Cost of a Bad Culture

Unfortunately, culture issues are prevalent in businesses today.  In fact, research has shown toxic cultures have cost businesses in excess of $200 billion over the last five years.  A business culture represents the beliefs, values, rules of behavior, attitudes, and norms that reflect a company’s values and modes of operation.  It is the day-to-day environment that everyone works within.  Every company has a culture—but not all cultures are conducive to helping a company achieve its goals.  It is not unusual for companies to have a “stated culture,” and another that is the “real culture”.  The “stated culture” may sound good on paper or on a website but may not be true.
 
Studies have found that 58 percent of workers who quit their jobs cite poor workplace culture as their reason.  If you suspect there could be an issue, here is why it is important to deal with it promptly:

• Incivility in the workplace isn't just bad for morale — it hurts a company's bottom line. Researchers estimate that disrespectful behavior costs companies $14,000 per employee due to lost productivity.
• A toxic culture might damage productivity by as much as a 40% decrease.
• Low-level engagement within companies results in a 33 percent decrease in operating income and an 11 percent decrease in earnings growth
• Disengagement is particularly expensive when going through a tumultuous time in the company, such as a change initiative albeit continuous improvement or reorganization (or a pandemic). Employees that hate their jobs are not going to fully participate during a transition.
• This is especially if much of your workforce is ‘just getting by.  These are the employees that do the bare minimum until 5:00 p.m. and ultimately don’t care how well the company performs (so long as they continue to have a paycheck).
• Trying to establish any type of continuous improvement effort in an uncivil culture is very difficult. 

 
Conversly, look at the business impact of a positive culture:

• A strong, effective culture, as shown by the research of Kotter and Heskett, can lead to 20-30% more productivity than the competition.
• A positive culture, consciously developed with positive leadership, might boost performance by at least 20% - if not more. (Estimated based on literature and client work).
• If you just take the incivility out and become an effective culture, your results could grow by 20%.  If you develop further into a positive culture, results could grow by 20-40%.
• A strong positive culture can enhance employee engagement by 30%, resulting in up to a 19% increase in operating income, and a 28% increase in earnings growth.
• On average, organizations that purposefully craft and develop their culture experience a 14% turnover rate, while organizations that ignore their culture experience a 48% turnover rate.
• Continuous improvement has a much better chance to succeed when built on a culture that embraces change and takes pride in what they do.