Recognizing and Managing Toxic Leadership in SMEs
Building Healthy Workplaces Through Ethical Leadership
How do organizations define and identify toxic leadership behaviors within their unique context? For small and medium-sized enterprises (SMEs), the answer begins with understanding what ethical leadership is and why it matters.
Ethical leadership isn’t just a lofty ideal; it’s the bedrock for every successful organization. At its core, ethical leadership is about your leaders demonstrating prosocial behaviors, making decisions based on shared values, and communicating transparently. For SMEs, where teams are often tight-knit and culture is everything, ethical leadership ensures that trust and respect flourish. Leaders must be competent and confident, inspiring trust and reliability in every relationship.
When navigating challenging situations, it’s crucial to identify what’s right and what’s wrong before taking action. That’s where moral agency comes in: the ability to make choices that reflect your values and take responsibility for your actions. In an SME, this means everyone, from managers to employees, is accountable for treating each other with dignity, fairness, and respect. This shared pursuit of virtue fosters collaboration and trust, driving the business toward its goals.
Defining Toxic Leadership for SMEs
So, what does toxic leadership look like in an SME? The U.S. Army’s definition is widely adopted: toxic leadership is a mix of self-centered attitudes and behaviors that harm team members, the organization, and its goals. Researchers have identified common traits, including:
Narcissism: grandiosity, entitlement, exploiting others
Machiavellianism: manipulative tactics, strategic deceit
Psychopathy: impulsiveness, lack of remorse, callousness
These traits, sometimes referred to as the Dark Triad, aren’t about labeling individuals but about recognizing counterproductive behaviors so SMEs can intervene and improve the workplace.
How SMEs Can Identify Toxic Behaviors
The ability to recognize when leadership behaviors conflict with the company’s culture is vital. SMEs can use practical tools to spot toxic behaviors, such as:
360° feedback and peer reviews
Employee surveys
HR complaint and incident logs
Exit interviews and turnover rates
Metrics tracking productivity and morale
Creating an environment of continuous learning through workshops, mentoring, and open discussion helps define and agree on what “good leadership” looks like. This way, everyone is on the same page, and problematic behaviors are easier to spot and address.
Critical thinking is key: encourage employees to analyze situations from multiple viewpoints, considering all relevant factors that contribute to workplace dynamics. Skills like moral discernment, empathy, and reasoned deliberation empower teams to balance individual needs with organizational standards.
The Impact of Toxic Leadership on Employee Well-Being
In SMEs, the effects of toxic leadership can be felt in subtle ways. Employees may notice tension in the air, spot nonverbal cues, hear negative chatter, or see rising absenteeism. Business owners and managers need to identify sources of stress, whether environmental, organizational, or personal.
Toxic leadership can make things worse, amplifying stressors such as:
Economic uncertainty and rapid technological changes
Ambiguous roles and unclear job expectations
Unsafe work conditions or unfair task assignments
Interpersonal conflict: bullying, instability, moral disengagement, and abusive supervision
These stressors damage employee well-being, morale, and motivation, ultimately leading to lower job satisfaction, higher turnover, and declining productivity.
What SMEs Can Do
For SMEs, cultivating ethical leadership isn’t optional; it’s essential. By defining clear organizational values, holding leaders accountable, and giving employees a voice, you can create a workplace where toxic behaviors are quickly identified and addressed. Invest in training, encourage open communication, and make well-being a priority.
A healthy work environment starts with ethical leadership and results in a thriving team and a successful business.
Dr. Irby
Shaping Leaders Elevating Standards
