Many of us have experienced toxic behavior in the workplace. Though many of us use stories and anecdotes to illustrate and process our experiences, few of us have had access to quantifiable data when attempting to communicate the importance of managing these behaviors at work. What are the full costs of toxic workplace behavior? To help organizations get clarity around the value of reducing toxic behavior in the workplace, we’ve anonymized and aggregated a trove of data around this question, and taken it upon ourselves to use this data to provide meaningful insight for companies around the world.
Last year, we kick-started this conversation by publishing a study called "The Cost of a Toxic Hire.” It was a breakthrough resource showing how much money companies were losing to the turnover and absenteeism caused by toxic employees. While the response was overwhelmingly positive, we recognized that companies were losing far more than $1.2 million per year. We soon found even more information about how much market cap companies were losing to toxic behavior, and the measures that boards are now taking to protect their companies from the fallout of insidious workplace events.
Earlier this year, we launched the Toxic Employee Handbook with Dr. John Sullivan, a renowned influencer in the world of talent management. This newly released handbook covered over 40 distinct categories of damage caused by toxic employees and offered new tools to start building a business case for formal toxic behavior reduction efforts. Again, the response was overwhelmingly positive. More and more companies are looking to understand the full extent of damages that toxic employees inflict on our businesses and to discover ways they can identify them before they harm our organizations.
Still, we get questions about the value of certain preventative methods. As the leading provider of online background screening, we’ve worked with hundreds of clients to develop strategies to identify workplace behaviors ranging from subtle bigotry to violent threats. Even though more than 70% of employers today research candidates on social media before hiring them, we’re often asked: why should I look online to keep my company safe from bad hires?
Each year, the Oxford English Dictionary selects a Word of the Year based on its ability to reflect the ethos of that year and its potential as a term of lasting cultural significance. Though previous words, such as “selfie” and “post-truth,” have revolved around politics or pop culture, the Word of the Year for 2018 could not be more relevant to business. After narrowing all of 2018 down to a few phrases and going through rounds of debate, Oxford has chosen a word that speaks to what we’ve gone through this last year and, more importantly, where we need to go. The Word of the Year 2018 is toxic.
With one word, Oxford called out the elephant in the room: toxic behavior has infiltrated the business world. Though initially used to describe the substances and waste generated by mass industry, more and more people in the world today use ‘toxic’ to describe workplace afflictions. As people in 2018 demanded safe and welcoming workplaces, denounced company leaders for enabling harassment, and took to protest in the Google walkouts, the world became awake to toxic work environments, toxic masculinity, and toxic culture. Regardless of fault, corporations have become a focal point of harmful behavior, and people are tired of it.
According to the Gallup 2018 Global Emotions Report, fewer and fewer people today are well-rested, respected, or finding enjoyment in daily life. Instead, they’re reporting record-high levels of worry, sadness, stress, and anger. As headline after headline hits businesses for the decisions they’ve made or the cultures they’ve enabled to fester, it’s important to recognize the financial and reputational costs of bad business. But to avoid future financial and reputational fallout, business leaders need to recognize the sheer anger emerging from consumers and workers, and the ways they communicate this through turnover, legal actions, and protest…
Attracting and retaining talent is hard work. For years, employers have tried to understand what helps companies attract and retain top performers. For the most part, they've found that companies with great financial outcomes almost always have happy employees. The research even shows that it's employee satisfaction that results in good performance, not the other way around.
However, this phenomenon has led many companies to confuse the difference between culture and perks. In an attempt to please and attract high level talent, companies are spending more money than ever on perks and benefits believing this to be the key to happiness. Though the increase in company amenities, trips, and material rewards can temporarily boost employee satisfaction, it does little to address any real underlying issues that could be destroying your culture.
If your company offers great amenities but is experiencing low performance or high turnover, then you need to ask why it’s happening. Is it because you need to allocate more of your budget towards perks and benefits, or because your culture has a toxic behavior problem that you need to confront?
Just how costly is a bad hire? It depends on who you ask. If you were to Google “cost of a bad hire,” you’d find percentages, arguments, and even calculators promising to show you the “true cost of a bad hire” while offering little insight beyond the fact that they cost more than the worker's salary and turnover. As a result, the discussion on the direct and indirect costs of bad hires has become somewhat obscured. Some sources cite the “astronomical costs” of an unfortunate appointment while offering few measurable impacts, while others claim that a bad hire costs $240,000 while citing outdated and unavailable sources.
None of these sources tell you how often you’re making a bad hire, making it hard to know how these figures apply to your company. They often don’t tell you how the calculations are made or where the numbers come from, making it impossible to say whether the issue is of genuine business concern. When it comes down to it, they offer vague ideas about how to definitively avoid paying the costs of a bad hire. All of this has led HR to rely on "hope for the best" approaches to personnel management, with no clear insight into their hiring risk or effective actions they can take to manage it.
How much are toxic hires costing your organization? Relative to hiring a standard, non-toxic worker, a single toxic employee on a team of 20 will cost $25,600 per year due to increased voluntary turnover and absenteeism alone. This means that a company of 1,000 employees is losing at least $1.2 million to toxic workers each year…
What are the costs of sexual harassment?
Companies have long known that sexual harassment can lead to costly lawsuits. But since the explosion of #MeToo and the fall of Harvey Weinstein, the costs of misconduct have grown. Today, harassment is no longer just a cultural or legal issue, but a financial and brand issue that reaches every corner of the company. That means that no matter how good your training and reporting may be, they’re no longer enough.
Story after story has shown that when a brand loses authenticity over sexual harassment, they also risk losing their hard-won earnings. Uber has lost nearly 15% of its market share over the two years of its harassment scandals. After it was announced that Steve Wynn had received multiple allegations of sexual harassment, Wynn Resorts lost $3.5B in company value.
Your company should be armed and prepared to deal with toxic behavior as well as the brand damage that results when people hear about it. Companies are owning up to faults and taking action faster than ever when CEOs misuse their power. If you turn a blind eye to identifying and preventing toxic behavior, you’re risking more than legal fees and turnover—you risk irreparable damage to your market share, merger outcomes, and your name…