In this episode of the Scaling Up Business podcast, scaling coach Bill Gallagher warns that a hidden "tax" on companies comes from toxic workplace culture, not from financial costs. He opens with the claim that toxic culture predicts employee turnover ten times more than pay, and explains that leaders’ behaviors create that culture. Gallagher shares a case study of a healthcare CEO he calls "Lee," a perfectionist micromanager whose need to control every detail leads to employee frustration, disengagement, and slowed progress. He describes how Lee’s over‑involvement forces the team to wait for approvals, costing time and money, and illustrates how such behavior stems from a personal drive to be the top performer, which ultimately weakens the group. Gallagher then presents research to back his points: a 2022 MIT Sloan study of millions of employee profiles and Glassdoor reviews that found toxic culture as the top turnover driver; Gallup data showing that highly engaged teams have dramatically lower absenteeism, higher productivity, and higher revenue per employee, with global disengagement costing $8.8 trillion annually. He cites field experiments indicating micromanagement cuts team output by 28%, and studies showing that working 70 hours a week yields no more output than 55 hours, while adding health, relationship, and judgment costs. He argues that the “busy” mindset—extra hours, sacrifice, and hustle—does not boost business performance but instead fuels burnout, health issues, and a toxic culture. The episode shifts to a practical self‑assessment challenge, asking listeners to consider whether their teams could operate for a week without them, whether they are the bottleneck for approvals, how much of their calendar is reactive versus strategic, and whether departing employees cite culture as a factor. Gallagher encourages honest reflection and feedback from teams to identify over‑control. Finally, he previews the next episode, which will compare two successive leaders of Disney to illustrate how leadership style impacts company outcomes, and thanks his producers and mentor Vern Harnish. The episode serves both as a diagnostic call to leaders to recognize the hidden cost of toxic culture and as promotion for his upcoming book "Busy Is Broken" and related resources.
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Well, we know it, we've heard it. Toxic culture is 10 times more predictive of people quitting your business than pay. Toxic culture is the killer, and the leader's behavior, your behavior, my behavior is what creates the culture before anything else does. Hey everybody, I'm Bill Gallagher, scaling coach and host of this Scaling Up Business podcast. Our show comes to you every week. We bring stories, examples, facts, figures, gurus, authors, CEOs, everything to do with growing your business. You'll find all these shows and more at scalingcoach.com. We've also got a great new assessment for you there that will give you a diagnostic on your growth for your business. Scalingcoach.com/q20 is the link for that. We do workshops, that kind of thing, all the time. Go to scalingcoach.com. You'll find out about all of our stuff and more. Like, subscribe wherever you're getting this right now. Our show goes out everywhere we can get it. So just turn on your notifications and we'll keep you in touch every week with the show. All right, listen into our topic of the day. Let me start off by telling you about one of the people that we feature in my upcoming book, Busy Is Broken. So we'll call, we'll call the CEO Lee. And I was coaching the CEO of this healthcare company, lots and lots of people, nationwide company. And, and yet we are having serious engagement, toxic culture issues because Lee was a perfectionist. Lee was a perfectionist, a micromanager, and Lee wanted to get their hands in everything all the time. And, uh, even me, telling me how to coach them in the company. Like, hey coach, I'd like you to coach me like this, right? And I mean, to a certain point that's okay, but then there's a point at which, like, I think you're blowing the whistle wrong, coach. Um, you should tell us how to do it like that, or whatever. Like, and then it's not personal to me, it was happening everywhere, all over the place. Uh, what did that cause? Well, the the, from the leaders on down, people got frustrated and disengaged. They didn't know where their job began and end. They didn't know should they show any initiative or not, it was going to get cut off, um, and countermanded. So they would go in with kind of loose things, kind of playing it safe, waiting for Lee to weigh in on things, but became a real problem. And it costs the company time and money and progress. Now the company didn't fail. Um, it just, everything moves slower because everything had to move through Lee. Lee had to put their hand into everything. And look, from a very early age, Lee had been the sort of person who worked a little harder than all the other kids in the group project, right? And, and had that, like, I'm going to be a winner no matter what. I'm going to be the A student, right? And that's great, except the group isn't made stronger by that kind of behavior, right? So Chapter 3 in my book is The Invoice Nobody Opens. And we think about, as leaders, we think about that like our work, our sacrifice is a noble sacrifice. Our extra hours is the hustle grind, the leaning in that's needed to make something happen. And we accept certain costs on ourself. We're like, well, I'm sleeping less, or I'm getting less, uh, I am, I have more stress, or I'm adding pounds on my body, or my, my relationship suffering, or maybe even a little bit of my family life is suffering. And we make our bargain with it because we think, well, that's necessary to drive the company forward, except Um, maybe it doesn't actually work. And so here's some of the facts and figures that I think are useful. And I'm actually doing more research on this right now, but so that the personal costs are known. We all know that the extra work and less rest and less balance, that kind of thing has an impact on our relationships, our, our sense of fun, our joy, our, uh, health and fitness. Our family life, like all that. We know there's a personal cost, but we're willing to make it because we think it helps the company. What if it doesn't, right? MIT Sloan did a study in 2022 across millions of employee profiles and over a million Glassdoor reviews. They tested everything— compensation, the commute, uh, job level, geography. Compensation was a distant fourth in dissatisfaction. What was the big leader in turnover? Toxic culture. The main thing, 10 times more predictive of turnover than pay, was toxic culture. Uh, so I saw this play out with Lee and with many other companies, uh, where they had real serious issues. And the cost isn't just a recruiter's fee and having to replace people, it's the time, the attention, the, the, the churn that builds on it over time. So your micromanagement, your poor delegation, your perfectionism, your inward focus, operational focus, it creates dissatisfaction, creates a toxic culture, burns people out, upsets people, right? When you do that, you think you're helping, but in fact, you're diminishing the team. Gallup looked across 100,000 business units, and they found the top quartile engaged teams, the most engaged teams in the group, had 81% less absenteeism, 14% higher productivity, 18% higher revenue per employee. Easy for me to say. And, and, uh, and they estimated global disengagement costs at over $8.8 trillion per year. So global, uh, absenteeism, right? Doesn't necessarily bring, uh, alarms and bells and things like that. There's not like a, an alert for that most of the time, but it builds over time. People get burned out when we're bad leaders. When you're filling in for the gaps for your team, you're actually probably not delegating. You're probably micromanaging after you have delegated, right? So micromanagement is when you delegate and then you still are in their business, right? That's micromanagement. Or you are a perfectionist, right? You don't ship things. You just keep noodling on it, keep noodling on it, and nope, nothing can ever get done. People get frustrated, right? People get frustrated when you don't pass the baton. People get frustrated when you're in their business. People get frustrated when you won't let them ship things. And if you're too operationally focused, the whole company suffers because you're missing the market opportunities, right? All of this builds up over time. Micromanagement cuts team output 28% in field experiments. So think about that. Where are you micromanaging? Where are you not delegating, right? That has a real impact. And in another study, um, uh, they looked at hours worked per week and the productivity. And what they found across a wide, uh, spectrum is that somebody working 70 hours produces nothing more than somebody working 55 hours. 15 extra hours are wear on your body, your relationships, and judgment, right? Doesn't produce more. And if that's the case across wide things, it's got to be the case also with CEOs. This wasn't exclusively to CEOs and senior leaders, right? But that extra work, then what does that mean? Well, I think we can be pretty sure because I've seen it again and again with clients over 13 years now. That extra work is you're doing other people's job, and that's a downer, and that contributes to a toxic culture. So, you know, it's a big range of things to think about. We think that we're just trading our personal work and doing what's needed for the company, but what we don't realize is that extra work that's having the personal cost on us, that's, that's giving us a higher rate of heart attacks. That's adding to our weight. That's adding to our, our other stress markers. That's reducing our sleep. That's impacting our relationship, our family time, our joy, our fun, our fitness. Like all of that, all of that stuff we think we're doing for the good of the company. But in fact, that our extra effort is robbing people or riding people in our teams. And that's actually having a negative effect on the business. That sacrifice you think you're making for the business is actually upsetting the team, harming, inhibiting, diminishing, and creating a toxic culture. And that has a lot of pretty obvious, measurable, proven negative consequences. But that's not what we think about all the time. So I'd like to invite you to think about a few things over the next little bit and to start to build your muscle. So This is a challenge, right? This is, this is a chance for you to ponder what is it that you do. I know at different times in my life and in prior iterations of my career and my clients, we see pretty unpleasant answers to all these. So first up, can your team run for a week without calling you? Can your team right now, can you disappear for a week? Right. Hopefully it's something good, like not a hospital visit, but maybe a trip to an island, uh, resort, right? Can you leave for a week without being on phone calls and emails and that kind of thing? Are your people leaving— the people who leave your company, are they ever citing culture or anything related to culture? Is your calendar reactive or proactive? Are you putting out fires and dealing with emergencies, or are you working on strategic forward, not urgent kinds of things, right? Are you in the important and not urgent category, or are you in the firefighting? So if your calendar is more than half of reactive, we— and, and definitely if you're in the 80%, right? So think about what percentage of your time, your day, your week is spent on reactive firefighting operational things versus strategic growth-oriented kinds of things, the important and not urgent, right? So, and then, are you the approval bottleneck on more than a couple processes? So, think about what are the kinds of things that you have to sign off in the company? How many things is that? How many areas does that cover, right? Are you more than a couple? I'd be really concerned about that. Would critical projects freeze if you disappeared for a 4-day weekend, right? So, uh, can you disappear? Can you check out for a little bit, and even spontaneously, and have things go okay, right? Can you step away? So, uh, my invitation to you is to answer the questions honestly. Take each one of them in turn, and then ask your team to assess you. Take these questions to your team. Can the team run a week without calling you? Are people who leave the company citing the culture of the company as one of the contributing factors? Is your calendar more proactive or reactive? Are you the bottleneck, the approval on more than one process in the business? And would critical projects freeze if you vanished for a few days, if you just checked out for a little bit to go work on something or go have some fun, right? So Reflect on it honestly yourself, then get some feedback. Give people permission to be honest with you. Start to look at where are you maybe too hands-on in the business. So, we're a few episodes into this series to do with my upcoming book, Busy Is Broken. Busy is cultural, not personal, right? You and I are born into this culture that venerates, that celebrates, that uh, uh, that worships busyness and the costs are real on us, but the costs are actually real on our business too. Uh, in the next episode, I'm going to talk about two guys who ran the same company, not at the same time, but successively ran the same company. I'm going to compare two leaders of Disney and we'll talk about what happened under each of those, what their styles were and what the results were. That's coming in the next episode in a couple of weeks. Hang in there. We'll talk to you soon. Thanks again to, uh, my, uh, show producers, uh, Wanda and Anna, to my friend and mentor Vern Harnish for getting our show, giving us the whole framework of scaling up that goes behind our work. And thanks again to all of you for watching, for listening. Until next time, keep scaling.
