Why do workplaces suddenly become toxic? Why risk losing market position for short-term gain?
Canaries were once regularly used in coal mining as an early warning system. Toxic gases such as carbon monoxide or asphyxiating gases such as methane in the mine would affect the bird before affecting the miners. The presence of singing canaries was a sign of healthy air in the mine.
Similarly, the presence of happy staff is the sign of a thriving company. When workplaces start to become toxic the following usually happens in four stages:
So how and why does this happen?
Two factors can lead to this, one is deliberate policy by senior management, and the other can be due to knee-jerk reaction to external factors.
Management can instigate changes without consulting the staff, due to pressure from shareholders. In a corporate environment senior management can be too distanced from the day to day workings of the team or be in a different location or region. This can lead to decisions made that make sense on a spreadsheet or might make an accountant happy, but impacts work negatively. It can also happen when a company goes through a takeover or having new management trying to make their mark.
It can also be due to real external circumstances, such as increased competition, financial instability or increased costs. When this happens staff are usually asked to make sacrifices that are meant to be short-term but somehow never end despite the crisis passing.
So what happens?
There are two strategies that a company might adopt which are not necessarily mutually exclusive but are not as effective as each other. One is to focus on cost-cutting and creating efficiencies, the other is to innovate, grow the business and become more effective.
The orthodoxy according to many MBAs is to immediately cut “costs”, with people being one of the main costs of a business. Instead of innovating, investing in staff or trying to win new business there is an increased focus on cost-cutting, efficiencies and the bottom-line. Targets are raised, head count is reduced, travel bans are instigated and the experienced staff are made redundant. At Da Vinci’s Workshop we call this The Efficiency Illusion, where effectiveness is sacrificed to achieve efficiency. The canaries recognise what is happening at this stage and start to leave.
Now what is counter-intuitive is that in the short-term this strategy works. Existing staff work harder to make up for the gap, so the company makes more money and the share price improves (investors love cost-cutting and efficiencies). This makes senior management think that their strategy is working and that the staff are just “moaning”, so the cost-cutting is increased, headcount is further reduced and pay-rises are frozen. This is when those who were holding out for things to change or believed the situation could be improved start to leave, leaving a massive gap. Those left now have to fill the knowledge and experience gap with fewer resources and lower motivation; from the company perspective however, they have made massive savings because experienced staff cost more, there was no need for further redundancies and those left are usually hostages (too terrified to leave).
This is the classic business three-year cycle. In the short-term this strategy works, the share price goes up and costs go down. CEOs and board members receive their big bonuses despite the complaints of staff and they possibly move on to a different company with a large pay-off during this period with tales and evidence of success. As management consultants and business psychologists, we have seen this cycle many times and we are usually brought in at the end of it to help repair the damage.
In the medium to long-term, they have gutted talent and reduced potential to compete and grow. Organisations that do this lose talented staff, fail to innovate, lose customers and sustain reputational damage. The biggest damage will be that man-hours will be lost and wasted which will prevent staff from innovating, growing the business and exploiting new markets. There is simply no capacity for anyone to pursue new leads, create ideas or take risks.
How to recognise a workplace that is becoming toxic:
Don’t damage yourself trying to “save the company” and never listen to that “someday this will be better” spiel. A company doesn’t need to be constantly growing to be an amazing company, always remember that. Amazing happens every day at amazing companies. There is no-one at an organisation who is indispensible and you will be replaced quickly when you’ve burned out or your job will be quickly automated or outsourced.
So what can you do as an employer? Instead of focussing on cost-cutting, focus on retaining clients, winning business and innovating. Develop long term strategies and not just chase every quarter. Invest in systems and processes that will help your staff to become more effective and consult with them on how to make improvements. Correctly train your staff properly to use principles such as Lean, Kaizen, Agile and other forms of process improvements to make long-lasting changes (these processes are about improving process not cost-cutting). Recruit talented people with ideas that will help you disrupt your industry, give them time to take risks and innovate and empower them to help you become the market leader. Otherwise what’s at stake is your reputation and results, which will be like the titular canary (dead down the mine).