Corporate Burnout Is Coming For Investor Profits

Key takeaways

• Corporate burnout is on the rise, particularly among middle management
• Financially, the costs of corporate burnout include $1.8 trillion in lost productivity in the U.S. alone
• Other impacts include higher training and retention budgets to address rising turnover
• The more companies lose to corporate burnout, the less profit they have to show investors

Corporate burnout is on the rise again – particularly among middle management.

The numbers are clear: in 2022, over four million U.S. workers left their jobs each month. Some who participated in the Great Resignation left their jobs to seek better pay or hybrid opportunities. But a not-insubstantial number cited toxic workplaces or just feeling…well, burnt out.

It’s well known that employee turnover can cost businesses big bucks. But companies that address their “burnout culture” may find themselves struggling less with retention, lowering their overall costs while bumping productivity and profits.

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Corporate burnout is on the rise

Corporate burnout has been on the rise for around a year.

Increasingly, people report feeling exhausted by or trapped in their jobs. Many feel that the work offers few to no opportunities for advancement that could provide better conditions or more fulfilling work.

Corporate burnout is also linked to feelings of ineffectiveness, cynicism and depression – all of which can contribute to lost productivity.

McKinsey’s 2022 corporate burnout survey

Back in May 2022, McKinsey research found a 22% gap between employer and employee perceptions of mental health. Their survey of 15,000 employees in 15 countries found that workers were more likely than their employers to:

• Witness or struggle with toxic workplace behaviors
• See their workplaces as “poor environments”
• Feel stigmatized or a lack of inclusivity and belonging
• Have negative views on leadership accountability

Overall, workers in “toxic” workplaces suffered more symptoms of burnout, including anxiety, depression, distress and lower productivity. And it was these workers who were more likely to disengage with their jobs – or just leave entirely.

Asana research corroborates McKinsey’s findings

Shortly after, a 10,000-strong global survey of knowledge workers by Asana found that 70% of workers experienced burnout in the prior 12 months.

Burnout was highest among Gen Z, with 84% reporting job-related emotional distress compared to 74% of Millennials. Around half of Baby Boomers felt similarly. Burnout was also more prevalent in women than men, at 67% to 59%.

And sadly, 40% of workers believe that “burnout is an inevitable part of success” in the modern workplace.

Data from Deloitte and Workplace Intelligence put a finer point on how workers experience burnout, with:

• 43% reporting feelings of exhaustion “always or often”
• 42% suffering from stress
• 35% feeling overwhelmed
• 23% struggling with feelings of depression

Corporate burnout in 2023

Unfortunately, it looks like 2023 isn’t predicted to see much improvement over 2022.

Data from insolved’s annual year-end survey finds that a shocking 69% of employees suffered burnout due to workplace stressors and recession fears. That “unprecedented” rate saw 45% of respondents report a lack of enthusiasm, with over a quarter reporting unwillingness to perform “beyond their required responsibilities.”

To cope with the situation, over half of employees are looking for job opportunities elsewhere, be it a second job or new employment entirely.

Don’t forget about manager burnout

Employee burnout continues to climb at every level – but middle managers may be driving current trends. Research from Gallup and Microsoft finds that manager burnout has climbed since the start of the pandemic, and it’s only getting worse.

A recent Slack survey found that 43% of middle managers report burnout in the U.S. alone. Executives aren’t immune either: 40% report more work-related stress and anxiety, while 20% struggle with a worse work-life balance.

Experts say that manager burnout can be particularly problematic due to their unique blend of positioning and responsibilities. When managers stop showing effort, they stop encouraging and supporting lower-rung employees. That can lead to higher rates of employee dissatisfaction, “quiet quitting,” and toxic workplace complaints.

But now, many stressed-out managers aren’t staying in place – they’re seeking better, lower-impact opportunities. That has substantial impacts on corporate outcomes, as companies lacking managers struggle to find and retain talent.

And for current or new employees, manager burnout takes its toll. As data from BCG shows, in-person workers are 1.5 times more likely to burnout if they feel unsupported by management.

The dangers of not addressing corporate burnout

According to McKinsey’s report, “Organizations pay a high price for failure to address workplace factors that strongly correlate with burnout, such as toxic behavior.” Turning a blind eye to problems that lead to corporate burnout can lead to:

• Higher attrition
• Increased absenteeism
• Decreased engagement
• Lower productivity

In particular, employees who experience “high rates of toxic behavior” are eight times more likely to experience burnout. In turn, those employees are six times more likely to report intentions to leave in six months or less. That’s consistent with data showing that workplace toxicity is “ten times more predictive than compensation” for whether a company will suffer high turnover.

The cost of high attrition

McKinsey also cites a number of studies that show just how damaging corporate burnout can be.

Conservative estimates peg the cost of replacing employees at one-half to twice an employee’s annual salary. More progressive models suggest these costs are far higher – up to three times the exiting employee’s salary.

And that doesn’t account for the costs incurred while burnt-out employees continue to work, including the impacts of increased absenteeism and sick leave.

Lost productivity

Asana’s research suggests that corporate burnout is linked to low employee morale and reduced engagement. Workers are also more likely to miscommunicate on the job and make mistakes that can cost companies long-term.

In general, when employees are unhappy, they’re more likely to spread their resentment around the office. And as workers leave their positions – particularly if they don’t have a better opportunity lined up – their colleagues may ask just what drove them away.

All of this leads to decreased engagement and reduced productivity – both of which can be measured quantifiably. Data from HubSpot pegs the financial cost of lost productivity in the U.S. at an astonishing $1.8 trillion annually.

Fixing corporate burnout requires change

Companies will have to take myriad approaches to counter corporate burnout, depending on their unique problems. But, broadly speaking, research shows that companies can cultivate more positive workplaces through:

• Salary transparency
• Ensuring positive work-life balances with flexible scheduling practices
• Remote or hybrid work opportunities
• Addressing workplace toxicity, such as bad management
• Supporting employees’ mental health
• Hiring enough employees to manage a department’s workload
• Reducing discrimination with forward-thinking DEI initiatives
• Investing in employee growth and resilience

Of course, each of these solutions carries their own costs. But, as the numbers show, failure to address the underlying problems costs even more.

The investor cost of corporate burnout

Through all of this, we’ve focused on the corporate costs of employee burnout. But those costs don’t cease there – investors are heavily impacted, too.

While direct research is remarkably light on the topic, it stands to reason that when companies bleed productivity and training dollars, that’s potential profits circling the drain. (At least $1.8 trillion in lost productivity alone – oof.)

Companies with high turnover and low retention are also signaling to investors that internal problems – such as poor management or lowballing salaries – are leading to increased rates of employee dissatisfaction.

That’s before considering how burnout and low employee morale correlate to decreased innovation, preventing companies from building teams and products that can propel them to the next best thing.

As an investor, that means corporate burnout doesn’t just impact past and current investment performance, but future performance as well. Companies that fail to support their employees properly may still generate returns – but the opportunity cost involved with toxic workplaces may well be incalculable.

The bottom line

No industry is immune to corporate burnout – the problem extends from individual companies outward. However, as HR and management teams grow more attuned with employee needs, the personnel and financial hemorrhage may slow.

Only time will tell if corporations are willing to address their burnout problems on the front end with data fresh in their minds…or after their stock prices have taken a plunge.

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