Toxic Workplace Culture: What It Looks Like and What Actually Fixes It

If you sit at the top of a business, a toxic culture rarely announces itself. Nobody sends an email saying the culture’s gone bad. It turns up in the numbers first, usually long before anyone says the word “toxic.”

In short, a toxic workplace culture is one where poor behaviour and poor decisions have become normal. It’s usually caused by how the work is set up and led, and by leaders who don’t step in to change it.

Signs of a toxic workplace culture (when you’re looking from the top)

Here’s where it tends to show up:

• Results sliding without a clear market reason.

• Departments working against each other to hit their own KPIs, so one team’s win becomes another team’s problem.

• More disputes and complaints than you used to have.

• Recruitment and retention getting harder, especially losing experienced people. MIT Sloan researchers found a toxic culture was ten times more powerful than pay in predicting whether people quit. (MIT Sloan)

• Sick leave creeping up. Gallup’s 2024 analysis of more than 3 million employees found the most engaged teams had 78% lower absenteeism than the least engaged. (Gallup)

• Psychological injury claims appearing. In Australia, a serious mental health claim now involves a median of almost 35 working weeks off and $68,600 in compensation. (Safe Work Australia, Key WHS Statistics 2026)

• Online reviews turning sour. The MIT team measured toxic culture using more than a million Glassdoor reviews. Your own reviews are worth a read.

• Doing everything “right” on the spreadsheet and still watching the business go backwards.

If a few of those sound familiar, our Team Culture Diagnostic will help you see what’s going on underneath them.

What is a toxic workplace culture?

A toxic workplace culture is one where poor behaviour, poor decisions or poor treatment of people have become normal, because nobody with the power to change them does. It usually shows up as disrespect, unfairness, fear of speaking up, people protecting themselves instead of helping each other, and good people leaving.

I’ve never worked in a fully toxic workplace. I have worked in places where clear signs of toxicity crept in. What held them together was the quality of the staff on the ground. It wasn’t until the numbers got bad enough that upper management had no other option that things really started to change.

That’s the pattern. A toxic culture rarely starts with one big dramatic moment. It builds slowly, out of small things: decisions made a long way from the people they affect, behaviour nobody pulls up, good work nobody notices. Left alone long enough, those small things become “just how it is around here.”

The good news is that the same small things are where the fix starts.

Culture is built around the actions you walk past

A while back I was running a corporate breathwork session and got to stay on and watch some of the other speakers. One was a former CEO of a big international Japanese camera company. He said something that stuck with me: culture is built around the actions you walk past.

Australians might know a version of this from Lieutenant General David Morrison, who in 2013 told the Australian Army, “The standard you walk past is the standard you accept.” (NPR)

The usual meaning is clear. If someone does something poor and you, as a manager or leader, walk past it without saying anything, you’ve just helped build your culture.

I agree with that 100%. I’d add the other side of it too. If you walk past someone doing something good and don’t stop to tell them, that builds your culture as well. Even a quick “hey, I noticed that, great work, keep it up” matters. (I’ve written more about this in employee recognition.)

Culture comes from what you stop for, in both directions.

It often starts at the top, with "spreadsheet decisions"

One of the most common toxic elements I’ve seen is poor decisions made by upper management who rarely get down to ground level to see how things actually run. They’re looking at the business through a spreadsheet, not through the people doing the work.

Those decisions then get filtered down through middle management. I sometimes wonder whether senior leaders would make the same calls if they had to deliver them face to face, to people they actually knew.

I see it most in publicly listed companies, where the pressure to deliver for shareholders every quarter pushes decisions towards the short term. A cost gets cut to make the books look good this quarter, and the damage turns up in another department, or a year later. I’ve seen businesses end up selling parts of themselves at a loss after years of decisions like that. (It’s the same pattern I wrote about in why KPIs so often backfire.)

Running a business off the spreadsheet is like driving at night. All you can see is the patch of road your headlights light up, and that’s your profit. Every now and then, pull over and get out. The road’s still there. So is everything you’ve been driving past: your people, your customers, and the reason you started the trip.

Go and see for yourself

Toyota has a name for the fix: genchi genbutsu, “go and see for yourself.” The idea is that the best way to understand a problem is to go to where it’s actually happening. (Toyota)

They live it, too. Engineers behind the new Hilux came to New Zealand to see local conditions for themselves and hear from owners first-hand. (Toyota NZ) That’s why I love Toyota.

For a senior leader, it can be as simple as sitting in a call centre and listening to some calls. Asking the team a few questions between them. Getting to know your managers, and encouraging them to properly know their people. (More on that in high performing teams.)

Purpose, standards and people

A clear sense of purpose matters too, the point Simon Sinek makes in Start With Why. Say what you like about Steve Jobs or Elon Musk, both had a clear vision and high standards. Pair that with someone brilliant with people, like Sir Alex Ferguson, and you’ve got something special. You don’t have to copy everything a leader does to learn from the best bits.

“Toxic” people are often just untested boundaries

The other common element is toxic workers. I want to put a caveat on that label.

A lot of the time, it’s really about what some people are allowed to get away with, and what management doesn’t pull them up on. The person behaving badly might actually be a good worker. They might just be someone who tries things on, and keeps trying them on as long as they get away with it.

Deal with it in the moment, and many people learn where the boundaries are. Once boundaries are learnt, people don’t test them as often. If someone keeps testing them anyway, then it’s fair to ask whether they belong in the culture you’re building.

One important distinction. Bullying, harassment or serious misconduct isn’t boundary-testing. That needs a firmer, formal response. Sometimes it means stepping in on the spot, then following up privately through your proper process.

There’s an Australian reality to keep in mind here. Once someone has passed the minimum employment period (six months, or twelve for small businesses with fewer than 15 employees), they can generally make an unfair dismissal claim, and other conditions apply too. (Fair Work Ombudsman) The smart move is usually to invest in making that person part of a positive, functioning culture first, rather than writing them off as toxic.

If it does come to letting someone go, don’t assume a fair process automatically makes it safe. Get proper legal advice. I work with a few employment lawyers, so if you need a referral, get in touch and I can pass you on.

How to pull someone up without it becoming a drama

The managers I’ve seen do this well handle it privately wherever they can. They don’t make it a public thing.

• Take them aside and keep it calm. You’re not there to belittle anyone.

• Name the behaviour. “That’s not the kind of behaviour we want here.”

• Check in on them. “Is everything okay? Is something going on at the moment?” Sometimes an outburst comes from things at home that have tipped someone over the edge.

• Hold the line anyway. “Whatever’s going on, that behaviour isn’t okay here.”

• Decide the next step. Depending on how serious it was, that might be a verbal or written warning.

Compassionate, firm and decisive. And if you’re unsure, put the shoe on the other foot. If you were the one being pulled up, how would you want a manager to approach you?

Culture also comes from the bottom up

You don’t need a title to shape a culture. I’ve seen two kinds of people do it.

The first is the connector. We had a guy join who was a natural with people. He started a group chat for social stuff outside work, made sure nobody was left out, and played the odd practical joke, never too far. In what could be a pretty serious workplace, he made everyone feel more at ease. People just liked having him around.

The second is the person who points out what could be done better. That same guy was good at this too. A lot of managers feel threatened by people like that. They shouldn’t. Those people are gold, if you have a system to catch what they say.

When someone raises an improvement, even a small one, take it seriously. If it can’t be fixed on the spot, book a time to dig into it. What could be done better? Is there a reason it isn’t happening already? What could we try? Then trial it.

That’s what turning managers into coaches looks like: listen, ask good questions, and help people find solutions they can actually test. It’s a big part of what we do at Base State.

So what fixes a toxic workplace culture?

Rarely one big initiative. More often, it’s leaders who get out from behind the spreadsheet and see the business for themselves. Managers who deal with poor behaviour quietly, quickly and fairly. People at every level who notice good work and say so. And systems that turn people’s ideas into real improvements.

Don’t forget the conditions people are working in, either. A lot of what looks like a people problem is really a system problem: workloads that can’t be done in the hours, unclear responsibilities, unrealistic targets, incentives that pull against each other. If two departments keep clashing, don’t send them to a conflict workshop. Look at whether their KPIs are set up to clash. Set the conditions up for your people and the business to succeed.

Culture comes from the top down and the bottom up. Either way, it’s built in the moments you choose to stop for.

So stop walking past it. The bad and the good.

This article is general information, not legal advice. For specific employment matters, get advice from an employment lawyer.

Frequently asked questions

What is a toxic workplace culture?

A toxic workplace culture is one where poor behaviour, poor decisions or poor treatment of people have become normal because nobody with the power to change them does. It typically shows up as disrespect, unfairness, fear of speaking up and good people leaving.

What are the signs of a toxic workplace culture?

Common signs include declining results without a clear reason, departments working against each other to hit their own KPIs, more disputes and complaints, trouble recruiting and keeping staff, rising sick leave, psychological injury claims, and negative online reviews from employees.

What causes a toxic workplace culture?

Toxic cultures usually build from small things: decisions made far from the people they affect, short-term thinking driven by the numbers, managers walking past poor behaviour, and no system for people to raise problems or improvements.

How do you fix a toxic workplace culture?

Start by having leaders go and see how the work actually happens, rather than managing only from reports. Fix the conditions behind the behaviour, such as unrealistic workloads, unclear roles and conflicting KPIs. Deal with poor behaviour calmly and firmly, recognise good work in the moment, and build feedback systems that turn people’s ideas into real improvements.

Want to know what your culture is quietly building?

Our Team Culture Diagnostic shows you what’s happening beneath the numbers. If you’d rather talk it through, get in touch.

Culture that drives performance.