In today’s fast-paced business world, leadership isn't just about calling the shots — it's about inspiring, guiding, and building an environment where people can thrive. Yet, not all leaders rise to this ideal.
Toxic leadership — marked by manipulation, favoritism, poor communication, and lack of empathy — is a silent destroyer within organisations. It doesn't just bruise egos or create minor setbacks; it systematically erodes employee morale, wrecks team dynamics, and cripples overall company performance.
In this edition of Arowana Insights, we’ll take a deep dive into how toxic leadership affects employee morale, the warning signs organisations need to watch for, and why addressing these issues is critical for long-term success.
Toxic leadership refers to a style of management where leaders prioritise their own interests, often at the expense of their team’s well-being and the organisation’s mission. Instead of empowering employees, these leaders instill fear, insecurity, and distrust.
Common traits of toxic leaders include:
While toxic leadership can sometimes deliver short-term results, its long-term effects are devastating, leading to broken teams, burned-out employees, and massive hidden costs.
Trust is the bedrock of any healthy organisation. When leadership becomes toxic, trust is the first casualty. Employees subjected to manipulation, inconsistency, or favoritism begin to doubt their leaders — and eventually, the organisation itself.
According to a 2024 survey by Gallup, trust in leadership is directly correlated with employee engagement. Without trust, morale plummets. Workers become guarded, communication suffers, and innovation grinds to a halt.
In a toxic environment, employees often find themselves second-guessing not only their leaders but also their coworkers. Paranoia spreads, and collaboration evaporates. It's not just uncomfortable — it's organisationally dangerous.
Key takeaway: When employees can't trust leadership, morale doesn't just dip — it falls off a cliff.
Toxic leadership doesn't just stay within office walls — it takes a heavy toll on the mental health of employees. Chronic stress becomes the norm, with anxiety levels steadily rising as employees navigate unpredictable and often hostile work environments.
Research from the American Psychological Association (APA) shows that workplace stress is a leading cause of anxiety disorders, emotional exhaustion, and eventual burnout. Under toxic leadership, workers often feel trapped: powerless to change their situation but fearful of speaking up.
Burnout isn't just feeling "tired." It’s a complete emotional and psychological shutdown. Signs of burnout include:
Organisations led by toxic managers often see burnout rates skyrocket, especially among their most dedicated and high-performing employees — a tragic irony.
Key takeaway: Toxic leadership transforms the workplace from a place of growth into a source of chronic emotional distress.
Job satisfaction and employee engagement go hand-in-hand with effective, supportive leadership. In toxic environments, both steadily deteriorate. Employees begin to feel undervalued, unheard, and ultimately invisible.
When leadership consistently overlooks input, dismisses concerns, or takes credit for employee achievements, team members lose their motivation to invest emotionally in their work. As engagement drops, so does overall organisational performance.
According to a 2023 LinkedIn Workforce Report, companies with highly engaged employees outperform their competitors by 21% in profitability. Conversely, disengagement — often triggered by poor leadership — drags down productivity, customer satisfaction, and profit margins.
Key takeaway: Toxic leadership doesn't just sap satisfaction; it drains the energy and enthusiasm that fuel company success.
One of the clearest signs of toxic leadership is increased turnover. Talented employees — the very people organisations can least afford to lose — often choose to leave toxic environments rather than endure ongoing emotional harm.
A study by the Society for Human Resource Management (SHRM) found that toxic workplace cultures cost U.S. companies over $223 billion between 2015 and 2025, primarily due to employee turnover.
High turnover isn't just a numbers game. It creates significant operational challenges:
Absenteeism is another telltale symptom. Employees may start calling in sick more frequently, using mental health days to escape the toxic atmosphere.
Key takeaway: If your best people are leaving or frequently absent, toxic leadership could be to blame — and the financial cost is staggering.
Leadership should act as a catalyst for high performance, but in toxic environments, it becomes a bottleneck. Demotivated, stressed, and disengaged employees are far less likely to perform at their best.
Instead of bringing new ideas, solving problems creatively, or going the extra mile, employees under toxic leadership often do only what’s required — no more, no less. This phenomenon, known as "quiet quitting," is becoming alarmingly common in toxic workplaces.
Productivity suffers in multiple ways:
When morale hits rock bottom, organisations often find themselves struggling to compete — not because they lack talent, but because they failed to nurture it.
Key takeaway: Toxic leadership doesn't just dim individual performance; it darkens the entire organisation's future.
Teams thrive on trust, mutual respect, and open communication. Toxic leaders, however, often sow division instead. Whether through overt favoritism, scapegoating, or pitting employees against each other, these leaders create fractured, distrustful teams.
In such environments, communication becomes guarded or entirely shuts down. Employees fear retaliation for honest feedback or dissenting opinions. Meetings become performances rather than platforms for real collaboration.
Ultimately, a breakdown in communication leads to:
According to Forbes, highly cohesive teams are 50% more productive and 30% more innovative than fragmented ones. Toxic leadership not only undermines cohesion — it actively destroys it.
Key takeaway: Toxic leaders don’t just damage individual relationships — they dismantle the entire social fabric of the workplace.
The impacts of toxic leadership are not confined to working hours. Stress, anxiety, and dissatisfaction often spill over into employees' personal lives, affecting their health, relationships, and overall well-being.
Employees under toxic leadership may experience:
This spillover effect creates a vicious cycle. As personal lives become strained, employees’ ability to focus and perform at work deteriorates further, perpetuating the negative impacts.
Beyond the individual level, toxic leadership also damages an organisation’s brand reputation. Glassdoor reviews, employee testimonials, and word-of-mouth all suffer when people feel mistreated.
Key takeaway: Toxic leadership doesn't clock out at 5 PM — it continues to hurt employees long after they leave the office.
The longer an organisation tolerates toxic leadership, the deeper the damage becomes. Companies that fail to act risk not only losing their best employees but also facing long-term reputational and financial consequences.
Key steps organisations can take include:
Ultimately, companies that foster healthy, supportive leadership styles reap massive benefits: higher engagement, stronger performance, lower turnover, and a reputation as an employer of choice.
At its core, leadership is not just about meeting KPIs or maximising quarterly profits. It’s about creating environments where people feel safe, valued, and inspired to do their best work.
Toxic leadership is a hidden epidemic in many organisations, silently eroding morale, trust, and performance. Its impacts stretch far beyond the workplace, affecting the mental health and well-being of employees — and eventually the bottom line.
Companies that recognise, confront, and correct toxic leadership will not only save their cultures — they’ll position themselves for sustainable success in a world where talent and innovation are the ultimate competitive advantages.
For more news and insights, stay tuned to the Arowana website.
