What is the True Cost of a Toxic Leader?

What is the True Cost of a Toxic Leader?

angry leader

Most people have known toxic individuals, whether they’ve been so-called friends, or even guardians and siblings; these are the people who love to deride you, bully you, trying to gnaw away at your self-esteem in order to feel better about themselves.  Whilst we can detox these often jealous people from our personal lives, what is the ripple effect and cost of a toxic leader on their direct reports, teams, and ultimately the business as a whole?

Toxic leaders tend to have poor listening skills and lack self-awareness and Emotional Intelligence; they are often arrogant and aggressive, lose their temper easily and commit one of the cardinal sins of leadership by delivering overly critical feedback in public; these individuals can also display poor judgement, try to empire build and play power games.  Other traits include not being a team player and having a misguided belief that they are intellectually superior to others, which may be evident in discriminatory remarks.  Toxic leaders have a tendency to apportion blame and avoid responsibility; they can also come across as narcissists, controlling and manipulative, and are often self-deluded with self-destructive behaviours.

Even in the 21st Century their numbers appear to be on the rise: some studies suggest that between 20 – 56% of employees consider their leader is toxic, with up to 70% in some public sector organizations.

So how can you avoid the wasted costs of hiring a toxic leader? Incredibly many organizations still rely on a traditional selection process using only a CV, an interview and the obligatory standard reference to hire executives.  Interviews alone are regarded as less than 1% effective in determining future behaviour, performance and potential in a new role.  Frequently they result in the recruitment of a ‘mini me,’ who reflects an existing executive’s personality, resulting in future clashes, or they may involve the hiring of a colleague or ‘buddy’ from a previous company, who ends up with feelings of grandeur, trying to take over in their new environment.

According to recent research, between 50-70% of executives fail within the first 18 months, with around 3% failing catastrophically.  With executive recruitment costs alone still being around 30% of an annual salary, and with the average executive salary estimated at a conservative £100,000, a poor hire can prove costly within a few months.  Utilising robust Executive Assessments such as Personality Questionnaires and objective qualified Assessors and/or engaging a reputable Head Hunting firm, will help to significantly reduce the risk of landing a toxic leader.

But what happens if an internal promotion creates a toxic leader?  ‘The power has gone to his head’ is an expression still heard in office corridors today, despite the well-publicised demise of many large corporations in the past being due to their overly authoritative, autocratic leaders.  In some organizations, once a toxic leader is in situ, if the Chairman, the Board and shareholders are happy with the company figures, they will be unaware of, or indeed choose to overlook, the potential toxic leadership style that is driving these statistics.  Action to remove the leader may only take place if the annual results dip.

However, if these key stakeholders dig deeper and engage in a confidential Face to Face 360 Feedback Review, as favoured by many US firms, they may discover that the senior leadership team is becoming disengaged with disempowered executives looking for new roles.  The cost of replacing each senior manager includes the selection process, any relocation fees, any upskilling required through Leadership Training and Executive Coaching or Mentoring, the overall downtime during the transition, as well as getting the new hire up to speed, which is estimated at around 18 months; clearly changes at senior level can have a major impact on productivity, morale and profit.

Ripple Effect

Increasingly more employees are being promoted in to senior positions, sometimes without any prior assessments or ongoing support.  Research shows that almost 80% of individuals promoted internally to more senior positions feel that they don’t receive the required preparation and assistance, with just over half receiving the relevant feedback and Coaching they needed to progress well.  Just under 50% felt they had completely underestimated the issues they would encounter in their new role.   In such an environment a toxic leader may well be born.  The resultant additional time to ‘step up’, added to the reduction in productivity and effectiveness will also impact negatively on the bottom line; when this is multiplied through an organization the ROI of correct assessment and development becomes evident.

Toxic leaders will frequently attempt to divide and conquer, sometimes promoting employees irrespective of capability, who they have won over by fear or promises of reward, resulting in a downward negative knock on effect on other team members, who may then also choose to vote with their feet.  Sometimes these leaders will stick to worn-out methods to achieve results, attempt to massage poor figures, and avoid change.  As a result the company culture can start to become toxic, with an increase in silo working, a downturn in productivity and innovation stifled.

Some studies show that peers and direct reports of toxic leaders admit to spending up to a quarter of their time in the office in secret meetings or discussions about their leader and the impact of his or her words and actions on their department or workload.  Managers may change their own behaviours and working practices to avoid the leader, remain silent in meetings, often agreeing with destructive initiatives just to ‘keep the peace.’  All this time there is no alignment between the company vision, strategy and team, tasks and objectives; it may take up to 3 years for the detrimental effects of a toxic leader to become completely apparent, as often they are adept at blaming others and outside factors for poor company performance.

Working for a toxic leader clearly increases stress in the workplace, as well as outside the office, with complaints about his/her behaviours and actions often dominating discussions at home.  Overall sickness absence figures tend to rise.  With low levels of engagement and high rates of attrition, it is often left to HR or the CFO to speak up to resolve the issue.  Any resultant compromise or settlement agreement can prove very costly in terms of time, focus away from the vision and strategy, aside from the legal expenses and payouts.

Executive Assessment and Development, added to identifying and addressing poor performance swiftly at all levels, will produce a high ROI and assist firms in avoiding expensive bad executive hires, as well as preventing the conditions where a toxic leader may start to thrive initially unnoticed.

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