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Apr 21, 2015

Understanding the hidden costs of toxic employees

Impact on co-workers and related turnover can be significant, study finds

By Claudine Kapel 

A new research study on toxic employees represents a good news/bad news story. 

The good news is employees who engage in the most serious kinds of professional misconduct represent only a small minority of an organization’s employee population. 

The bad news, however, is such employees — while limited in number — can still do a lot of damage. 

The study, conducted by Cornerstone OnDemand in Santa Monica, Calif., found good employees are 54 per cent more likely to quit when they work with a toxic employee if the proportion of toxic individuals grows by as little as one on a team of 20. 

To conduct its analysis, Cornerstone examined a dataset of about 63,000 employees spanning about 250,000 observations. It identified toxic employees as those who were involuntarily terminated due to policy violations such as workplace violence, drug or alcohol abuse, sexual harassment, falsification of documents, and fraud. 

In essence, the study defined toxic behaviour to be “the most egregious examples of employee misconduct.” 

Across the sample, Cornerstone found about three to five per cent of all employees met the criteria for being terminated as a toxic employee. 

The study findings indicate toxic employees can trigger higher staffing costs because they make co-workers significantly more likely to leave. Cornerstone’s findings suggest hiring a single toxic employee into a team of 20 workers will lead to replacement costs of about US$12,800 — compared to an average of US$4,000 for a non-toxic employee. 

As part of its study, Cornerstone also examined the results of the hiring assessments to try and determine which components of assessment scores were most predictive of someone’s likelihood of being a toxic employee. 

The study found that toxic employees scored low in two areas: 

  • attendance and dependability
  • service orientation. 

“Based on these results, it would appear that toxic employees are not reliable individuals, and they are not inclined to help others,” notes Cornerstone. “Although this is perhaps not surprising, these findings permit us to dependably identify characteristics we should be screening for at the point of application.” 

The research findings also indicated toxic behaviour is more likely to occur on larger teams, and there was “extremely strong evidence” to suggest toxic behaviour is contagious. 

“In other words, employees are many times more likely to engage in toxic behaviour if they’re exposed to other toxic employees,” notes Cornerstone. “The ramifications of this finding are fairly concerning. Namely, toxic employees have the potential to poison the entire well.” 

The study findings represent a firm reminder as to why organizations need to tackle performance issues in a well-considered and timely manner. 

Of course, for many managers, that’s probably their least favourite aspect of performance management. As a result, there’s sometimes a temptation to ignore a problem in hopes the performance issue will resolve itself, or that the employee will get another job – or transfer to another department. 

The absence of action, however, means the impact of toxic employees will be left unchecked — to the detriment of their co-workers and the organization overall. 

If your HR objectives include maintaining a positive and productive work environment, consider what processes your organization has in place to address toxic workers. 

  • Does your organization have a performance management process?
  • Are employees clear about the organization’s expectations with respect to workplace behaviours? Is there a code of conduct?
  • Are managers expected to identify and address performance issues with their employees?
  • Is there a clearly defined process for developing and managing performance improvement plans? How often is such a process utilized?
  • Is there a clearly defined process for managing progressive discipline? How often is such a process utilized? 

Toxic behaviour isn’t easy to tackle. Depending on the types of actions being taken or behaviours being exhibited, a parting of the ways may become necessary. 

But clear and consistent policies and processes, along with solid training for managers, can help make a bumpy road a little smoother. 

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