How stress is harmful for business

Written by Danielle Owen Whitford

Stress in the workplace is one of the most significant challenges businesses will face over the next decade. It affects how individuals and teams make decisions and accomplish tasks, having a profound effect on company bottom line.

It’s easy to be complacent and say that stress is just a normal part of the workplace - and it has become somewhat normalised. But the multibillion-dollar cost of stress on business just can’t be ignored.

Businesses that get ahead of the stress epidemic will have the advantage of a happier, healthier workforce. This means higher productivity, attracting the best talent, increased retention, better decision making at all levels, and lower risk of project failure. Those who ignore rising stress in their workplace may find that by the time it’s recognised as a problem, it’s already too late, and the costly and damaging effects of stress have already taken their toll.

This article looks at the common causes of stress in the workplace, how stress is costly and damaging to business, and what you can do about it.

Workplace stress is one of the biggest challenges businesses will face over the next decade.

Key points:

  • 70% of Australians and Americans say that stress impacts their health.

  • Presenteeism due to stress and illness costs the Australian economy $34 billion and the US more than $150 billion per year in lost productivity.

  • 95% of human resource leaders admit that stress and burnout are sabotaging workforce retention.

  • Organisations are more likely to increase recruitment costs instead of solving the cause of retention issues, such as stress and burnout.

  • Happy, healthy people are more able and motivated to come to work each day.


Common causes of stress in the workplace

There are many causes of stress in the workplace. Identifying repeat problem areas is an integral step in the prevention and management of workplace stress. 

Common causes of stress in the workplace include:

  • Long work hours

  • Poor communication from leadership, unclear expectations

  • Lack of control or say in decision-making processes

  • Lack of opportunities for career advancement 

  • Too much work and responsibility

  • General job dissatisfaction

  • Job security

  • Discrimination or harassment at work

  • Lack of consideration for employee well-being

How stress can hurt your business

Too much stress in the workplace can affect a business’ ability to operate, negatively impacting its bottom line. Here are several specific ways stress can be harmful to your business.

Effects of stress on businesses include:

  • Reduced productivity

  • Decline in employee health

  • Frequent absenteeism

  • Higher employee turnover rate 

  • Increased recruitment costs

Reduced productivity

Presenteeism - coming to work sick or too stressed to be effective - is costing the Australian economy $34 billion (AUD) and the US economy more than $150 billion (USD) in lost productivity per year. Furthermore, a study conducted by John Pencavel from Stanford University concluded that every hour worked after 55 hours in a week is unproductive and wastes time and money.

Performing under prolonged stress impairs judgement, blocks creativity, and inhibits a person’s ability to solve problems. They can feel more agitated, affecting concentration and the ability to work in team environments. Stress also affects sleep, resulting in lethargy, reducing one’s ability to maintain focus throughout the day.

Each of these stress symptoms can negatively affect an individual’s level of productivity. However, when the symptoms are compounded, and present across multiple teams, a significant productivity issue in the workplace arises. This can result in failure to meet important deadlines, increasing the risk of project failure, damaging company reputation.

Decline in employee health

70% of Australians and Americans report stress impacting their personal health. Furthermore, in the APA’s annual Stress in America survey, work is consistently among the top causes of stress.

Stress causes the immune system to weaken, increasing the risk of disease and infection. A common cold becomes easier to catch and harder to recover from. Stress can also lead to weight issues (loss and gain), mental health issues, and ongoing physical health issues. The stress caused by these problems can often become the source of further chronic stress.

Frequent absenteeism

Absenteeism is costing the Australian economy more than $44 billion and the US economy $84 billion per year. On average, Australians take 8.8 unscheduled days off each year. A large survey from Australian Industry Group (AIG) in 2015 reported that absenteeism directly costs organisations an average of $578 per employee per absent day.

Frequent absenteeism burdens those who do show up with extra responsibilities. This can result in feelings of frustration, reducing morale, adding to the overall stress and effectiveness of a team.

Common causes of absenteeism in the workplace include: bullying and harassment, burnout, low morale, caregiver responsibilities, depression, disengagement, illness, and injury. Many of these are stress related or can result in chronic stress.

Higher employee turnover rate 

A stressful work environment influences job satisfaction, which in turn can affect talent retention. Two common reasons good talent leaves are boredom and burnout.  A 2017 study by Kronos Incorporated found that 95% of human resource leaders admit that stress and burnout are sabotaging workforce retention.

The study also asserts that larger organisations are far more likely to be affected by stress than smaller ones. 15% HR leaders surveyed from organisations of 2500+ employees stated that burnout causes 50% or more of their annual turnover.

Increased recruitment costs

A high stress workplace results in higher turnover. This means increased recruitment costs. The aforementioned Kronos Incorporated study found that despite the high costs of turnover, organisations are more likely to increase recruitment costs instead solving talent retention issues such as stress and burnout.

97% of HR leaders surveyed planned to increase their investment in recruiting technology by 2020 to combat high turnover. 22% of these anticipate a 30-50% increase in such spending. However, this still doesn’t address the cause of the problem.

Moving towards a solution

Too much stress is bad for business. Moving forward, it’s imperative that leaders treat the cause of workplace stress, not just the symptoms. The simple fact is, happy people are healthier and more productive.

Here are some suggestions for improving workplace culture to help prevent stress from sabotaging your organisation:

  1. Ensure people have access to the tools and resources they need to effectively do their jobs.

  2. Create opportunities for further learning and career development.

  3. Make people feel appreciated by recognising achievements - big and small.

  4. Ensure people know how their work contributes to the bigger picture of the company.

  5. Ensure feedback is delivered in an efficient and productive way.

  6. Trust your people and discourage harmful micromanagement practices.

  7. Prioritise, encourage, and support healthy work-life balance.

  8. Facilitate flexible work options to accomodate the responsibilities of parents/carers.

  9. Ensure the physical environment is conducive to your people and the work they do, your clients, and prospective talent.

  10. Promote an active lifestyle with health/fitness facilities and team building activities.

  11. Provide healthy food and beverage options for sustainable focus and energy.

  12. Prioritise wellness and engagement in organisational strategy and ethos.

  13. Ensure people have access to information and tools for identifying early warning signs of stress in themselves and their team.

  14. Provide access to information and tools to help individuals and teams manage and prevent stress.

Final thoughts


Happiness, like stress, is contagious. When people are happy, team morale is lifted. This can increase productivity, reduce absenteeism, increase retention, and attract top talent - all very good things for business.

Investing in employee wellness can be expensive, but, in the long run, ignoring stress in the workplace can prove far more costly.

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