer rather to be unemployed than to remain in the company. It's not the salary neither the perks that makes them to quit. Here's the elephant that many don’t want to recognize: a toxic culture.?Let's see if the reader can recognize some of these symptoms:

1. Is the organization always looking for culprits?
2. Is there an atmosphere of office worship, are managers treated like medieval nobles, their voice is unchallenged and are they always surrounded by fawners?
3. In the organization “who screams louder is the one who takes it all”?
4. Is management cracking the whip demanding results from unclear goals? Would apply the saying: "I don't care if the duck is male, I want it to lay an egg!"?
5. Does the company claim to promote meritocracy, but in reality, job promotion is reserved for someone's friends?
6. During the recruitment they promises to take care of the employee, but fires anyone anytime, according to the manager's mood?
7. Who dares to point out that something that needs improvement is fired and the problem swept under the carpet?

These are only symptoms, consequences of a deeper problem. Just as health problems are a consequence of bad habits, and these bad habits are the result of ways of thinking, of a mindset, in organizations is similar. The equivalent of mindset in company is the “organizational culture”. It is the set of beliefs and values that translate into organizational "bad habits", which generate the symptoms mentioned above. How does this toxic culture is shaped?

How is a toxic culture shaped?

One of the most important factors that shapes a toxic culture are managers, as they are an example to follow. Consciously or unconsciously, they show which behaviors and which values are approved.

It worths to note that the survival of the organization and its ability to face change is built in a daily basis. The culture defines the ability to face changes and the culture is built in the daily relationships (1). ?If the manager hides the problems and only reports good news, he is promoting fraudulence (one of the five managers deadly sins). ?If he imposes his point of view, even in topics where he is not an expert, he is promoting arrogance and "rational ignorance" (two more of the five deadly managers sins of) (2). At the same time, is preventing open communication and collaboration, that are essential to promote agility and facilitate innovation.

The cost of toxic leadership and the “no asshole rule” (*)

If a poorly prepared manager negatively influences the culture, what to expect when it comes from a toxic person? An arrogant, prejudiced creature who leaves a trail of humiliation, frustration, and resentment wherever it goes? That manager who seems to have been trained to run a concentration camp?

For these cases, Stanford University professor, Dr. Bob Sutton recommends the "no asshole rule".?It may look like an exaggeration to use such a strong term but consider that must be a strong reason why Harvard Business Review and other editors, agreed to use the term:?they don’t worth the trouble they cause. Especially because they threaten the survival of the organization, preventing it from reacting with agility in the face of changes. Is the toxic leadership that promotes the toxic culture that expels talents while preserves assholes (apologies from the author, but they deserved the term).

How to prevent or correct a toxic culture?

1.??Assesment of the dynamics of the organization: organizations are complex systems of interdependent and interrelated elements. There are 87 dynamics, each with different maturity levels, that determine an organization's ability to cope with change.

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2.??Cultural transformation: what culture is being promoted by the dynamics above? It's not what human resources says, neither their "cultural fit", nor what marketing or CEO says, but the true organizational culture, the one effectively promoted in the daily relationships, by the values promoted by the leadership styles or the performance management processes adopted.?Depending on the assessment, a plan for cultural transformation should be set in motion towards the desired culture.

Some examples with which the author has come up are the promotion of collaboration and autonomy to allow organizational agility; promoting a culture centered on people and not processes to enable digital transformation; promote the culture of innovation in a digital ecosystem to enable open innovation, among other cases. ?During M&A integrations, promoting a cultural transformation in not an option, is a necessity.

3.??Executive coaching: except for “assholes”, most managers sin unconsciously due to lack of skills. This humble author was once a toxic manager early in his career. Fortunately, leadership skills can be developed. This is the way that should be given priority, to develop the talents.

During the pandemic, it became evident which organizations were best prepared to face the changes. While some suffered losses, others took advantage of opportunities. Webex, for example, missed the opportunity that Zoom, founded by a former Webex employee, took to become the market leader. This means that the company had the talent that allowed them to lead the market, but they lost it and, together, the ability to face change diminished. Could you blame the global economy? the company systems or processes? or the culture that rules everything?

Already in 2023, the world scenario expects recession, peak inflation, risk aversion on the part of investors. The unicorn bubble might burst. Will your organization's culture allow you face the changes and survive in this scenario?

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INVITATIONS:

(1) If you prefer to dive into the theories and authors that support this article, do not miss my international certification course in change management at APMG International.

(2) If the reader wants to know the five deadly sins, I leave my invitation to read my article The Titanic and the 5 deadly sins of managers.

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If you are more interested in cultural transformation, do not hesitate to contact me!