In today’s digital age, where technology and social media platforms provide employees a voice louder than ever before, the dynamics of workplace culture and favoritism are under increased scrutiny, and employees are increasingly disengaged.

According to the latest State of the American Workplace report by Gallup, only about one-third of employees are truly engaged, showing enthusiasm and a proactive attitude towards their work and workplace. This is potentially due to a disconnect with existing company culture, and instances of favoritism, once confined within office walls, can now be broadcasted globally to showcase poor company culture, compelling leaders to adopt transparent and equitable practices.

This digital transparency acts as a catalyst for change, urging CEOs to critically evaluate and address favoritism, ensuring a fair and inclusive work environment that resonates well in both internal and external perceptions of the company.

Related: 4 Signs Your Workplace Environment is Toxic

Unpacking the bias of CEO favoritism

At its core, CEO favoritism refers to the preferential treatment of certain employees over others based not on merit or achievements but on personal biases or relationships. This could manifest in various ways, such as disproportionate bonuses, undue promotions or even the assignment of coveted projects. Such preferences, when noticed, can significantly demoralize other employees who feel their hard work may never be recognized in the shadow of the favored few.

This phenomenon is far from rare. A study showed that 47% of workers thought their supervisor played favorites, and some of the favored employees weren’t enjoying the treatment, a lose-lose all around.

The ripple effects of workplace toxicity

The immediate consequence of CEO favoritism is the breeding ground it creates for resentment, distrust and division within the team. As favored employees are elevated, often visibly through gestures like high-profile acknowledgments, a chasm grows between them and their colleagues.

This division fosters an environment where collaboration and teamwork are replaced by competition and isolation, severely hampering productivity and the collective drive toward organizational goals.

Moreover, this resentment can evolve into a pervasive sense of workplace toxicity, where employees are more inclined to engage in gossip, backstabbing or even sabotage rather than focusing on constructive and cooperative work. The impact on mental health and job satisfaction can be severe, leading to a workplace that feels more like a battleground than a community striving towards common objectives.

Related: How To Spot Toxic Behavior—Be It By You, Or By A Colleague—In The Workplace

The cost of favoritism is employee disengagement

One of the most detrimental outcomes of CEO favoritism is the profound sense of disengagement it instills in employees. Feeling undervalued and overlooked, many talented individuals may withdraw, reducing their effort and commitment to the company’s success. This disengagement is not just a matter of hurt feelings; it translates into tangible losses for the business, including decreased productivity, increased errors and a higher turnover rate.

The costs associated with replacing disengaged employees — both in financial terms and in lost institutional knowledge — can be staggering. Moreover, the cultural damage inflicted by ongoing favoritism can tarnish a company’s reputation, making it difficult to attract high-caliber talent in the future.

Strategies for a fairer future

Acknowledge and address favoritism: Start by recognizing the presence and impact of favoritism. Transparent acknowledgment is the first step towards healing and change. Consider Salesforce and its efforts to combat pay inequity. Salesforce has set a benchmark in acknowledging and addressing pay equity as part of its commitment to fairness in the workplace. Its proactive stance includes conducting annual pay audits to identify and rectify any pay discrepancies across its departments, including looking at gender and ethnicity. This ensures that every employee is compensated fairly for their contributions. This approach exemplifies how leaders can recognize and tackle potential biases and favoritism, paving the way for a more equitable and inclusive corporate culture.

Cultivate an inclusive culture with fairness and transparency: Foster an environment where every team member feels valued. Recognition should be based on merit, and opportunities for advancement should be equally accessible to all. Implement clear and fair processes for recognition and rewards. Distribute award plaques to employees who are shining in their roles and going the extra mile. An inclusive culture is key to preventing the divisiveness that favoritism can cause.

For example, Accenture has made significant strides in fostering a culture of equality by conducting annual pay equity reviews and achieving 100% pay equity for women compared to men in every country they operate. This commitment extends to achieving pay equity by race and ethnicity in the United States, the United Kingdom and South Africa. Their efforts underscore the importance of transparency, fairness and action in addressing issues of favoritism and bias, showcasing how dedicated initiatives can lead to substantial improvements in workplace equality.

Related: 7 Ways Entrepreneurs Can Ensure Better Equality at Their Workplace

Focus on long-term solutions and leadership development: To enhance long-term organizational health, it’s vital to extend efforts beyond quick fixes, focusing on creating a culture grounded in fairness and respect. This involves embedding merit-based leadership principles and consistently reviewing the dynamics of the workplace to identify areas for improvement. Equally important is the commitment to leadership development across all levels, ensuring leaders possess the skills to make impartial decisions and cultivate an environment where every employee feels valued. By prioritizing these areas, businesses can foster a genuinely inclusive culture that stands the test of time, leading to sustained success and a more engaged workforce.

The effects of CEO favoritism extend far beyond individual complaints, impacting the very fabric of organizational success. By prioritizing fairness, inclusivity and engagement, leaders can nurture a more productive and positive workplace. This journey may be challenging, but it is essential for the long-term health and success of any business.