Shifting the culture of a company is considered an advanced leadership skill, since culture is fundamentally comprised of relationships. When conflict ensues, miscommunication persists, and drama becomes pervasive, the economical toll on a company is disastrous. Lack of trust and constant fear perpetuate wasted time spent on gossiping, planning defenses, protecting turf, and assembling allies.
The most common outcomes of unresolved conflict, personality clashes, and toxic employees are:
- Departments fighting against other departments, creating an “us” versus “them” mentality;
- Employee disengagement and lack of accountability;
- Gossip and consensus-seeking (getting others on board with their point of view);
- Employee withdrawal–not speaking up and sharing ideas for fear of retribution, which limits brainstorming, contribution, and collaboration;
- Appeasing and fake agreements–employees choose their words and actions carefully to say what others want to hear without being able to respectfully disagree with others;
- Walking on eggshells and wasting time–employees run things by peers first, postpone conversations for the “right time,” or wait until people are in a good mood;
- Sugar-coating–dance around a main point in fear of defensiveness and more arguments;
- CYA and blaming–pointing fingers and creating excuses for missed deadlines, work failures, and dropped balls;
- Hearing the same problems over and over–because the root cause is not surfacing, problems get repeated; and
- Exhaustion and burn-out–frustration with lack of real progress, needing to baby-sit and forcing managers to offer “marriage counseling.”
As a result, teams do not work effectively to meet goals, deadlines are missed, and customers are overlooked. Interpersonal conflicts at work lead to chronic stress and long-term unhappiness, ultimately impacting presenteeism, absenteeism, and turnover. Employees seem to have a bad attitude and are disgruntled; their negativity spreads to other employees and the service provided to the customer suffers.
- Disengaged staff–leads to a lack of collaboration and informed decisions and inhibits listening and contribution. Disengaged employees have 37% higher absenteeism, and 18% lower productivity. The cost is 34% of a disengaged employee’s annual salary. For an average salary of $40,000, this cost is $13,600.
- Gossip and conflict–employees spend an average of 2.8 hours per week dealing with conflict: watercooler gossip, social media distractions, boring meetings, sick days. For an average employee making $40,000 per year, this translates into $2,800 per employee. With a departmental conflict or team impact, this number can cost a company a full-time position.
- Resignation of top employees–if problems are not resolved, top employees will seek jobs where they can make a difference and not get sucked into the drama. More than 1/3 of employees said that conflict resulted in someone leaving the company. At the most conservative estimate, replacing a salaried employee costs 6-9 months salary on average (SHRM). Other reports indicate the cost is 150-200% of the employee’s salary. The cost of hiring a new employee includes: (1) recruitment–advertising, interviewing, screening, and hiring, (2) Onboarding–training and management time; (3) lost productivity–it may take up to 2 years to reach the productivity level of an existing employee; (4) lost engagement–impact on other employees and their concerns; (5) customer service errors–employees take longer and are less adept at solving problems; (6) training costs–10-20% investment in developing a new employee.
- Limitations to growth–stifled creativity and missed opportunities impact the number of new customers.Nearly 10% of employees report that workplace conflict led to project failure. Lack of trust and communication leads to loss of client business and loyalty. Consider losing just one large customer and what that costs the company, not just from the loss, but the cost of acquiring replacement customers.
- Absenteeism and sick days–missing work due to stress, avoidance, or health conditions. Twenty-five percent of employees said that avoiding conflict could be tied to sickness or absence from work. When someone uses a sick day, productivity is lost for that employee, and creates a burden for others. The cost quickly adds up when you consider the impact on an entire team, department, or company.
- Presenteeism and loss or productivity–ongoing stress leads to health conditions such as headaches, backaches, depression, and anxiety.
Consider these numbers in terms of a small business with 100 employees. If only 21% of employees are engaged, 79 employees are not engaged. Calculating on an annual salary of $40,000 and $13,600 per disengaged employee (34%), employee complacency for that company costs $1,074,400; more than a million dollars –just in one year!
The culture of a company is not something that gets better in time without a conscious effort. The most challenging part of shifting a culture is understanding the root cause of the problem. Even if you remove a toxic employee, it may take years for the contagion and damage to heal. Unfortunately, only 9% of the leadership is typically committed to cultural initiatives. Fifty-eight percent of employees stated that their leadership takes no action regarding their company culture, or they are merely reactive instead of proactive. Therefore, the first step in shifting a culture requires a strategic plan to implement initiatives that will encourage buy-in.
You cannot afford to ignore the cost of drama in your company.
Essentials to transforming a culture:
- Get an honest and accurate assessment of the culture
- Work together; productive culture is a joint effort
- Be able to address challenging problems
- Be willing to look inward and make personal changes
- Leverage talent and strengths for enhanced engagement
- Listen and understand differing perspectives
- Value employees
- Develop the skill of having awkward conversations
- Tackle real dialogues about underlying issues
- Restore trust and respect
- Create a compelling future and vision
Culture change requires significant investment of time, resources, and effort, but the payoff is well worth it. Businesses with happy employees have 22% higher profitability, 21% higher productivity, 10% higher customer engagement, 25-65% lower turnover, and 37% lower absenteeism.