The Cost of an Unhealthy Culture

Why Organizations Can’t Afford to Ignore Employee Engagement

Before you can build a thriving, emergent culture, you have to face the reality of the status quo, and it’s not pretty. I’ve spent decades working with leaders and organizations, and what I see repeatedly is a talent crisis that isn’t just looming, but already upon us. Corporate America is grappling with the retirement of Baby Boomers, fierce global competition for a limited talent pool, and a workforce that’s increasingly disengaged and disillusioned. According to Gallup, only 17% of U.S. employees are actively engaged in their jobs, meaning 83% are either checked out or actively resistant. That disengagement costs companies up to $550 billion a year in lost productivity alone.

The problem is about more than just the numbers. It’s about the human side of business. Today’s employees aren’t exclusively looking for a paycheck. They want purpose, respect, and a place where they can belong and thrive. If they step into a toxic workplace or an organization with misaligned values, they leave. And they don’t leave quietly. The revolving door of hiring, losing, and rehiring is costly: $125,000 to $250,000 per professional, with some roles costing three to seven times their annual salary when you include lost knowledge, training, and cultural disruption.

The Three Faces of an Unhealthy Culture

In my work, I see three types of cultures that sabotage employee engagement and stifle performance: Toxic, Entangled, and Transactional. Leaders often don’t even realize these patterns are embedded in their organizations. Let’s take a hard look.

1. Toxic Culture

If your organization feels like walking on a minefield, chances are you’re in a toxic workplace. Here, fear, conflict, bullying, public shaming, and blame are normalized. Leaders often turn a blind eye, overwhelmed or unwilling to confront dysfunction. Values exist only on paper while the real currency is silence and compliance.

The cost? High performers quietly leave, morale plummets, collaboration dies, and innovation stagnates. Lawsuits and legal liabilities become an imminent risk. I’ve seen organizations spiral because leaders ignored the warning signs. The fix requires courage, owning responsibility, modeling integrity, and establishing zero tolerance for hostile behavior. You can rebuild trust, but it starts with awareness and decisive action.

2. Entangled Culture

An entangled culture looks “polite” on the surface but is a web of passive-aggressive behaviors, unspoken rules, and hierarchy-driven politics. Everyone nods in meetings while silently protecting turf or undermining initiatives. This environment breeds defensiveness, disengagement, and stifled innovation.

I’ve coached teams where passive resistance and aggressive behaviors feed off each other in a vicious loop. Ideas die before they even reach the table. The antidote? Authentic transparency. Leaders must model vulnerability, invite honest feedback, and create a safe space for difficult conversations. Only then can entrenched patterns unravel and employee engagement grow.

3. Transactional Culture

In a transactional culture, work is a series of exchanges, i.e. effort for pay. People show up, do just enough to get by, and leave the rest at the door. Short-term results may look acceptable, but creativity, innovation, and intrinsic motivation are suffocated.

I see organizations where employees’ souls check out long before their bodies do. Leaders chasing quotas without cultivating purpose unwittingly create burnout and disengagement. Long-term, this causes stagnant growth, rising turnover, and creates a workforce that’s operating at a fraction of its potential.

A Better Way: Emergent, Purpose-Driven Culture

Here’s the truth I share with every leader I work with: when people feel aligned with purpose and recognized as whole human beings, engagement comes naturally. Self-actualization becomes the engine for motivation, creativity, and commitment. Employees start showing up fully, not because you enforce it, but because they see meaning in their work.

Creating this type of organizational culture is intentional. It starts with embedding purpose into every role, promoting autonomy, encouraging mastery, and connecting every task to a larger mission. Leaders must cultivate environments where people feel safe to express ideas, take risks, and innovate. When employees feel seen, heard, and empowered, they naturally become stewards of the organization’s success.

I’ve seen teams transform when leaders shift from transactional thinking to purpose-driven leadership. Employee engagement skyrockets, creativity flows, collaboration deepens, and retention improves. The organization becomes a place where people don’t just survive, but thrive.

Final Thought

Unhealthy culture is expensive. Toxic workplaces, entangled behaviors, and transactional thinking erode engagement, drive turnover, and stunt organizational growth. But change is possible. It starts with awareness, courage, and the commitment to create a culture where people are valued as humans, not just resources.

If you’re ready to stop tolerating dysfunction and start building a culture that unleashes your people’s full potential, the first step is clear: reclaim the human before the task. When you do, innovation, loyalty, and purpose naturally follow.

P.S. A healthy, high-performance, emergent culture starts from the top down. If you’re looking to take you’re leadership to the next level and ignite your organizational culture, check out Margaret Graziano’s Evolve the Leader Within Seminar Series!