New Research Exposes the Hidden Costs of Toxic Employees
March 31, 2015
New Research Exposes the Hidden Costs of “Toxic Employees”
Cornerstone OnDemand report shows increase in employee attrition due to toxic behavior in the workplace, identifies warning signs to look for during candidate searches
SANTA MONICA, Calif., March 31, 2015 – “Toxic employees” can have a major negative financial and cultural impact on companies that make the mistake of hiring them. A new Cornerstone OnDemand (NASDAQ:CSOD) report, “Toxic Employees in the Workplace,” reveals that, along with the direct costs incurred by toxic employees, they also incur hidden costs to employers. The report shows that good employees quit at a 54 percent higher rate when they work with a toxic employee. Additionally, the onboarding cost of hiring a toxic employee is three times the amount of a non-toxic employee.
Leveraging a dataset of approximately 63,000 hired employees spanning approximately 250,000 observations, talent management software provider Cornerstone conducted the research by identifying those who were terminated for reasons related to “toxic behavior.” This behavior includes misconduct, workplace violence, drug or alcohol abuse, sexual harassment, falsification of documents, fraud and other violations of company policy. Across the sample, 3 to 5 percent of all employees met the criteria for being terminated due to toxic behavior.
A Toxic (and Financial) Burden
According to the report, the indirect costs of toxic employees, as measured by the toll they take on co-workers, can have a far greater overall impact and create an even larger financial burden on the business than the direct costs of a toxic employee’s misbehavior.
Key report findings include:
- 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 a 1:20 ratio;
- By making their co-workers significantly more likely to leave, toxic employees lead to rising replacement costs; hiring a single toxic employee onto a team of 20 workers costs approximately $12,800, whereas hiring a non-toxic employee costs an employer an average of $4,000;
- Toxic employees have a negligible effect on the performance of their co-workers, which suggests that they have a stronger influence on stress and burnout than on day-to-day task completion.
The Warning Signs
The ability to identify candidates that display a high likelihood for toxic behavior before they cause havoc in the workplace is tremendously valuable. The report uncovered behaviors that should be considered potential warning signs.
Key report findings include:
- Individuals who are self-proclaimed “rule followers” were 33 percent more likely to be toxic employees, which underscores the need to ask assessment questions in an opaque way;
- Applicants who were notably overconfident about their technical proficiencies for a job were 43 percent more likely to engage in toxic behavior;
- Toxic behavior is contagious and can spread from co-worker to co-worker at faster rates for larger teams;
- Poor attendance and dependability, as well as lack of customer service orientation, are most predictive of toxic behavior.
Comments on the News
“Employees are a company’s most valuable resource, and retaining the best and brightest is critical for a business to succeed long-term,” said Adam Miller, founder and CEO of Cornerstone OnDemand. “Hiring is a very complex process, and a candidate who gave a stellar performance during the interview may turn out to be a poor fit. Fortunately, companies can use science-based assessments, like those offered from Cornerstone Selection, to identify applicants who are not only more qualified for the job but also a healthier, long-term fit for the organization.”
“This report set out to answer two questions. The first is whether it is possible to identify the factors that make someone likely to engage in toxic behavior, and the second being whether we can quantify the impact that toxic employees have on their coworkers,” said Michael Housman, chief analytics officer at Cornerstone OnDemand. “Finding that both of these questions were measurable, and behavior can indeed be predicted, validates the usefulness of employing data-driven intelligence to support hiring decisions.”
- Read additional commentary about the report results on the Cornerstone blog: https://www.cornerstoneondemand.com/rework/cornerstone-report-details-effects-toxic-employees-workplace.
- View an infographic accompanying this report: https://www.slideshare.net/cornerstoneondemand/inside-the-mind-of-a-toxic-employee.