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What is the True Cost of Toxic Leadership?

What is the True Cost of Toxic Leadership?

What is the True Cost of Toxic Leadership?

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, bring you down, 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 management, their teams, and the business as a whole?

Toxic leaders tend to have poor listening skills, lack self-awareness and emotional intelligence; they are often arrogant and aggressive, lose their temper easily and deliver 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.  They may even actively discourage an inclusive culture.  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. Unfortunately, they still exist in politics, corporations, and in sports teams. 

So how can you avoid the wasted costs of hiring a toxic leader? Incredibly many organizations still rely on a traditional selection process just using a CV, interview, and 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 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 their head’ is an expression still heard in company corridors today, despite the well-publicised demise of many large corporations in the past being due to their overly authoritative, autocratic, leaders.  Once a toxic leader is in situ, in some organizations, 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. 

However, if they 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 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 all this change has a major impact on productivity, morale, and profit, as well as company reputation.

Increasingly more employees are being promoted into 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 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 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 effect on other team members, who may then also choose to leave.  Often 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 or online in secret meetings or discussions about the toxic leader and the impact of their actions on the department or workload.  They may change their behaviours and working practices to avoid the leader, remain silent in meetings, often agreeing with destructive initiatives just to ‘keep the peace.’  

Working for a toxic leader clearly increases stress in the workplace, as well as outside the office, with complaints about their behaviours and actions often dominating discussions at home.  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 legal expenses and payouts.  Executive Assessment  and Development, as well as robust Talent Management and Succession Planning, and addressing poor performance swiftly and at all levels will all produce a high ROI and avoid expensive bad executive hires and prevent the conditions where a toxic leader can thrive.

'The 360 Feedback Process was so well-handled thank you.  Your ability to provide the right balance of check and challenge as well as empathy was commended by the SLT.  You dealt with a very challenging situation with consummate professionalism and expertise.'  CHRO

About Jill Maidment

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