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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.”

Additional Resources

About Cornerstone

Cornerstone powers the future ready workforce, with HR software and solutions designed to unite people, teams, technology and business, and inspire a work environment of growth, agility and success for all. With an AI-powered and skills-forward system designed for the contemporary workforce, we help organisations modernise the learning and development experience, deliver the most relevant content from anywhere, accelerate talent and career mobility, and establish skills as the universal language of growth and success across the business. Cornerstone serves over 6,000 customers and 75M users and is available in 180 countries and 50 languages. Learn more at Cornerstone OnDemand.

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