The Real Cost of Hanging on to Toxic Employees

Nearly everyone has worked at a company that has a toxic employee (If you haven’t, count yourself lucky). Even businesses that are lauded as being a “Best Place to Work” can run into problems by hiring a bad apple. Toxicity can range from bullying to sexual harassment to workplace violence. Regardless of their actions, though, every toxic person you employee can be a hit your pocketbook, whether it’s the cost of replacing them, or replacing the people who leave because of them. And don’t forget potential fines or lawsuits you might face, depending on the severity of the actions.

It’s easier to change people than to change people

The unfortunate reality is that not only are toxic employees extremely disruptive to individuals, teams, and even the boss, but they also can have a damaging effect on the bottom line.

In their 2015 study, “Toxic Employees in the Workplace: Hidden Costs and How to Spot Them,” human capital management company Cornerstone OnDemand found that your good employees are 54% more likely to quit when they have a toxic co-worker. And that can really cost you because replacing employees is expensive. The Society for Human Resource Management (SHRM) reported that, on average, it costs a company six to nine months of an employee’s salary to replace him or her. For an employee making $60,000 per year, that comes out to $30,000 – $45,000 in recruiting and training costs. If people are leaving your company because of one person’s bad behavior in the workplace, it’s more cost effective to get rid of the bad apple than lose multiple good employees.

According to Harvard Business School, toxic employees can also have the following “hidden” effects on your company’s revenue:

  • Employees subjected to incivility in the workplace experience “markedly loosened bonds with their work life.”
  • Nearly half of employees “decreased [their] work effort” and intentionally spent less time at work. This might even apply to you if you have a toxic person on your payroll.
  • 38% “intentionally decreased” the quality of their work.
  • 25% of employees who had been treated with incivility admitted to taking their frustrations out on customers.
  • 63% actually lost work time avoiding the offender.

How to Minimize Damage When Firing a Toxic Employee

After realizing what employing a toxic person can do to your company and your good employees, it’s easy to see why letting them go is the right option. But you have to be careful. With the ease of access to social media and online review sites, a vengeful employee can quickly, easily, and very publicly attempt to damage your reputation and that of your company. To protect yourself from the retaliation of a disgruntled former employee, it’s critical that you document every instance of bad behavior and consider adding a sentence or two to the separation agreement to protect your company from slander (be sure to consult your attorney).

Today’s businesses are especially vulnerable to damage that toxic ex-employees can inflict once they are gone. This is why it’s important to the success of your company to carefully screen applicants to help ensure that, as employees, they are aligned with your company culture and core values.

Business Planning and strategy consulting are just two of the high-level services The Alexander Group provides to St. Louis business owners. Contact us today for more information.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.