Boorish bosses are bad for business

Bullying and harassment at work is not only bad for the bullied, but for profits too.

It is aggressive, humiliating and often illegal. There are lots of reasons why the kind of bullying and harassment of which retail boss Philip Green has been accused, and which in the last year has been exposed in Parliament, Hollywood and elsewhere, is completely unacceptable. But there is another problem, and one that is often overlooked: it is also terrible economics and very bad for business as well.

It remains to be seen whether Green, the tycoon who controls Topshop and other fashion chains within his Arcadia Group, is quite as bad as some of the recent coverage has suggested. What we do know is that Green was often crude, offensive, and certainly boorish. So are many other business leaders. Plenty engage in minor harassment, often excusing it as nothing more than "harmless banter". And many people might even be willing to overlook that as part of the rough and tumble of corporate life. Yet there is a growing body of evidence to suggest that any form of sexual or racial harassment is very damaging to the wider economy. Why? Because it imposes costs on both the business and society more widely.

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More than rough and tumble

First, it reduces the pool of people a company can hire from. At least half the potential workforce women and ethnic minorities are not going to want to work at a company where they are routinely being humiliated, at best, or, at worst, assaulted. In an economy with full employment, why would they? It isn't much fun, it is unlikely the money is worth it, and there is notmuch chance of them ever reaching the top. Even if they do take a job, they are not going to stay very long they will be looking for a new one as fast as they can. For firms such as those that make up Green's fashion empire, that will be especially damaging. Its customers are mostly women, and so are many of the staff if it can't employ intelligent, capable women it is not going to thrive. But it will be damaging to any business. Such a firm will only be hiring people who have low self-esteem, or who couldn't get a well-paid job elsewhere. It is unlikely they will be much good.

The costs of abuse

Next, routine harassment increases the turnover rate of staff. The victims inevitably leave, which means the firm has to spend more on training their replacements than they otherwise would. The best-managed firms have stable leadership, and lots of continuity right through the ranks. Over time, that translates into better performance and higher profits but it is not going to happen in an organisation where staff are regularly abused.

Third, abuse demotivates and demoralises staff right through the ranks. No-one wants to work for a bully, and no- one enjoys being in an office where people are being treated abusively even if they are not directly victims themselves. There is plenty of evidence to show that the most successful companies over the long term are those that motivate their people, train them and encourage them to come up with fresh ideas. None of that happens in the kind of businesses where harassment is tolerated.

Finally and this might sound like a slightly obscure point but it is important it reduces women's incentive to increase their human capital. There is not much point in women taking time to earn extra degrees or professional qualifications, or to learn new skills, if they can't earn a return on that hard work because sexism and discrimination are rife. They won't bother and why should they? But a successful modern economy depends critically on the skills and talents of its people. If you exclude half the population from developing those skills, that makes everyone poorer.