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  • mattheelan

The correlation between a toxic work culture and your financial results.

I was talking to a friend of mine whom we will call Sarah. Sarah has been the CEO of a technology company for the last 10 years. She had reached out to me and said, “Matt, we are struggling to hit our financial goals each quarter. I know that we have struggled on the delivery side but I don’t fully grasp why. Can you help me figure this out?”

The company that she was running was relatively small (60 employees), had been around for 10 years, and had a solid list of clients who consistently gave them projects. In addition, on the new sales front, her team was led by another woman, Julie, who had built an amazing team that was consistently exceeding their goals. We began working together to investigate the issue on the delivery side. We sat down with the COO, Jeremy, and tried to get his thoughts on the delivery issue. Jeremy cited some scope issues with a particular client, increased expenses, and challenges around productivity with people working remotely. He had a team of 3 Team Leads with each Team Lead having between 10-12 Team Members. These Team Members were project managers, analysts, developers, and engineers. The majority of the Team Leads and Team Members had been with the company for 3-5 years.

Sarah informed me that they were utilizing EOS (Entrepreneurial Operating System) for the past year and she really enjoyed the framework and the ability to focus on data, processes, and people. She had utilized some frameworks in the past but found them to be impractical and burdensome to implement. I had also been sharing with her over the course of our coaching sessions some tools and frameworks around Systems Thinking.

As we started to dig into the data reported via each team's scorecards we noticed one team's results were all over the place in terms of the achievement of their goals. This team was run by Mike. I met Mike at the company’s planning meeting last year and found him to be a little “rough around the edges” in terms of how he interacted with his team members. Some of his teammates even described him as a manager as “somewhat disrespectful” “backstabber” and “hostile” in some previous employee surveys. Jeremy was working with him on improving his performance but in the meantime, there was significant attrition on Mike’s team.

After several more conversations with Sarah, Jeremy, Mike, and his teammates we reached the following conclusions:

1) The poor performance and leadership of Jeremy and Mike were impacting the financial results of the organization. The simple fact was that no one wanted to work with Mike and because of this Mike became ineffective as a leader and his ability to get results out of his team members.

2) Jeremy worked too slowly to address the issues with Mike and was viewed by Mike’s team as being complicit in allowing his behavior to continue.

3) In a conversation with the Director of People Operations, Kristen, she noted that there were several notes made about Mike’s leadership style from her team's exit interviews with Mike’s outgoing team members. These notes were shared with both Jeremy and Mike.

4) Kristen also mention that Mike was promoted because he was considered one of the brightest developers and did some amazing technical work when he was hired 5 years ago. Because of his high level of performance as a developer, he was promoted to Team Lead by Jeremy.

5) Sarah noted the failure of this issue to get surfaced within their monthly EOS sessions as a Leadership team was baffling to her. Sarah also noted that she felt the organization failed Mike by promoting him to a role that was not a good fit and without a lot of support to improve his performance.

In my experience, people feel the solution to eliminating a toxic work environment is to get rid of the root cause - the person or people contributing to the toxic culture. Systems thinking teaches us that we can’t just look at one component within the broader system but that we have to look across the organization.

Here are some systems-wide organizational questions:

1) How did we encourage and endorse this behavior?

2) Have the values of the organization changed such that somehow we are now promoting this behavior?

3) What systems and structures failed to alert us of the toxic behavior? Or if they were working why didn’t we listen?

4) What systems and structures do we need to improve in order to prevent toxic behavior in the future?

5) Why did our communication break down within the Leadership Team?

6) What is the overall cost to the organization for our inability to effectively deal with this issue?

I gave Sarah the following advice:

  • Focus on the organization as a system.

  • Utilize EOS and the principles around being clear about the vision, reviewing and analyzing the data, building and maintaining processes, getting and keeping the right people, and resolving issues quickly.

  • Find additional tools, frameworks, and systems and empower your team to utilize these throughout the organization.

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