The True Cost of Toxic Employees and What To Do About It

By: Renee Heinemann, Sr. Consultant, Barrett Rose & Lee Inc.

In his book by the same name, Malcolm Gladwell defines a successful outlier as someone who charted a predictable course, was given an opportunity and had the strength and presence of mind to seize it.  There is much discourse on identifying a superstar, recognizing their overall impact on productivity and rewarding them with opportunity and attention.  Often there are colleagues who counter this effort, who have significant negative financial and cultural impacts on an organization, and to whom there has been much less attention paid, thereby concealing the true cost of managing Toxic Employees (TE).

TE, defined in a Harvard working paper[1], are those who engage in behavior that is harmful to an organization, its property, and people.  Research has seen that overconfident, productive, self-centered, and rule-following employees are more likely to be TE, challenging the assumption that it is the poor workers who are toxic to the workplace.  There are several classifications of TE; from the procrastinators to the productive, but all these are behaviors that can have a tremendously negative impact on the organization.

There are certain personality and behavioral traits that are predictive of such individuals, including;

The True Cost of Toxic EmployeesThe One Man Show.  Someone who insists on doing everything themselves and may have control issues.  Sometimes labeled the martyr, TE let others know they are sacrificing for the job.  Occasionally, these individuals can become arrogant in their approach.  Because they do not believe in group work, often, they interfere with others by viewing a project with only their perspective.

The Overconfident Worker. Those who overestimate their ability to do well, while articulating that rules must always be followed.  This narcissistic-type thinking has traditionally been associated with negative work outcomes, but research shows that those workers were also more likely to exhibit toxic behavior (TB).   In a recent study, individuals who were notably over-confident about their technical proficiencies were 43% more likely to engage in TB.   As an example, these persons often mislead during interviews by answering questions in the most favorable way that will help secure a job.

Research shows that those who emphasize rule-following are more cunning, and usually embrace whatever rules, characteristics or beliefs that will help their perspective, often leading to deviant behavior.   These individuals were more likely to ignore the rules and had a 33% higher likelihood of being terminated for a significant policy violation.

The Slacker. The demotivated employee who finds ways to avoid work has a high rate of absenteeism and a disregard for commitments and deadlines.

The Procrastinator, the “Creative Monster”.  One who spends hours online shopping, catching up on social media, or finding other creative ways to avoid purposeful work.  This can include those who evade their responsibilities by assigning themselves to multiple teams – Always very busy.

TE often displays similar recognizable traits in almost any organization.  Regardless of the individualized behaviors, the overall attitudes of TE are identifiable. They bring imbalance to the team with their lack of motivation or constant complaining. They may work too hard to prove themselves and are prone to burnout. They can foster unrest among their co-workers, disturbing the flow of the work.  TE demotivate their co-workers with their “my way” approach that shows little regard for the efforts of others. They display a nonconstructive attitude and often do not know their limits.

TE contribute little to organizational growth. The presence of one “bad apple” can cause the entire team’s performance to drop by 30% plus and cause other team members to adapt similar TB[2]   Several key studies have found positive correlations between toxic-like behavior between co-workers[3] and other employees, who then are more likely to engage in TB if they are exposed to it. TB is contagious.  One study cited that the most important factor in determining whether the work environment will increase the probability of misconduct is the likelihood that the workers’ colleagues will engage in TB.

The ramifications of TB across teams can be concerning.  Along with the direct costs, they also incur hidden costs.  In a large team, where TB is more likely to occur, this can carry significant impacts.  TE’s are expensive and the costs of disruptive behaviors can take an organization-wide toll.  While studies stress the importance of identifying TE’s before an offer is extended, it is not easily achieved.  TE’s usually show their true colors only after settling into their roles. Risk reduction can be achieved by in-depth interviews, preferably in a social setting with a seasoned astute senior executive, acknowledged being a fine judge of talent.

TE’s, regardless of their displayed behavior, can have a hugely negative impact on the entire organization.  Superstar employees are 54% more likely to resign when they work with a TE, even if the proportion of TE’s on their team grows to as little as 5% of a team.[4]  As TE’s impact retention, replacement costs rise greatly.  Employing a single TE costs approximately 3x more than a non-TE.[5]

High performing employees are sought after and with good reason. They comprise about    20 % of the workforce, yet generate 80% of results.  One study found that these employees add thousands to profits a year, whereas a TE can undo this and then simply contributes much more to costs annually.   The study emphasizes that broadly speaking, TE’s have a stronger negative effect on an organization than usually recognized.

TE behaviors are damaging and their harder-to-measure costs usually affect direct performance. The Harvard report examines these indirect costs, looking particularly at the toll TE’s place on co-workers, and concludes that these costs create an even larger financial burden on businesses than the direct impact of TE misbehavior.  While it has been established that toxicity is contagious, often estimations do not account for its ripple effects. Employee turnover caused by TE driving out other workers is a real issue. It affects training and reduces the productivity of teams. The effect of toxicity can pose detrimental issues in recruiting and retaining talent.  The onboarding cost of hiring a TE is three times that of a non-TE.  Hirers can also reduce their expectations that they will hire through referrals because prospective employees often do their homework about an organization before applying, thus becoming aware of any current cultural issues.

In measuring the costs of TE, often these workers outperform non-TE.  In their report, Housman and Minor found that TE is often high performing individuals, in terms of quantity of output.  In other words, they “fail up”, making it a difficult decision for management to address the misbehavior.   More often than not, the same qualities and characteristics that make these TE bullies is the same fuel that makes them high performers.  This explains how employees are able to stay with an organization for as long as they do.

Measuring the true cost of TE should go beyond their performance output, and consider the effect on the organization.  Research studies have attempted to identify reasons behind TB in the workplace and have found possible causes to include a lack of understanding of the vision of the organization, feeling underappreciated or becoming disconnected from the leadership.  Additionally, there are traits that are not attributed to the work environment.  Some TE lashes out from an unfulfilled need to address personal and family problems.  One article cited that the fight or flight response is in effect once an employee feels the need to exhibit TB.  Management’s willingness to quickly confront the TB signals that it is unacceptable and consequently the TE will adjust or leave.

TE carries varied descriptions in their behaviors. They range from being a bully and resisting authority, to being selfish in their work approaches or have an aversion to work. They are often unreliable or disinclined to help others.  They demotivate and infuriate other workers. To an organization, they are the three deadly D`s; destructive, distracting and draining.

To an organization’s well-being, a TE is an outlier that carries a cost too high to tolerate.  Like the effort made to recognize superstars, leadership also needs to place an emphasis on mitigating the true costs of a toxic employee.

Feedback: “When we hired Barrett Rose to study our workflow, production, and find bottlenecks in our processes, we were initially shocked when they said our structure was fine, the problem was two toxic employees. Once those two employees were terminated, revenue increased by 38% in the next quarter. I would have never believed it. I highly recommend having a workflow audit performed,” Sidney Rice, VP of Operations First Structured Settlement.

[1] Housman, Minor. Toxic Workers. 2015. Harvard Business School.

[2] Cornerstone On Demand. Toxic Employees in the Workplace. 2015.

[3] Housman, Minor. Toxic Workers. 2015. Harvard Business School.

[4] Cornerstone On Demand. Toxic Employees in the Workplace. 2015.

[5] Cornerstone On Demand. Toxic Employees in the Workplace. 2015.