Employees Leaving Due to a Toxic Culture? Time to Renovate.

Amidst soaring inflation, recession, and now a bear market, the labor market continues to be robust. 

It was reported today that 193,000 workers filed for new unemployment benefits, a number which has continued to decline despite predictions it would increase by many experts. The number of available jobs continue to far outpace the number of available workers, and unwanted attrition in many companies remains high.

While conventional wisdom may say that employees are leaving simply for better opportunities, there’s another factor that you may be overlooking:  the culture of your organization.

Research shows that a toxic culture is 10x more likely to contribute to attrition than compensation. Yet, how are most companies trying to retain and attract talent? By compensating them more, according to a recent study by i4cp and Fortune.

The study, The Talent Imperative, shows that in this hypercompetitive talent market, compensation is currently the #1 approach companies are taking to hire more—and lose less—members of the workforce.

The problem for most companies that suffer from a toxic culture is they don’t know it’s toxic, or they are ignoring the obvious signs. And even if they do know, most are at a loss as to how to fix it.

Yet, over the last decade, we’ve seen many well-known organizations renovate their cultures…and improve their financial outcomes at the same time. They represent examples that many more organizations can learn from to combat the Great Resignation.

What defines a toxic corporate culture?

Toxic cultures come in many forms but often share common traits. These can range from a lack of inclusivity to unethical or abusive behavior to rampant discrimination.

The Netflix documentary, White Hot: The Rise & Fall of Abercrombie & Fitch, is a good example. In it, the filmmakers capture the storied company’s rise to fame in the late 90s thanks to incredible experience in marketing and branding. They buttress this with the company’s failures a decade later, the result of leaders’ lack of interest in retaining or hiring people who weren’t young, attractive…and white. It’s a staggering display of intentional discrimination, bundled with many other toxic elements that include inequality and non-inclusivity, disrespect, and questionable ethics.

While Abercrombie & Fitch is a different company now—and it may be an extreme example of a toxic culture—we’ve seen plenty of other organizations suffer from similar issues. In March of 2020 the US House of Representatives blamed the Boeing 737 crashes on a “culture of concealment.” WeWork and Uber’s toxic cultures resulted in significant financial loss, the drama of which earned both the honor of starring in big-budget TV shows. From Wells Fargo to Activision Blizzard to Netflix, the list of companies that attributed scandals and poor financial results to culture problems are numerous.

In this talent market, why would employees tolerate toxicity when they know they can easily jump ship and likely make more money? That’s a question every company today should be exploring.

Time to Renovate

While most leaders understand the risks of a poor culture, there’s a simple reason why organizations don’t automatically leap at trying to change: it’s damn hard to do successfully. i4cp’s research, representing thousands of organizations from dozens of countries, shows that only 15% of culture change initiatives are successful, and many of those efforts may not have been starting from a place of toxicity.

Based on that research, there is a clear blueprint for culture change which many companies (like Microsoft, T-Mobile, and Mastercard) have used with positive results. As outlined in the bestselling book Culture Renovation®: 18 Actions to Build an Unshakeable Company, certain sequential and proven steps can help fix a toxic culture and “future proof” the organization by creating an agile workforce ready to handle whatever changes the world has in store.

Here are 4 of the 18 that merit immediate attention.

1. Listen to your employees

   The very first action step in Culture Renovation® is to develop and deploy a comprehensive employee listening strategy. “Comprehensive” means going beyond whatever data you glean from an annual engagement survey and creating the means to collect, analyze, and report on the real-time (or at least continuous) sentiment of the workforce.

   It's astounding how many senior teams assume they know what’s right or wrong about the culture. Most don’t have a clue. Conducting periodic pulse surveys, enabling real-time technology, and monitoring external sources such as social media and job sites such as Glassdoor will provide a more well-rounded view of employee sentiment than an infrequent “point-in-time” survey. Unfortunately, too many companies rely on old or insufficient data when trying to figure out what issues they have with their culture.

   New technology is helping to make the process of analyzing employee sentiment much easier and more accurate. Using natural language processing (NLP) to categorize free-form text vs. pre-canned answers provides a significantly deeper understanding of issues affecting the culture—and where pockets of toxicity exist.

2. Identify energizers and influencers—and ferret out the skeptics

   With a commitment to change, organizational leaders must confront a reality: some leaders, and some employees, are not only a poor fit for a new, healthier culture—they may actively sabotage needed change. These people need to be moved, incentivized differently, or removed from the equation entirely. Too many organizations often tolerate “brilliant jerks,” emphasizing results over all else, and slowly destroy their culture in the process.

   On the flip side, companies that successfully changed their culture enlisted the help of countless internal influencers. These individuals, which most of the time act as workforce energizers, are the best candidates to be advocates of change. Unfortunately, they are often buried within your organization’s hierarchy and invisible to senior leadership.

   So how do you find them? An organizational network analysis (ONA) is in use at thousands of companies today to better understand workflow and collaboration…and identify these energizers who can influence those around them. Ultimately, successful companies have created a team of “culture ambassadors” made up of these hidden superstars to help culture renovation be successful.

3. Paint a vision for the future (and that future better include flexibility)

   The COVID-19 pandemic has dramatically changed how, when, and where work gets done. i4cp has conducted three major global studies since spring of 2021 that all deliver the same message: give your employees as much flexibility as possible. Companies that have forced their employees back to the workplace are at risk of losing key talent. The pandemic proved that work can happen remotely without impacting productivity, innovation, and business results.

   Flexibility has also been shown to have a positive impact on diversity and inclusivity—making it easier to attract new and different talent—while at the same time improving overall wellbeing.

   Flexibility is often thought of in the context of knowledge workers, but that doesn’t have to be the case. Our Flexibility or Flight: Hybrid Strategies to Attract and Retain Talent research provides recommendations on how frontline and essential workers can still be empowered to control or influence aspects of their job.

4. Create a culture of talent mobility

   i4cp research has consistently shown that allowing employees to move internally has a strong correlation to market performance. It leads to innovation and agility, helps build important cross-functional relationships, and gives employees new, challenging opportunities. High-performance organizations are 2x more likely to emphasize talent mobility, while low-performance companies suffer from the same familiar scenarios.

   Is it easier for managers to fill an open vacancy from the outside? Is it easier for employees interested in a new opportunity to seek it externally? For most companies, the answer to both of those questions is yes, but top companies know differently. Our research has shown several times that talent mobility is one of the most underutilized yet most effective organizational development and culture enhancement techniques in companies today.

   Talent mobility is not just about promotions or geographic movement. Research shows that lateral career opportunities are 12x more effective at employee retention than promotions.

   Sadly, many companies still suffer from talent hoarding, in which managers try to hold onto their best employees at all costs. Building a culture of talent mobility—which in part can be achieved by incentivizing managers to become incubators and developers of great talent—is an important step toward retaining and attracting future stars.

Toxic cultures look different to different people and may not be as extreme as those found in Abercrombie & Fitch or WeWork. Yet research has shown that many employees in large companies cite at least one toxic attribute in Glassdoor reviews. Even companies regarded as having strong cultures likely have toxic areas that could be improved.

So ask yourself…do you know the true health of your culture?