The Financial Cost of a Toxic Worker

A new Harvard Business School Working Paper by Michael Housman and Dylan Minor offers a detailed profile of toxic workers. Their research into 50,000 employees at 11 companies deepens traditional understanding of the role of toxic workers in financial losses and higher employee turnover. As the Washington Post summarized:

“In the continuum of toxic workers, there are those who are simply annoying and might just be a bad fit for an organization. At the other end are those who engage in harassment, bullying, fraud, theft or even violence in the workplace. The study zeroed in on those at the most extreme of the extreme who were fired for their toxic behavior.”

Violence can break out in a workplace without prior warning which is why many businesses look at implementing security awareness training to protect their staff in such scenarios.

Four Traits of a Toxic Worker:

By focusing these extremely toxic workers, Housman and Minor were able to identify four key traits that exemplify detrimental employees:

  1. Despite common thought, toxic employees are “insanely” productive and high-performing.
  2. Toxic workers experience a disconnect between their “self-regard” and their regard for others. “They do not fully internalize the cost that their behavior imposes on others” and are more likely to exhibit negative behaviors.
  3. Toxic workers are overconfident. They, therefore, inflate their perceive benefits of misconduct, believing “the likelihood of the better outcome is higher than it really is.”
  4. The most toxic workers believe that employees should always follow the rules without exception. Paradoxically, these workers were most likely to be fired for breaking the rules.

The Financial Costs:

Housman and Minor believe that these toxic employees have more twice the impact on a bottom line than their positive counterparts. Specifically, replacing one toxic worker costs companies $12,489, or “double the figure a company gains from hiring a ‘superstar.’” In addition to these losses, companies with toxic employees face high levels of liability connected to unethical behavior.

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Research conducted by Cornerstone OnDemand, a talent management systems company, also indicated that toxic employees lower retention rates. As Cornerstone shared, “Good employees are 54 percent more likely to quit when they work with a toxic employee, if the proportion of toxic employees on their team grows by as little as one on a team of 20.” To foster employee retention rates and limit financial losses, weed out or try to reform toxic employees.

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