‘Toxic leadership’ and the $2.3bn effect on productivity

Effective leadership can make all the difference within an organisation. However, new data suggests that there are many workplaces lacking in this department, and the effects of this are hurting not just businesses but also the wider economy.

What is being described as “toxic leadership” affects 27 per cent of businesses. According to management expert Margot Faraci, this is being propelled by fear and is costing the Australian economy a staggering $2.3 billion each year.

“Fearful leadership manifests in subtle yet corrosive ways in our daily interactions. It’s reflected in overly controlling management styles, where leaders micromanage every aspect, stifling creativity and autonomy,” Ms Faraci said.

“It’s evident in a reluctance to communicate transparently, often leading to rumours and misinterpretations. Fearful leaders might prioritise short-term gains over long-term employee wellbeing, inadvertently fostering a tense and anxious work environment. These actions stem from an unconscious fear of losing control.”

Ms Faraci revealed that fearful leaders in Australia lose an estimated $26,263 each year. The consequences of leaving these issues unaddressed don’t just influence the economy, however. The research found that 69 per cent of fearful leaders in Australia believe stress can be “positively harnessed” in the workplace. These attitudes can be detrimental to the company culture and employee wellbeing.

Another 87 per cent of fearful leaders see regular drops in team productivity due to toxic leadership, 49 per cent struggle with decision fatigue, 38 per cent see a decrease in employee morale, and 51 per cent are unhappy with their job.

Ms Faraci continued: “Our fear of failure, our fear of being wrong or being outdone, has devastating consequences for us personally, for our teams, and overall business performance. Fear shows up in various ways in leadership: avoiding difficult conversations, undermining others, shifting the blame, not allowing others key opportunities for growth, or not speaking up and staying small to be safe. All of these behaviours are damaging to the system and ourselves.”

“Fearful leadership is fuelling Australian and worldwide businesses. I’ve seen it for decades, and the majority of managers aren’t often aware they’re leading with fear or coming from a fearful response. It’s hardwired into our subconscious because it’s what we’ve been exposed to throughout our careers.”

The detrimental effect these issues can have on businesses if left unaddressed is clear. Leaders must begin to acknowledge and work towards dealing with these issues if progress is to be made. This can begin by replacing fear with love.

“The opposite of leading with fear is leading with love. People think of love as a romantic connection between two people, but it’s more than that. Love includes trust, compassion, vulnerability, respect, and other sentiments needed to create psychologically safe environments. It takes a level of self-awareness to reach a love-based response,” Ms Faraci explained.

“Love will bring trust, and it will expand. People come to you as their leader, saying, ‘I’m with you; I can see you’re having a hard time with you. I’m with you on what you know.’ It brings connection in critical moments. This can be the making of your leadership and your team. If you trust your members, it can bring the potential you didn’t even know was in you.”

She concluded: “Globally, we need to see love as this massive, powerful force we have rather than something that’s only romantic between two people. Love is nothing to be afraid of, especially in the workplace. Love needs to be redefined so that everyone understands it is the most powerful force on earth that we have.”