Why a toxic culture is the biggest risk to your organization

Toxic culture is the biggest risk that organizations face. CEOs can avoid this risk becoming a media issue by choosing to actively build a positive culture.

Having worked with almost 100 teams in 20 countries, I can tell you that this approach works for any organization, from sports teams to call centers, sales teams to startups, and banks to hospitality. Of course, it takes time and costs money, but it’s an investment worth making.

Not only is it reflected in the bottom line, it’s also reflected in the cultural reputation that the organization has, which in turn attracts other high-potential people who want to perform at the highest level in a values-driven environment.

How do you avoid a toxic culture? The secret lies in meaningful culture definition.

When middle managers understand how to build teams, communicate effectively, set expectations, have courageous conversations and motivate the individuals on their teams to achieve a set of results, everyone benefits. Employees feel motivated to achieve and CEOs see their organizations succeed in almost every metric.

It also requires an investment in management training. Millions of dollars are wasted every year investing in a special few potential ‘leaders’ on complex leadership development programs, when cultures are built, productivity generated and results achieved through competent middle managers.

This means involving employees – of all ages and tenures – in defining the values, behaviors and ways of working, rather than telling them what they are. Employees will take pride in upholding a culture that they feel they have had a say in. They will take accountability for its positive evolution and actively manage those who seek to undermine what they’ve built.

Meaningful culture

So how do you avoid a toxic culture? The secret lies in meaningful culture definition. As an organization, you get the culture that you choose to build. CEOs who put time, thought and effort into building a culture in a meaningful way will avoid the conditions that lead to toxicity.

These leaders also recognize that employee generational attitudes have shifted and that in order to retain their best people and attract those who can further help them fulfill their ambitions, they must work hard to build a culture of belonging and respect.

Former Harrods owner Mohamed Al-Fayed, who died last year, photographed with Welsh singer Katherine Jenkins in 2008. The department store has recently come under fire following hundreds of allegations of sexual misconduct and abuse by Al-Fayed

Thankfully, many other forward-thinking CEOs now understand the need for meaningful work on defining culture to avoid the opportunity for toxicity. In one research report, 92 percent of CEOs acknowledged that improving their culture would increase company value; likewise, improving the employee experience (a fancy way of saying ‘culture’) is the number one priority for HR leaders.

CEOs who put time, thought and effort into building a culture in a meaningful way will avoid the conditions that lead to toxicity.

The best working cultures in the world are led by CEOs who recognize the importance of culture investment and they will spend one-to-two percent of revenue to get a 23 percent rise in productivity and the results that come with that. It’s no accident that United States-based IT company Cisco, for example, is continually successful.

Its CEO, Chuck Robbins, credits the company’s success to the culture that it builds and continually evolves, rather than the products it builds and sells. In 2019 he said, "My ultimate goal is for Cisco to be the best place to work in the world."

A preventable problem

Toxic cultures harm humans, results and reputations. Yet toxic culture is preventable. By understanding what culture is and the actions required to address the risks of toxic culture occurring, CEOs and executives can not only create a great place to work, but also – as a by-product of this – achieve results, keep their best people, attract others who can help to strengthen it and safeguard the reputation of the organization, and their own legacy too.

The negative publicity faced by organizations with alleged toxic cultures has a detrimental effect in almost every area of the business. In 2023, a toxic culture in the Confederation of British Industry saw the company come close to complete collapse. A year on, it’s still struggling to recover. A toxic culture at the United Kingdom’s Post Office has seen its CEO and senior leadership team in court.

Former CEO of Post Office Paula Vennells faced criticism for her role in the Horizon IT scandal, which led to the wrongful conviction of over 900 subpostmasters in the United Kingdom for theft, false accounting or fraud

And yet, many organizations refuse to see toxic culture as a risk. This year alone Nine News, Country Road Group, Boeing, London Metropolitan Police, the Strictly Come Dancing TV show, the Fire Brigade Union and Harrods have all faced allegations of toxic culture, and this is just a snapshot of a few of the higher-profile cases. The leaders of these organizations either:

● Didn’t think culture was worth investing in;

● Took their eye of the ball when things were good;

● Thought toxic culture was something that other companies had to worry about; or

● Just assumed that a vibrant culture would build itself.

Toxic culture is every organization’s biggest risk. It doesn’t matter whether it is a retail, technology, financial services or government organization, or any kind of sports team, toxic culture can damage employees’ mental and physical health, and negatively affect results and targets from being achieved.

It can also generate silos and factions, destroy leadership and company reputations, generate high attrition and can be a barrier to hiring high-potential employees in the future.