The Truth About “Toxic Culture” And Why Workers Leave Their Jobs

Published on

Toxic Cultures include a failure to promote diversity, equity, and inclusion. Beginning to emerge is a full spectrum of worldviews no longer willing to remain unacknowledged. HR needs to focus diversity and leadership training towards understanding varying worldviews and behaviors.

Get The Full Henry Singleton Series in PDF

Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q4 2021 hedge fund letters, conferences and more

According to the MIT Sloan Management Review, a research highlight released January 11 by Donal Sull, Charles Sull, and Ben Zweig reports that “Toxic Culture is Driving the Great Resignation.”

“Much of the media discussion about the Great Resignation has focused on employee dissatisfaction with wages. How frequently and positively employees mentioned compensation, however, ranks 16th among all topics in terms of predicting employee turnover. In general, corporate culture is a much more reliable predictor of industry-adjusted attrition than how employees assess their compensation. A toxic corporate culture, for example, is 10.4 times more powerful than compensation in predicting a company’s attrition rate compared with its industry.”

While attrition rates vary within differing industries (Telecommunications 7% and enterprise software 13%) or competitors (Boeing at 5.2% and SpaceX at 21.2%), the top five predictors of attrition include:

  1. Toxic Corporate Culture 10.4%
  2. Job Insecurity and reorganization 3.5%
  3. High levels of innovation 3.2%
  4. Failure to recognize employee performance 2.9%
  5. Poor response to COVID-19 1.8%

What is “Toxic Culture”?

According to MIT, “Our analysis found that the leading elements contributing to toxic cultures include failure to promote diversity, equity, and inclusion; workers feeling disrespected; and unethical behavior.” Companies with high attrition rates include SpaceX, jetBlue, Hertz, Netflix, and Goldman Sachs.

Failure to promote diversity, equity, and inclusion

For some time, employees have demanded that companies promote diversity, equity, and inclusion (“DEI”). DEI is about developing initiatives beyond the hiring process and providing equal opportunity and treatment throughout every touchpoint of the employee experience. DEI promotes representation and participation for different individuals, including people of different ages, races and ethnicities, abilities and disabilities, genders, religions, cultures, and sexual orientations.

In most corporate cultures, DEI is not a new topic to human resource departments. In the 1960s, the US Equal Pay Act of 1963 and the Civil Rights Act of 1964 compelled HR to focus on compliance issues. Human motivation theories, including Herzberg’s Two Factor Theory and Deci and Ryan’s Self-Determination Theory, began to transform the workplace. Organizational management and industrial psychology contributed to HRs evolution, paying more attention to employees’ rights and psychological motivators, including autonomy, purpose, and mastery in their work.

In the late 1990s and early 2000s, HR departments began to spend their resources on employee engagement and bolstering culture, increasing the odds they’re happy at work and will stick around for the foreseeable future. Company culture began being viewed as more malleable, an environment shaped for better outcomes. During this time (especially during the exponential rise of digital tech), we began to see corporate culture movements that include bottom-up reorganizations, the birth of Agility, and competitive talent heists.

An increasingly agile and restless workforce

Today’s HR directors will need to be forward-thinking and nimble enough to deal with an increasingly agile and restless workforce. The typical career is no longer viewed through the lens of company loyalty but rather an individual’s focus on dedication to themselves, their purpose, and their skill development. Today’s workforce sees hopscotch jobs as a means to develop their industry influence, market value, and independent gigs. Some employees are even funding new ventures on the social capital acquired through multiple job/life experiences.

Creating a culture that nurtures hopscotch jobs and promotes DEI is not straightforward in a restless cancel-culture climate. Now, more than ever, people are on the hunt for inequities, and long-overlooked infractions are no longer dismissed. Beginning to emerge is a full spectrum of worldviews no longer willing to remain unacknowledged. HR needs to focus diversity and leadership training towards understanding varying worldviews and behaviors; to understand our own ideology as one in a rainbow of mindsets—where no one view takes preference.

The unfulfilled promise of personality testing

Throughout history, we’ve attempted to understand other views and unique perspectives. A recent survey by the Society for Human Resource Management estimates that 18% of companies employ some form of psychometric testing during their recruitment process. Primarily, “employers use this kind of testing [Myers-Briggs Type Indicator, DISC personality test, The Caliper Profile, etc.] to determine if a candidate is a good fit for a specific role or the culture of the company, gain insights into a person’s working style, or easily compare different candidates. Sometimes companies use personality testing to evaluate their current employees or better understand, manage, or leverage their individual strengths.”

They’ve failed to use these indicators to understand diverse ideologies, nurture unbiased views, and produce improved situations and conditions. “Worse, rather than increase conditions and effectiveness, companies use them to justify promoting or rewarding their employees, potentially stifling career progression based on a scientifically questionable assessment. It’s also possible that personality tests increase hiring bias because they stifle diversity of thought.”

More than ticking boxes to discover what you already hope to be true

In many ways, personality models have attempted to understand ourselves and one another better. However, personality models often fail to help us see our missteps; they tell us how to leverage our strengths, but they don’t warn us of our shortcomings. Transactional competence does both. Contrasted with Myers-Briggs and the like, rather than justify our behavior after taking a test, it correlates with worldview, behavior, and roles. More than ticking boxes to discover what you already hope to be true about yourself, studying transactional behavior involves rigor and practice. It fosters a deep understanding of respecting others’ views and working successfully together.

Training people to understand their own and others’ worldviews isn’t easy. This kind of training requires humility, respect, and empathy. Successful cultures find ways to train their workforce to respect diverse individuals, recognize performance, and offer inclusive promotions. In the companies where this does occur, things are faster, and there is less friction and little dysfunction. Products get released to market faster. Initiatives get launched with ease. The culture is one of empathy and respect.

Article by John Patterson, CEO, Influence Ecology

About the Author

John D. Patterson is the CEO of Influence Ecology and senior Faculty Manager of Influential U. He is co-creator of a next-generation business curriculum and since 2009 has taught thousands of business professionals the philosophy and practice of Transactional Competence™, a set of core competitive skills not taught in business school. Learn more at