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Bad Apples: Calculating the True Cost of Toxic Workers

12 March
by Josh Hrala
6 minute read

As HR leaders, we all know the social cost of having a toxic worker inside your organization. They can lead to spikes turnover, harassment claims, and a slew of other issues that rot your corporate culture from the inside out.

But what do they cost, really?

What type of financial damage can these workers do on otherwise fantastic firms? And, what if they are toxic but a great performer in every other way?

These were the questions on the mind of Michael Housman and Dylan Minor, two researchers from Harvard Business School, who decided to literally calculate how much toxic workers are costing companies in the US even if those workers were extremely productive by themselves.

Toxic Workers: A Huge Issue Even If They Perform Well

In their paper, Housman and Minor explain that even if a toxic worker is killing it in their role and making the company money, they are still actually costing the company a lot more money than they make.

"While a top 1 percent worker might return $5,303 in cost savings to a company through increased output, avoiding a toxic hire will net an estimated $12,489," reports The Havard Gazette.

"That figure does not include savings from sidestepping litigation, regulatory penalties, or decreased productivity as a result of low morale."

This means that a toxic hire is actually a poor financial decision even if it appears like they are a good investment. If you consider the costs of possible litigation - should it arise - the financial hole gets even deeper by orders of magnitude.

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To make matters even worse, especially for HR, little research attention has been given to these 'bad apples' over the years, meaning that we still don't know a lot about them because researchers have focused most of their attention on how to extract the best work from top performers - not those that cause company-wide issues like toxic workers can.

“Most of the work in organization design and human resource management has been focused on what I would say are ‘positive outliers’ — the really top performers,” explains Minor, who at the time of the study was a visiting professor of business administration at the school.

“[As] it turns out, we’ve all had personal experiences where we have a worker on the other side of the distribution [who], rather than really helping performance, actually hurt performance in one way or another.”

Noticing this, the team decided they wanted to legitimately study toxic workers to understand what they do to organizations.

Let's take a look at how they did that.

Studying Toxic Workers

As Minor said, studying toxic workers has largely gone under the radar for a long time with many people focusing instead of top performers.

So, the first thing the team had to do was to come up with a definition as to what a toxic worker actually is.

“I wanted to look at workers who are harmful to an organization either by damaging the property of the company — theft, stealing, fraud — or other people within the company through bullying, workplace violence, or sexual harassment,” Minor states.

“The other reason I chose the term ‘toxic’ is that, as I find in the empirical study, it also tends to spill over — that if you are exposed to these toxic workers, then you become more likely to ultimately be terminated … later on.”

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Basically, the team decided to look at the worst of the worst - employees that do actual damage and not those that are just hard to work around because of their behavior.

This also allowed the team to come up with a data-driven study because these types of behaviors are so bad that they result - hopefully - in the employee's termination, meaning that there are reports available to actually dig through, helping the team understand how toxic workers impact organizations on a deeper level.

For the study, the team analyzed 60,000 workers from 11 different companies, giving them a pretty large sample size to draw conclusions from.

When all was said and done, they found that avoiding - and rooting out - toxic workers saved companies about $12,489. If you compare that to how much a company makes off a toxic but highly productive worker, a non-toxic, 'middle-of-the-road' worker is worth about twice as much as a high-performing toxic worker.

In clearer terms, this means that by simply not having toxic workers, companies save more money than if they had toxic superstar.

This part is vital because toxic workers can sometimes be rockstars at companies. They can meet their goals and deadlines. They can seem profitable on paper. However, if you dig deeper, you'll see that the problems they cause extend so deeply into the organization that no matter what they do in their role, they are still negatively impacting the bottom line.

Can You Spot Toxic Workers Before They Do Damage?

After hearing all of this, you're probably wondering what the solution is. Well, simply put, it's to avoid hiring toxic workers at all costs and - if you should find yourself dealing with one - you should root them out as soon as possible.

The team was able to nail down three strong indicators to help you understand what makes a toxic worker become toxic in the first place. These are:

  • Selfishness: If someone only cares about themselves and not other people, they will apply these feelings to the workplace, eroding teams and culture along the way.
  • Overconfidence: If someone feels like they can get away with things, they might try to. This is a feeling of being 'untouchable,' which can lead to misconduct.
  • Strict rule followers: Wait, what?

Yes, the third indicator that the team found shows that toxic workers can be adamant rule followers, which sure doesn't to seem make a lot of sense when you first read it.

Here's minor explaining it to The Harvard Gazette:

“That is kind of counter-intuitive. In a simple world, we would just ask someone, ‘Do you always follow the rules?’ And if you do, then of course, you’re not going to ever break them. But I find very strong evidence in my study that those that say ‘Oh no, you should always follow the rules’ — versus those that say ‘Sometimes you have to break the rules to do a good job’ — that the people who say ‘I never break the rules’ are much more likely to be terminated for breaking the rules."

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Minor also found that, since toxic workers can often times be really productive, managers simply ignore the behavior. This is a huge problem because the impact of toxic workers can spread, causing other workers to turn toxic. In other words, toxicity in the workplace is like a virus.

“A natural question I get from people is ‘Why would anyone have a toxic worker? That’s crazy!’” Minor told The Harvard Gazette. “But then you realize they’re incredibly productive. And so, it makes sense then that maybe managers would look the other way because they’re really hitting all their productivity numbers.”

“Literally, the worst thing to do is to not do anything, which happens a lot, unfortunately."

The Takeaways

While this can all seem rather confusing, the takeaway is very simple: try to understand what makes up a toxic worker and, if you find one in your organization, get rid of them ASAP because they can spread the toxicity around.

This piece of advice is true even if the worker is really productive and good at their role. Just because they seem stellar, there are hidden costs that spring up in a toxic environment. In the study, they found that it pays off more to lose the 'toxic superstar' in the end.

The keys to success for managers, as Minor puts it, it to create a holistic hiring process that not only looks at productivity but views workers as 'corporate citizens.' In other words, hire people that will fit in at your company and be great additions to your community. These workers will pay off a lot more in the end over superstar caustic workers.

You can read the team's full study here.

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