Bad Company Cultures and How to Fix Them

A company’s culture is not a “nice to have.” It’s the operating system beneath every decision, interaction, and outcome. When culture is unhealthy, it drags down performance, morale, retention, innovation, and reputation. In Make Work Healthy, I explore how leaders can overcome challenges preventing them from creating resilient cultures where your people and your profits both thrive. Let’s take a closer look at what bad cultures look like and how you can take control of changing them.

What a “Bad Culture” Really Means

The signs of a toxic or dysfunctional culture are easy to recognize — but too often, leaders dismiss them as isolated issues rather than systemic ones.

Common red flags include:

• High turnover and quiet quitting: When talented people leave or mentally check out, it signals deeper cultural problems.

• Lack of psychological safety: People don’t feel safe to speak up, challenge assumptions, or admit mistakes.

• Erosion of trust and transparency: Leadership hides information or manipulates communication.

• Blame over accountability: Mistakes are punished instead of learned from.

• Unhealthy internal competition: Silos, politics, and resource hoarding win out over collaboration.

• Burnout and imbalance: “Always on” behavior is rewarded, while sustainable performance is ignored.

• Values not lived: The organization’s stated values don’t match what’s tolerated day to day.

Research from MIT Sloan has shown that three factors drive toxic cultures more than any others: poor leadership, dysfunctional social norms, and bad work design.

Even when strategy and systems are sound, a bad culture will undercut success again and again.

Why Leaders Must Pay Attention to Company Culture

Culture amplifies strategy. If your culture is broken, even the best strategy won’t survive contact with reality.

A toxic culture has real business costs, including lost productivity, legal exposure, damaged reputation, and difficulty attracting or retaining talent.

Superficial fixes rarely work. You can’t communicate your way out of dysfunction or design new values overnight. Real culture change requires deep shifts in behavior, structure, and system design.

For more on the trust foundations that underpin healthy workplaces, see my blog on Creating Trust in the Workplace.

The Anatomy of Bad Company Cultures

These dysfunctions reinforce each other. Authoritarian leadership discourages feedback; poor feedback perpetuates secrecy; secrecy erodes trust.

MIT’s analysis confirms that while leadership is the strongest predictor of toxicity, social norms and work design are nearly as influential.

Steps to Go From Toxic to Healthy Company Culture

As I’ve said before, transforming culture is a marathon, not a sprint. But progress is possible when leaders act deliberately.

Start with Diagnosis

• Conduct culture audits, interviews, and focus groups. Use data and sentiment analytics to identify fault lines.

• Find the true sources of toxicity — not just the symptoms.

Align Leadership

• Commit visibly and consistently. Have leaders take ownership. Culture work can’t be delegated.

• Align to a clear mindset, leadership expectations and behaviors: role model healthy, functional behaviors

• Tie leader performance and rewards to culture outcomes.

• Build self-awareness through coaching and feedback. Encourage shared, not hierarchical, leadership.

Shift Social Norms

• Model and celebrate small but symbolic behavior changes.

• Use storytelling and recognition to reinforce new expectations.

• Treat culture change as a movement, not a mandate.

Redesign the Work System

• Review goals, incentives, and metrics, and  remove those that reward bad behavior.

• Clarify decision rights and collaboration rules.

• Prioritize sustainable workloads and clear accountabilities.

• Build feedback loops into the workflow.

Communicate and Embed

• Share both successes and setbacks transparently.

• Align onboarding, performance reviews, and leadership training with new norms.
  Track progress and revisit regularly.

• Consistently circle back to the organization’s values and link to that.

Stay the Course

• Culture change takes years. Expect resistance, celebrate early wins, and keep listening.

• McKinsey’s Five Bold Moves to Quickly Transform Your Organization’s Culture outlines how reinforcement, accountability, and talent systems accelerate progress.

• As HBR reminds us, sustainable change comes from systems, not slogans.

3 Company Culture Turnarounds Worth Learning From

If you’re struggling with a toxic culture, know that change is always possible. No matter how hopeless it might seem or how ingrained negative behaviors and mindsets might be, there is always a way to create lasting change. Let’s take a look at three examples of company culture turnarounds from organizations of differing sizes, industries, and geographies.

Microsoft 

Then: A “know-it-all” culture that rewarded internal competition and punished risk.
Now: Under Satya Nadella, Microsoft shifted to a “learn-it-all” mindset focused on empathy, collaboration, and continuous learning.
Result: Greater innovation, internal mobility, and cultural trust.

Ford Motor Company 

Then: Bureaucratic silos, fear-based management, and weak accountability.
Now: Alan Mulally’s “One Ford” vision unified teams through shared purpose, transparency, and data-driven dialogue.
Result: Ford avoided bankruptcy and regained profitability — driven by cultural repair, not just financial restructuring.

Dr. Reddy’s Laboratories

Then: Rigid, risk-averse culture with fragmented identity.
Now: CEO G.V. Prasad led a purpose-driven cultural renewal, co-created with IDEO and rooted in empowerment and innovation.
Result: A more agile, engaged workforce aligned around shared purpose.

How to Start Changing Your Company Culture

If you suspect your culture is broken, start by asking:

• Where is trust weakest?

• What behaviors are tolerated that undermine our values?

• What’s rewarded — and what isn’t?

Real change begins when leaders face those questions honestly and act accordingly. Remember that the high watermark of your organization’s culture is the worst behavior that your leadership tolerates.

Culture isn’t a side project. It’s the system that defines how people experience your organization every day. And it’s the ultimate determinant of whether your company thrives or merely survives.

If you’re ready to take the next step on your culture change journey, reach out to schedule a call with me.