Toxic leadership undermines an organisation, making an HR director’s role in instigating change as difficult as it is necessary.

The history of business is littered with examples of serious mismanagement leading to the downfall of once promising or previously successful ventures. Such cases are typified by bad decision-making, sometimes by the kind of management tyrants who in the past 20 years have come to be known as ‘toxic’ leaders.

Toxic leadership is more complex than a series of poor decisions by tyrannical leaders controlling downtrodden workforces. It requires supportive groups of followers and enablers who collude with them, or at least willingly conform to their wishes, even as the red flags of commercial and financial disaster are waving.

It is the constant interaction of the leader, their followers and the business environment that creates the situation where the predictable outcome is the collapse of the organisation.

It can be argued that, in certain situations, HR directors are best placed to initiate change in toxic situations.

The first step is to identify the types of susceptible followers that toxic leaders attract. When toxic leaders have a following, a destructive influence is allowed to spread throughout the organisation. But there’s a catch in getting to the root of the problem, says Liz Schenke, industry consultant and managing director of Thrive HR.

“HR practitioners need to help the leadership of the business to address the issue,” she says. “And if you have a toxic CEO, that is a problem. If it’s possible, you need to demonstrate to the relevant senior management that action needs to be taken.”

This includes demonstrating how the leader’s behaviour affects individuals and collective morale, and how it runs counter to the organisation’s desired work environment.

A prime example

In this context (and many others), the collapse of Australian insurer HIH in 2001 is a case worth examining. The second largest insurance company in the country at the time, its collapse led to the imprisonment of various executives on fraud charges and estimated losses of up to $5.3 billion.

Had HIH’s HR team and committee conducted proper internal reviews of the remuneration and performance of its directors and senior management, the crisis may have been avoided.

However, a Royal Commission found that the company’s corporate culture had led directly to unsound management practices at every level of the organisation. Blind faith in the leadership group had been ill-founded.

“There was insufficient ability and independence of mind in and associated with the organisation to see what had to be done and what had to be stopped or avoided,” the Royal Commission said in its final report in 2003.

“Risks were not properly identified and managed. Unpleasant information was hidden, filtered or sanitised. And there was a lack of sceptical questioning and analysis when and where it mattered.”

Make a case for change

In her 2004 book The Allure of Toxic Leaders: Why We Follow Destructive Bosses And Corrupt Politicians – And How We Can Survive Them, US author and professor Jean Lipman-Blumen recommends an initial, open and democratic procedure for selecting leaders in the first place.

If the toxic leader is a legacy issue, periodic 360-degree reviews can be conducted that include reports of interacting with the individual, she says. Similarly, accountability forums at which leaders must explain their decisions and actions could prevent or curtail toxicity.

Schenke advocates the use of tangible evidence coupled with a business case for change, saying that the reality is the impact on economic performance may be the strongest point.

“Ask yourself what the benefit is for the senior manager to redeem or remove this toxic leader. If it’s not going to help them, they may not care,” she says.

Lipman-Blumen’s research recommends other options that could serve as safeguards, such as including term limits, departure initiatives and the creation of a ‘transition year’ or gardening leave.

Convincing a CEO that they are the root of toxicity, whether by decaying employee morale or breeding a toxic culture, requires substantial direct evidence.

While evidence gathering can be the task of the HR team, whistleblowers may also come forward who must be protected from retaliation. A business case should also include the consequences of not removing a toxic leader, such as low morale and engagement levels, reputation, revenue and meeting budgets.

“Find the evidence that this adverse behaviour is happening, make the tangible link between adverse outcomes as a result of this behaviour and identify the changes that need to be made,” says Schenke.

“Then outline what the risks are to the business if changes aren’t made and, most importantly, make these monetised and measurable. You have to highlight both the negatives of no change and the positives of making it.”

Ultimately, HR practitioners who initiate action face possible termination themselves. Even if there is a strong and comprehensive business case against a toxic leader, proceed with caution.

Part two of Terror at the top delves into the specific types of followers: those who seek to get ahead (colluders) and those who toe the line (conformers).