Every organization wants superstar employees and some will even delay the hiring process weeks or even months until that perfect candidate blips on the radar. What happens though if once you find your purple squirrel, they have mange or rabies? Do you cut them lose or keep them around for their quota busting, nut gathering ability?
Economist Dylan Minor and Cornerstone OnDemand’s chief analytics officer, Michael Housman, examined nearly 60,000 workers to determine the cost of retaining toxic workers. In their study, they define “toxic” as conduct harmful to an organization’s people or property. They found that retaining toxic workers, even those residing in the top 1% for productivity, cost far more than the rewards reaped from a toxic employee’s high production.
Their study revealed that a top one percent worker could produce over $5,000 in annual cost savings however a company could avoid $12,000 in costs by not hiring a toxic worker. In short a toxic worker, even if they are super productive, is far more costly to an organization than an average, non-toxic worker. Take a look at the chart below provided in their study!
Even though a worker in only the top 25% of productivity saves a company far less than one in the top 1%, the study shows that replacing a superstar toxic worker with a less than stellar non-toxic worker, to still be the more cost effective choice.
Why are toxic workers so much more expensive? The most apparent answer is turnover. Toxic workers drive other employees away and the cost of replacing those employees is high not to mention that morale and productivity often drop until a replacement is found. Additionally toxic workers produce other toxic workers. Negativity spreads like wildfire.
Interestingly enough, toxic workers are more productive in terms of their output and one 2013 study found that unethical workers remain longer at organizations. This explains why toxic workers are so often selected and even retained for long timespans.
In summary, avoid hiring a toxic worker if you can but should you find yourself burdened with one or many, remove them despite their high production. As former GE CEO Jack Welch put it, “People are removed for having the wrong values…we don’t even talk about the numbers.”
As we likely all know, U.S. workers have not been enjoying much in the way of rising wages for some time. The economy’s health as far as bringing workers ever increasing prosperity is a function of ever increasing worker productivity.
Labor productivity is defined as the amount of output produced per hour of labor. Productivity is affected by new technology, capital investment, the organization of production, managerial skill, and the characteristics and effort of the work force. The more you produce per hour the more your employer profits. The employer hopefully shares the profits of your labor with you, the worker, through higher wages.
But productivity growth has been lagging. During America’s post World War II boom years of 1947 through 1973, productivity enjoyed a 2.8% annual growth rate. This sharply contrasts with 2007 through 2015 when productivity grew just 1.2% per year, a drop of almost 60%.
So why is productivity not increasing faster?
First of all, we’re all busier than ever but are we getting more work done? The problem is the things we’re busy at are not necessarily resulting in higher productivity. For example, just think about how much time you spend cleaning up your email box every day. Sure, email has made communication more efficient, but has it made it more effective? We don’t have to play phone tag so much anymore, but email has also brought us spam. But it’s not just email. Think how Facebook and Twitter and Snap Chat and Instagram and Youtube, etc., all take their toll on productivity.
Economists are arguing over whether succeeding waves of new technology necessarily deliver less and less in the way of productivity gains. I’d argue that some technology gains deliver productivity loss.
Second, the gig economy and the celebration of entrepreneurship means many workers, and in particular millennials, are working on their own projects even if they have a fulltime job, and often while they’re at that fulltime job. As a manager I’m astounded at how much time millennials at work spend not working on their employer’s agenda, but rather on their own. In a discussion with a high level corporate executive, he told me that their company was formulating a policy that their workers would be required to spend at least 75% of their time on the job working on the employer’s assigned tasks, allowing them to work 25% of the time on their own projects. Say what? His rationale was that their millennial workers would just quit otherwise. This is a clear case of corporate insanity sabotaging the company’s own productivity growth.
Finally, the baby boomers aren’t capable of delivering strong productivity growth. Research shows that worker productivity slows down after age 45, at least in some industries. Forty-five plus old individuals make up about 44% of all employed workers, and of course most of these are baby boomers, the youngest of whom are now 53 years old. I’m not saying baby boomers don’t contribute. Science says our analytical skills continue to develop as we age, even if our memories degrade. But baby boomers are not going to be delivering the productivity gains needed to fuel significantly growing worker incomes.
The best hope is the millennial generation, which is even larger than the baby boom. But unless they get focused on being more productive for their employers than they have been we may have many more years of sub-standard productivity and wages.