Superstar employees are the obsession of the corporate world. They are highly sought after, given the most attention and the best opportunities, generously rewarded, and expressly reassured after setbacks.
While some question whether such special treatment is appropriate, it is clear that this group has outsize influence: high-performers have been estimated to be four times as productive as average workers, and research has shown that they may generate 80% of a business’s profits and attract other star employees. They can comprise the top 3% to 20% of a company’s workforce.
But according to a recent working paper from Harvard Business School, there is another group that can have an even greater effect on organisations: toxic workers. These are talented and productive people who engage in behaviour that is harmful to an organisation, say authors Dylan Minor, a visiting assistant professor at HBS, and Michael Housman, Chief Analytics Officer at Cornerstone OnDemand.
They looked at otherwise skilled employees who ended up doing real damage — employees who had been fired for egregious company policy violations, such as sexual harassment, workplace violence, or fraud — and found that avoiding such people can save companies even more money than finding and retaining superstars.
Their data came from a company that sells job-testing software to large employers, and it combined three things: 1) job assessment scores that captured applicant traits like confidence in their skills, whether they care about others people’s needs more than their own, and their philosophy on following rules; 2) attrition data, which included hire dates, termination dates, reasons for termination, etc.; and 3) daily performance data. The dataset spanned 11 global companies and 58,542 hourly workers. Minor and Housman found that roughly 1 in 20 workers was ultimately fired for toxic behaviour.
They compared the cost of a toxic worker with the value of a superstar, which they define as a worker who is so productive that a firm would have to hire additional people or pay current employees more just to achieve the same output. They calculated that avoiding a toxic employee can save a company more than twice as much as bringing on a star performer – specifically, avoiding a toxic worker was worth about $12,500 in turnover costs, but even the top 1% of superstar employees only added about $5,300 to the bottom line.
The real difference could be even bigger, if you factor in other potential costs, such as litigation fees, regulatory fines, lower employee morale, and upset customers. One 2012 CareerBuilder survey found that 41% of the nearly 2,700 employers surveyed estimated that a bad hire could cost $25,000, while a quarter believed it was much higher—$50,000 or more.
Thus, it is better to avoid toxic employees than hire superstar employees.
Also read: Do You Hire for Attitude or Aptitude?