In today’s Finshots, we tell you what toxic workplaces cost the economy and why employers don’t want to fix them.

But before we dive in, we’ve got some exciting news that we spilled in our Sunday newsletter. It’s something we wanted to share exclusively with you before we told the world. Check it out here if you missed it!

The Story

Last week, employees at SEBI, India’s capital markets watchdog, raised the alarm about a “toxic work culture”.

Things seem so dire that they’ve actually written to the government. And it’s not just a small complaint. There’s a laundry list of grievances, and here’s what’s got everyone talking.

To begin with, there’s the unrealistic KRAs (Key Result Areas). Employees say the bar is set so high, it’s like trying to hit a moving target. And it’s nearly impossible to meet these expectations.

Then there’s the immense work pressure. And if that wasn’t bad enough, some employees have faced public humiliation at work, which has completely shattered morale.

Oh, and let’s not forget the strange case of the swing barriers. SEBI introduced a system that tracks employees’ entry and exit times, adding a layer of micromanagement. No one likes to feel like they’re being watched every minute, and it only adds to the pressure.

It’s no wonder that they’re finally speaking out.

But here’s the kicker. All of this has reportedly led to severe mental health issues. Employees who rarely ever saw a counsellor before are now flocking to them in droves. SEBI’s HR team had to expand mental health services and offer unlimited appointments just to cope with the influx.

And while SEBI is just an example, it’s far from the only one. This toxic workplace culture is more common than you’d think and it’s quietly wreaking havoc on the broader economy. How’s that, you ask?

For starters, it hits employees right where it hurts — their well-being. To put things in perspective, only 14% of working Indians feel like they’re thriving, while the rest are either struggling or outright suffering.

This stress doesn’t just stay at work, it seeps into their mental health as well. Poor workplace culture is linked to severe mental health issues and costly problems like high attrition, absenteeism, low engagement and decreased productivity.

For instance, in Australia, the cost of mental-health-related absenteeism for businesses is around $13.6 billion per year. In Japan, compensation claims for mental health conditions reached record highs in 2021. And back in India, nearly 40% of private-sector employees face anxiety or depression, a much higher rate compared to those in government jobs. The main culprits? Longer working hours and lower pay.

And here’s something that may or may not surprise you. A 2023 report by the International Labor Organisation (ILO) suggests that India has the highest weekly working hours in South Asia, but the lowest per-capita GDP. It’s a combination that leads to a deeper issue — workplace dissatisfaction.

There are numbers to back this up. A survey revealed that over 90% of employees who’ve considered quitting their jobs, think so because of poor workplace culture. In fact, a company’s culture is 10 times more likely to drive someone to quit than their salary.

But here’s the thing. Even with all this toxicity, most people in India don’t have the luxury of quitting their jobs. Family responsibilities, lifestyle costs and a cooling job market mean that people stay put, even when they’re burning out and their mental health is at stake.

So, they do the next best thing. They “quiet quit”. For the uninitiated, quiet quitting is when employees do just the bare minimum to get by. No extra effort. No engagement. And the end result is that productivity takes a nosedive.

Sure, people might still show up to work, but they’re just going through the motions. Innovation dries up. Employees stop coming up with fresh ideas or solving problems creatively. Even absenteeism starts rising, with more sick days and no-shows.

If you really think about it, promoting a toxic work environment costs a company far more than simply motivating employees to hustle harder. It’s like trying to avoid the immediate costs, but eventually, still facing high recruitment costs when they may have to fire a disengaged employee. They have to spend more time, money and resources on hiring and training a replacement. Advertising the position, conducting interviews and training a new hire all take significant effort and funds. Plus, until the new person is fully onboard, the company operates with a leaner staff. And that’s not even the worst part.

On a larger scale, quiet quitting is actually a massive economic drain. It costs businesses over $500 billion every year in the US alone. And globally, this low engagement costs the economy a whopping $8.9 trillion — or 9% of global GDP.

So then, why don’t companies just fix their toxic workplace cultures? You’d think it would be a no-brainer, right?

Well, the truth is that many companies see addressing workplace issues as more costly than beneficial. Take, for example, a manager who turns a blind eye to workplace harassment because it seems like too much hassle to deal with. Even though it’s clearly hurting employee morale and productivity in the long run, the immediate time investment to fix the issue feels too high, so it gets ignored.

Another problem is that the impact of a toxic culture isn’t always obvious. Imagine a high-level executive focused solely on hitting quarterly profit targets. They might miss the damage an unhappy workforce is causing because they’re fixated on the final numbers. They’re so wrapped up in the end result that they overlook the messy process behind getting there.

To put it differently, employee dissatisfaction is more like a slow leak than a burst pipe. It goes unnoticed until things really start breaking down. And this leads to bigger problems down the road.

Sometimes, toxic cultures even attract the wrong kind of people. If a company’s reputation is bad, it tends to draw employees who either don’t mind the toxic environment or, even worse, contribute to it. It’s like a restaurant with terrible service — the longer it gets away with it, the more it becomes the norm. New hires start to expect it, and the cycle just keeps going.

But here’s the silver lining.

Upwards of 60% of Indian workers are more likely to stick with a company if it has a positive culture. That’s significantly higher than the global average of 37%. And despite economic upheavals and rising inflation, Indian workers generally view workplace culture positively.

That’s good news. It means that there’s hope, and not everyone feels stuck in a toxic environment.

In fact, a study by the UKG Workforce Institute adds more optimism to the picture. It says that in India, more than three-fourths of employees feel motivated by their managers to go the extra mile. They also receive actionable feedback and clear performance goals, with many confirming that their workplaces provide ample learning and development opportunities. So yeah, some workplaces are doing things right.

Time for SEBI and others to take notes, eh?

Well, SEBI is actually denying any toxicity in its workplace. So, it looks like there’s still a lot of change needed before tackling the issue of a toxic work environment.

Until then…

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