Reference no: EM132204698

Hazard Warning: The Unacceptable Cost of Toxic Workers

by Roberta Holland

Harvard Business School

Toxic workers aren’t just a pain in the rear; they’re also a pain in the bottom line, according to a new Harvard Business School working paper.

Dylan Minor, visiting assistant professor of business administration in the HBS Strategy unit, says a company stands to lose $12,489 in costs from replacing one toxic worker, which is almost double the figure a company gains from hiring a “superstar.” A superstar in the top 1 percent of performers adds $5,303 in increased performance to a company’s profit, Minor’s paper Toxic Workers shows.

“Every time you turn around there’s the next book on the war for talent, and it’s all focused on these high productivity people, and very, very little on those workers who actually may hurt organizational performance,” Minor says.

Fired toxic workers can leave a big mess for companies to clean up.©iStock

Firms, however, would be wise to pay more attention to what he calls the negative outliers. The estimated cost—based on turnover triggered by the toxic worker and the cost associated with new hires and training—is likely on the low end, Minor says, because it doesn’t take into account lawsuits or other liability that could result.

“Those who would be a good corporate citizen at the end of the day, not only do they make it a nicer place to work, but they also help the profitability of the firm compared to those who are at the other extreme,” says Minor, who’s visiting from Northwestern University’s Kellogg School of Management.

A firing offense

Minor’s definition of a toxic worker isn’t the employee who is gratingly loud or who leaves her lunch in the office refrigerator until fossilized. He is focusing on employees who damage the company itself or other employees and were fired as a result.

“There’s really a continuum from stealing office supplies to disrespectful behavior, falsifying documents, bullying people, and sexual harassment, and what I’m observing are those people who are actually terminated,” Minor says.

“IF YOU’RE OVERCONFIDENT, YOU THINK YOU’RE LESS LIKELY TO BE CAUGHT. THAT’S VERY PREDICTIVE OF TOXICITY”

Those serious incidents amounted to about 5 percent of the pool of workers studied over the three-year period. “If I was [studying] paper clip stealing and all that, then it should probably be 75 percent,” Minor says.

Minor’s co-author, Michael Housman, chief analytics officer of Cornerstone OnDemand, was key to unlocking the data used in the analysis. Among other services, the consulting company advises clients on how to make better hires by tracking personality traits and skills revealed during the hiring process. Cornerstone usually focuses on good hires, but Minor approached Housman about using that same data to decipher traits belonging to toxic workers.

The result was anonymized personal data of almost 60,000 workers from 11 firms, about 70 percent of which were based in the United States. The positions were similar front-line, customer service jobs like sales or technical support in industries that included retail, financial services, and health care.

Tip-offs to toxicity

The data reveal three traits that indicate which would-be hire needs a warning label. Human resources managers should be alert to signs an applicant is self-regarding, overconfident, or a self-proclaimed rules follower, Minor says.

Workers are flagged as self-regarding through a series of nuanced questions to determine how much they value others. “If you’re selfish, you’re more likely to steal and bully,” Minor says.

To determine whether an applicant is overconfident, Minor looked to questions asking an applicant to rate himself on various skills, like how many words per minute he types, without the applicant knowing he would be tested on the skill later in the day. Minor says applicants hoping to get a job are unlikely to lowball their answer, so the comparison between their prediction and actual skill level reveals how confident they are.

“If you’re overconfident, you think you’re less likely to be caught. That’s very predictive of toxicity. The more overconfident you are, you’re much more likely to be toxic,” Minor says.

The rule-following trait was the one that surprised Minor. Applicants were asked whether rules always should be followed or sometimes need to be broken to get the job done. Those who proclaimed always to follow the rules were much more likely to be toxic. Minor suggests the question basically reveals how truthful an applicant is, noting numerous instances when breaking the rules is the morally correct path.

“To say the rules should never be broken isn’t completely forthright and honest, so this is basically a sophisticated way to capture that,” Minor says.

Another factor could be more Machiavellian applicants trying to “game the system” by providing what they think is the more strategic answer, he adds.

Toxic workers whose glass is half full

However, the toxic worker’s qualities aren’t all bad, presenting companies with an apparent trade-off.

“It turns out that, on average, they’re actually very good workers on the productivity dimension. So, if you’re just hiring based on productivity, you’re going to tend to hire more of these individuals,” Minor says, adding that many companies value productivity above other traits.

Longtime General Electric CEO Jack Welch had his own name for toxic workers, whom he called Type 4 workers. “These were workers who always hit their numbers, but they weren’t a good corporate citizen essentially,” Minor says. “So what he basically says is you have to close your eyes to their great productivity and have the courage just to terminate them.”

Minor echoes Welch’s advice in his paper. Companies need to realize that their source of productivity comes at a cost. “It’s still more of an improvement to profit to get rid of toxic workers, even if they’re superstars, which is exactly what Jack Welch was saying,” Minor says.

“THEY’VE BEEN POTENTIALLY CONTAMINATED. PUT THE YELLOW SUIT ON”

Another consideration is the spillover effect of toxic workers, whose behavior tends to rub off on coworkers over time. If a company keeps a toxic worker, managers need to be on “red alert,” since coworkers have an increased propensity to become toxic themselves, Minor cautions.

“They’ve been potentially contaminated. Put the yellow suit on,” Minor says.

Follow-up study

Minor has also begun a follow-up study on the effects of worker physical location on toxic behavior. He is able to track worker movement over several years on a monthly basis to determine how location might be related to toxicity. Minor hopes to learn how the length of exposure to a toxic colleague affects workers, and whether supervisors’ proximity plays a part in toxic behavior.

Another question is whether a toxic worker can be tamed or even cured. Minor believes there are some “truly bad people” who will never reform and good people who will never go to the dark side, but many more can be swayed.

“There’s the mass in the middle where people are on the margin, and given the right nudges they will go for good or evil. So, what those levers are and how to manage those, I definitely hope to learn more about,” Minor says.

The bottom line for managers is to take a more holistic approach in hiring and get rid of the tunnel vision on managing productivity, Minor says.

“Even if you don’t care about people and all you want to do is make more money, you still should care about hiring people who care about more things than just money and productivity,” Minor says. “You need to be multidimensional. Otherwise you’re going to make some bad hires.”

QUESTIONS

Assuming you are a manager, comment/elaborate on this line by Minor above, “Even if you don’t care about people and all you want to do is make more money, you still should care about hiring people who care about more things than just money and productivity”.  

Describe a toxic worker/s as defined in the case or article. Do you agree that there are really such toxic workers based on your experience in the workplace? Justify your answer