How fearful leaders cost Australian businesses $2.3 billion a year

The following is an abridgement of an article originally published on the NSCA Foundation website.

A new study by management expert Margot Faraci reveals that toxic leadership is rampant in Australian workplaces, with 27% of managers leading with fear. This creates less efficient and less psychologically safe work environments, resulting in lower productivity, higher stress and lower morale.

What is fearful leadership?

Fearful leadership is not just shouting or aggressive behaviour, it includes a range of behaviours that stem from inexperience, low self-confidence or past trauma. Some examples of fearful leadership are:

• Avoidance, complacency, decision fatigue
• Hesitancy to express viewpoints, fear of letting people down
• Micromanagement, reluctance to provide feedback
• Not creating space for others to speak up, holding back growth opportunities from others

What are the consequences?

Fearful leadership has a negative impact on both the individual and the organisation. According to the study, fearful leaders in Australia:

• Lose an estimated $26,263 in a year, equalling a $2.3 billion cost in productivity across Australia
• Believe that stress and fear can be used as a positive or motivational tool, despite acknowledging its adverse effects
• Offer less guidance and learning opportunities to their direct reports, either being fully hands on or hands off
• Struggle with decision fatigue, witness declines in team morale and productivity, and are unhappy with their job
• Shift the blame to management, citing micromanagement and lack of communication as the main reasons for declining productivity

How to break the cycle?

The study suggests that the opposite of leading with fear is leading with love, which includes trust, compassion, vulnerability, respect and other sentiments needed to create psychologically safe environments. To achieve this, leaders need to:

• Acknowledge and confront their fears, and understand how they affect their behaviour and impact others
• Develop self-awareness and emotional intelligence, and seek feedback and coaching
• Foster a culture of openness, collaboration and innovation, and empower others to grow and contribute
• Prioritise long-term employee wellbeing over short-term gains, and create a positive and supportive work environment

The study is part of a global research project by Faraci, who analysed the leadership behaviours of 2500 managers in Australia, the UK and US.

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Sources

Report: Toxic leadership “fuelling” Australian businesses by NSCA Foundation, 30th November, 2023.