The Cost of Poor Leadership in Australia

Earlier this year, Professor Alex Christou of Monash Business School wrote an article discussing the systemic issues behind the increasingly high reports of employee dissatisfaction and burnout within Australian workplaces. It’s a topic we at The Leadership Sphere have covered ourselves and unfortunately, continue to see reported in organisations today. The pervasive concern is that poor leadership is quietly draining billions from the economy while leaving employees feeling disengaged, overwhelmed, and ready to walk away.

Recent research by Gallagher reveals that over a quarter of Australian employees are experiencing burnout, with only half believing their organisation will take meaningful action following wellbeing feedback. This leadership deficit stretches beyond individual performance and affects productivity, organisational culture, and ultimately, success.

The Hidden Financial Toll of Poor Leadership

Stress-Related Absenteeism

Christou cites the 2023 PwC report commissioned by Beyond Blue that found poor leadership to be a significant contributor to stress-related absenteeism. According to the report, this resulted in a $10 billion annual loss to the Australian economy. When leaders fail to provide clear expectations, adequate support, or psychological safety, employees become overwhelmed and disengaged. The result? More sick days, reduced productivity, and significant costs that compound over time.

Burnout Epidemic

The Gallagher 2025 Workforce Wellbeing Index shows burnout rates climbing to 26% of Australian employees. This is a 3% increase from the previous year. Burnout doesn’t happen overnight; it’s the predictable outcome of prolonged workplace stress without adequate leadership support. Employees experiencing burnout are more likely to make errors, miss work, and even leave their positions entirely.

Lower Productivity and Engagement

McKinsey research demonstrates that disengaged teams (which is often a direct result of poor leadership) are 37% less productive than their engaged counterparts. When leaders lack empathy, communicate poorly, or micromanage their teams, they create environments where creativity stalls and innovation suffers. Australian businesses cannot afford this productivity drain in competitive markets.

Poor Employee Retention

Perhaps most costly of all, poor leadership drives employee turnover. McKinsey found that disengaged teams are 49% more likely to quit their jobs. Replacing an employee costs between 50-200% of their annual salary when you factor in recruitment, onboarding, and lost productivity. For Australian organisations already facing skills shortages, losing good people due to poor leadership is particularly damaging.

How Can You Combat Leadership Challenges?

The solution isn’t complex, but it requires commitment. Australian organisations must prioritise developing leadership capabilities that address the root causes of workplace stress and disengagement.

1. Increasing Empathy: Modern leadership demands emotional intelligence. Leaders must understand their team members’ perspectives, challenges, and motivations. This means regular one-on-one conversations, active listening, and responding to employee concerns with genuine care and appropriate action.
2. Improve Communication: Clear, transparent communication reduces uncertainty and builds trust. The Gallagher report identifies a 43% gap between the importance and satisfaction of the level of clarity in what is expected of employees who struggle with workplace wellbeing.  Leaders should provide specific expectations, regular feedback, and honest updates about organisational changes.
3. Ensure Psychological Safety: 86% of employees Gallagher identified as ‘Thrivers’ reported feeling safe speaking up at work, whereas only 17% of ‘Strugglers’ felt the same. This demonstrates the importance of creating psychologically safe environments that allow all employees to express ideas, raise concerns, and admit mistakes without fear of retribution.

Building a Culture of Leadership Excellence

The evidence is overwhelming: poor leadership creates measurable costs that Australian businesses can no longer ignore. Organisations that invest in developing strong, empathetic leaders will see improvements in employee retention, wellbeing, and productivity.

The path forward requires moving beyond reactive approaches to employee wellbeing. Instead of waiting for problems to emerge, Australian organisations must proactively develop leadership capabilities that prevent issues before they arise. This means investing in leadership training, creating accountability metrics for people management, and ensuring leaders have the support they need to succeed.

The cost of poor leadership is too high to ignore. The time for action is now.