The last decade in corporate Australia has seen a much greater acknowledgement of toxic workplace practices and their impact.

In the startup sector in particular, over recent weeks we have seen many women come forward to share their experiences of gender discrimination, sexism, harassment and abuse, a subset of toxic behaviour.

I am in the process of talking with anyone who wants to share their experiences and recommendations for how to do better, so I can pull together an open source resource for the ecosystem, and possibly implement some industry-wide best practices.

Many of these discussions have been difficult, because people have been truly traumatised by some of their treatment. But it has led to the natural question: why does this type of behaviour happen in the first place?

Acknowledging that there are additional factors that play into gendered workplace toxicity from other types of it, one participant charitably offered that perhaps managers or people in positions of power who create toxic workplaces are operating in such a competitive and demanding environment, they lose their compassion in the fight to retain their position. Perhaps.

There may also be some answers in a study released this month that has shown that a third of corporate managers are driven largely by fear, and this is responsible (at least in part) for the creation of toxic workplaces and $2.3 billion in productivity costs.

Worryingly, this study also showed that seven in 10 managers felt that stress and fear can be used as positive motivating tools, despite acknowledging the adverse effects on performance, wellbeing and company culture.

The study clarified that fearful leadership isn’t just shouting or aggressive behaviour: it’s 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 for others and more.

The study stated that fearful leadership often stems from inexperience and low self-confidence, leading to increased stress, fatigue and compromised decision making.

Margot Faraci, a veteran banking executive and management expert who led the study, says: “Fearful leaders might prioritise short-term gains over long-term employee wellbeing, inadvertently fostering a tense and anxious workplace. These actions stem from an unconscious fear of losing control”.

I understand this innately.

I’ve personally experienced highly toxic workplaces and I’ve observed plenty of examples of fearful leadership across my two decades as a venture capitalist. Stamping this out is an area where I attempt to ‘add value’ as an investor/advisor.

I’ve seen many companies wax lyrical about their culture – often tied to stories of their early days, the hard times, the initial wins, the principles that they believe are important to make and build great companies.

They talk of cultures built around empathy, honesty, persistence, accountability, frugality and preparedness to do the hard things. I’ve seen companies fly in culture experts, and undertake professional development lectures about cultures they aspired to mimic or borrow from, and I’ve seen many a company who felt they had built a strong team that trusts and respects each other, and have each other’s backs.

Until they don’t.

Crises expose poor cultures like nothing else and I’ve seen many companies when hit with a crisis, devolve into something closely resembling Lord of the Flies.

I’m not exaggerating. I’ve seen undermining, plotting, attempts to steal customers, attempted and successful coups, lack of understanding or seeking to understand, knee-jerk reactions, throwing people under a bus and self-preservation acts.

I’ve seen yelling, swearing, unfair blame, lack of empathy, temper tantrums, victim blaming, bullying, public humiliation, unrelenting stress, unreasonable expectations, heartlessness, crying, panic attacks, psychological assessments and therapy.

You would have thought this was the Australian parliament, not the private sector.

In these times of crises – be they true existential threats to the company or personally challenging issues for management – in my experience, management becomes hypersensitive to the things that affect them personally and starts to focus on the urgent instead of the important.

Unhelpfully, that tends to be the things they can’t control, like external factors, instead of those they can, such as business performance. And then when these types of crises continue and there is a buildup of exponential pressure, management can explode into full tyrannical effect.

In one example, a CEO slept in the office several days a week and made sure everyone knew it. They would brag about how many days they worked in a row to shame those who hadn’t.

Under increasing pressure, the CEO’s resentment and growing contempt for team members who refused to see it their way, or disagreed or couldn’t equal their commitment in hours, led to bullying, yelling, harassment and public shaming. Their rights were contravened and they were not provided support when needed. There was undermining in the media and to others on the team.

Pleas for a different leadership approach, such as encouragement and support, alongside listening to employees’ feelings and feedback, were met with eye rolls, dismissed as “silly”, “not hard enough” or “weak”.

It combined to alienate a team desperately searching for leadership, vision and stability. It caused severe emotional and psychological distress that required therapy and/or led to resignations to protect mental health.

It is counterproductive for management to devolve into using fear as their primary tool to drive short-term outcomes. Coups happen, good people leave, revenues fall and companies may not survive.

But here is the paradox. Often those involved are fundamentally good people but under extraordinary pressure in an exceptionally uncertain environment.

When uncertainty, inexperience and self-interest combine, leaders can default to fear-based decision-making. There are thousands of studies, including Margot Faraci’s latest study, that demonstrate that fear-based decision-making leads to very bad decisions and poor execution.

However, if fear-based leadership is still used by seven out of 10 managers today, how do we fix this to ensure psychological safety and sustainability for all and value creation for shareholders?

Faraci says managers and leaders need to acknowledge and confront their fears to break the cycle. Acknowledging is an important first step, but then what?

In my experience, leaders revert to fearful leadership because they’ve never been truly challenged before, so don’t know how to react. Or they have not learned how to manage through pressure, so they resort to lizard brain thinking and do what’s in their best interest or gets the desired short-term outcome.

Many leaders have also never really experienced true hardship or a crisis as someone with no power, so they don’t have the perspective and empathy to understand how those they are trying to lead are thinking and feeling and what will drive the best performance.

If we truly want to address toxic workplaces, we need to stop promoting people into positions of power without training on how to lead with vulnerability and not with fear.

And we need to stop rewarding behaviour that creates fearful leadership by promoting people who behave this way and lionising fearful leadership styles.

But it needs to be modelled from the top. If boards and key executives don’t have the ability to transcend fear and lead with vulnerability, then we have little chance of it trickling down to the broader workplace to create a less toxic environment.

It starts with assembling a broader scope of approaches at the board level, and that comes from diversity: diversity in culture, gender, background, experience and leadership style. Companies that don’t do that are operating in fear (fear of doing it differently, fear of working with people unlike them, fear of hearing they may not be doing a good enough job).

As Faraci says, the only way to fix this is to break the cycle by first acknowledging the fear.

It’s time we take a more human approach to leadership.

It’s tragic, actually. The traditional approach to leadership has been entirely human. It’s just extremely disappointing that we seem to tolerate using stress and fear to drive short-term gains instead of striving for ethical checks and balances through promoting diversity, integrity, empathy and vulnerability.

Elaine Steed is a venture capitalist and Director New Ventures and Entrepreneurship at the Australian National University.