The Hidden Cost of Toxic Leadership: 5 Ways Bad Managers Kill Revenue and Productivity
Within the business-world, the cost of toxic leadership to an organization is getting more attention as of late, and this is a very good thing. Avoiding toxicity and toxic individuals has been a bit of a buzz-focus within the pop psychology realm for the last decade, but mostly in the sense of identifying these people and learning to cope, not considering the effects.
Now that – as a culture – we’re more attuned to the fact that there really are some people out there who are suffering deep ego wounds and causing chaos, we are on the lookout for impacts.
And the impact toxic leadership can have on an organization is significant.
What is a toxic leader?
Before we go any further, though, a note on our verbiage: when we are referring to ‘toxic’ leaders, we are not talking about people who are just bad at their job, grouchy, overly strict, etc.
Some leaders are great people who are just not fit to lead due to deficiencies in skill. Or, it could be that a leader is challenging you to get out of your comfort zone, or become more disciplined, and you do not like this.
These traits do not make up the definition of toxic people. There may be some overlap in personality attributes, but we are talking about a more destructive force in this article as we use the word ‘toxic’.
We are referring to dark triad folks that mental health professionals literally define as harmful: the narcissists, the psychos (who don’t kill people), and the Machiavellian personalities.
This Mel Robbins podcast with guest speaker Dr. Leanne ten Brinke, PhD is the very best summary of identifying toxic personalities in a work environment that I have run across – truly brilliant. Check out the video of the entire episode here: The Manipulation Expert: 4 Hidden Signs You’re Dealing With a Toxic Person
These dark triad individuals can be found in any area of life, which includes leaders in all levels of the game – managers, team leaders, all the way up to CEO positions. It is widely believed that toxic individuals are often drawn to these roles, due to the power, or influence the position carries.
As a general definition, here is how we define a toxic leader:
An individual who has a PATTERN of ego-driven decision making that supersedes data, facts, and traditional best practices in favor of consistently bolstering themselves.
The word “pattern” is very important, as we can all be guilty of an errant ego-trip, a bad week, or even a bad season. To be toxic, the trend must be noticeable, persistent, and occurring over long periods of time.
In other words – you can’t (and should not) conclude you are in a toxic work environment if something subtle rubs you the wrong way. If you are working with a toxic leader, you will see prolonged evidence of disfunction.
However, if you are reading this and are saying, “oh, I know I have a toxic manager working for me, and I’ve had a surge of complaints since hiring him”, or “my boss is toxic without a doubt – I catch him in lies constantly,” then it is safe to say that something is off with this one individual that is harming the organization.
If you are a business owner, or executive who oversees managers, committees, and / or team leaders, it is important you know the consequences these toxic individuals’ behaviors can have on your operation, so this trend can be repaired. Otherwise, the consequence will become quite clear through your bottom line.
What aspects of a business does toxic leadership effect? 5 major areas
The cost of toxic leadership is manifested in five major areas of a business:
- Team morale
- Brand image
- Staff retention
- Productivity
- Revenue
These areas are a big deal to any operation! It is safe to say that the ripple effects of one leader’s toxic behavior can lead to substantial damage.
There is hope, though. When you know how a toxic-spiral forms, as well as the cost of the damage being done, there is an opportunity to stop bad trends and quickly identify them.
Here, we break down these impact-areas for businesses, as well as why any size of organization should pay close attention to the individuals they are putting in positions of authority. Read about each toxic leader archetype and how they create negative results and decline.
#1 – The Morale Killer: leader creates chaos within the team
Toxic leaders occupying managerial positions, or elevated roles within a team that oversee others, will often create chaos and disorganization within the group they manage. This chaos can occur in a number of ways, but the outcome is consistent.
This internal struggle and conflict leads to emotional distress for team members and subordinates, which is often combined with negative feedback from either the leader, or their realized work outcomes.
Some ways this toxic behavior can be introduced is through conflicting guidance being given to the team, blame-shifting mistakes to others, moving the goalpost on initiatives, as well as other micro-deceptions that compromise an environment of trust.
These classically negative tactics all go back to manipulation and deception, which also means this chaotic management style and toxic tactics can easily be masked in front of an owner.
Over time, this constant spinning will cause burn-out and resentment amongst your strongest team members, especially, who do things by the book, but cannot keep up with the back and forth.
THE IMPACT: Your team implementing the work will feel on edge and becomes LESS happy, creative, and productive. Morale has a wide-reaching impact that can affect any area from sales motivation to the engineering of new solutions proactively.
Death to morale = death to curiosity and the forward motion of innovation. That lack of energy can lead to loss of revenue and every subsequent area here, because a manager has drained the team’s passion.
THE REMEDY: Talk to all levels of your team regularly to check in on their experience, especially subordinates of a manager. Create an safe and private environment as an owner where your organization can express their concerns to you.
If you work in a small office environment, or have an operation under 10 people, this becomes even MORE crucial. It is easier for small teams to compartmentalize, so deep issues with a leader on the team will have a very large impact. Also, there isn’t always an HR department on small teams, so the feedback channel isn’t clear.
Create the opportunity for feedback, and this will not be an issue.
#2 – The Reputation Ruiner: toxic leaders hurt brand image
The way a toxic leader in your organization can hurt your brand image is subtle and takes time to manifest. There is the obvious issue that poor public-facing behavior carries for an organization, but eroding of a brand’s image often happens slowly and from within the organization. What the entire team is emitting into the universe, market, or conversation tells a story.
A brand starts to lose its strength when its employees are unhappy, and appointing leaders with mind-games who do emotional harm to their team members introduce a negativity that will trickle down to every level of your business, including your customer. That is when you start seeing bad reviews en masse and negative public perception.
HOW BRAND DECLINE STARTS (under toxic leadership): when your team is feeling disrespected, undervalued, and that they are not being led by a competent and transparent individual, that resentment will often start to recycle within the team.
Strategies for working with each other in collaborative settings may start to break down due to emulating the toxic leader, or lack of clear instruction.
Even worse, the negative feelings carried by team members may project into client / customer interactions.
Over time, this outgoing negativity will lead to bad interactions with customers, which will inevitably turn into bad reviews in some domain. Or, this toxic individual could directly represent the organization poorly in a public-facing way, as they are more inclined create turmoil that affects their connections.
THE REMEDY: As a business owner, take measures to ensure the culture, communication, and level of respect you want your brand to represent is happening within your organization too. The same values you promote must be the same you are embodying as a brand.
Creating systems of accountability within the team and guidelines for inter-office communications that you uphold as an owner will trickle-down in a positive way to your team, and in turn, your brand.
Happy employees and teams = happy customers
#3 – The Staff Destroyer: toxic leaders drive staff turnover
This one is quite easy to envision as a negative effect of toxic leadership – who would want to work in an organization where they feel they are being treated poorly?
The success of a manager is often based on a number of stats, and this one is a big metric to watch AND attribute to a manager if the staff leaves in droves after they have settled in. Consistently having to replace team members working under the same person’s leadership is a tell-tale sign that something in your organization is broken.
This trend of high staff turnover is not always due to a toxic leader, though. It could be due to compensation compared to other organizations, working conditions / hazards, or even world events.
THE WARNING SIGNS: If you see that staff turnover has remained high for a long period of time and retention is an issue, it is worth considering who your leadership team is and evaluating their level of success guiding others. If their subordinates feel positive and a good connection, this attrition rate is likely due to other areas the manager may need to work on, but the issue is not a toxic environment.
If you receive feedback that is vague from employees, cites concerns that are not expected, or your employees are expressing concerns about their own level of experience, we recommend digging deeper.
Employees working for a toxic leader can often present as self-critical, due to the consistent reinforcement that they are not producing good work.
THE REMEDY: As an executive, or business owner, implementing a reporting system for your managers to give you feedback about individual members and their performance is an excellent way to gain oversight. You will be able to determine how a manager thinks of their subordinates and if the performance you see matches retention stats.
If a staff member leaves, you can then compare the manager’s notes to the progress reports, then determine if the info is aligned. If not, you have good cause to investigate further and make sure your team is having a good experience with your company.
#4 – The Productivity Plunger: leader mismanages time and initiatives
Is your team consumed with meetings about meetings about meetings? Inundated with internal updates, reviews, and oversight? Or are the company’s action items and project-delays growing?
If any of these scenarios sound familiar, you likely have a productivity problem, and toxic managers can be a driving force for discord in this area. They drain your employees of their time and energy through exhaustive updates, and nothing is moving forward.
Of course, this is another area where a leader may not be toxic – just bad at managing the team they are in charge of. It is not a personality failing to be under-skilled, but it IS a personality failing to not seek help, or a remedy to this issue.
The toxic leaders will often create this particular issue by weighing down their teams with their own control issues. Excessive oversight, as well as general micro-management, can plague their teams.
When it gets destructive and creates problems is when a lot of work needs to get done, but the leader is not making room for it. Instead, they are using up the available time to exercise authority in every area.
THE IMPACT: This type of unilateral control-seeking behavior will lead team members to second guess their work, or be too busy with oversight meetings and internal checks to produce their deliverables.
This accumulated frustration will feed into the aforementioned areas of driving staff turn-over, harm to the overall brand image, and a dampening of team morale.
THE REMEDY: If you notice deliverables are off-track and a team, or manager’s group is not producing deliverables on the expected schedule, hop in directly to manage 1-2 deliverables directly with that same team.
If they are dealing with a toxic leader, you will typically see stellar performance emerge and evidence that the manager’s process needs work.
Even more importantly – holding your manager accountable for staying on schedule and outlining their steps for the team will quickly reveal if you are dealing with a toxic person, or not. Persistent excuses and failure to meet small goals is all the proof you need that the manager is source of this productivity-gap.
#5 – The Revenue Drainer: toxic leaders drain revenue health
When you are losing momentum, productivity, and even staff members, your revenue will typically suffer too. Toxic leaders at the helm create an environment that is more about feeding their ego and “being right” than the mission of the company, and this misalignment will literally steal your output.
The revenue drain from toxic leadership is not an immediate effect – especially in service businesses with recurring revenue models, or very established brands. Once you notice it, the damage has already been done. You are seeing the outcome.
DETECTING THE TREND: Though you can turn downward revenue trends around, it takes time to rebuild your brand image, create a stronger staff culture, and get productivity back to normal. But the good news is that revenue-loss is further into the list of outcomes for your business than areas like team morale and brand image losing traction.
There will be ample signs that revenue loss is coming due to a toxic leader on your team. The key is taking advantage of the opportunities to course-correct.
THE REVENUE REMEDY: Removing a toxic leader is the ultimate step to revenue repair. The cost of toxic leadership is great, and when you are actively seeing losses, it means their impact within your organization is quite large.
You will need damage-control at this stage and reworking your internal infrastructure. It’s also wise to implement new hiring practices to help further with weeding out these toxic individuals.
Avoiding the cost of toxic leadership for your business – in conclusion
For Founders, business owners, and executives of any size business, it is crucial to have a trusted management team that can implement your vision across your organization. When a member of that important inner-circle is a toxic person, the level of destruction they can unleash is significant and can impact many areas, especially team morale, brand image, staff turnover, productivity, and revenue.
Remember, toxic environments bring out the worst in your team. It takes positivity, genuine support, and consistency to inspire your group to go the extra mile and make your brand stand out amongst the competition.
With care and replenishing this well of good will, though you can inspire your community and create a staff that believes in the work they do – no matter the task.
This positive energy starts at the top. It requires strategic oversight at various levels of your infrastructure to make sure you have effective leaders in place, as well as solid channels of communication to quickly identify any areas that need attention.
If you are worried that toxic leaders and team-members are impacting your business negatively, help is just a message away! Schedule a discovery call with us to share more about your organization’s challenges, and we will propose a plan of action.
