It’s a dilemma common to executives. What should they do when they realize their company is staffed with mediocre performers? The immediate instinct is to go out and recruit superstars, but there’s new research indicating that there’s a better approach: remove or transform your toxic employees.
If you recently joined a new company or just received a new promotion you may have discovered that your staff isn’t effective. Whether by grand epiphany or slow discovery, you see the problem clearly and desperately want to solve it. You envy departments filled with high potentials brimming with vibrant energy, wishing you had the kind of people whose work ethic and intelligence you could admire.
Your secret wish is to somehow attract a few good ones, who would, in turn, bring in others, but there is new evidence to show that you should focus your efforts elsewhere.
In a recent working paper from the Harvard Business School, Michael Housman, and Dylan Minor start by sharing the obvious: toxic employees are costly. In addition, their study of over 50,000 employees shows that they also detract from the performance of others. They take a toll on morale, customer service, and turnover. They note that an employee who is surrounded by toxic colleagues is likely to fall into similar behaviors. In other words, toxicity is contagious.
Furthermore, the study also showed that it’s better to replace a toxic employee than hire a great one. Doing so has twice the impact.
But even with these facts in hand, the typical company often can’t take action. If you are an executive, consider the following reasons why your organization is unable to easily remove these employees.
Reason 1 – Toxic workers often appear productive
They know what to do to generate a lot of activity. But in the end, their presence is a negative one. For example, the rogue trader who cost Grace Kennedy some US$20m in profits in 2010 was, from all prior appearances, a high performer. Earlier removal would have made a gigantic difference.
Reason 2 – Toxic workers are confident, plus they follow the rules
Their outward personality makes it difficult to see them as anything other than strong people who never do much wrong, according to written company policy. Furthermore, they are bold in asserting their high productivity, doing a good job of those things that can easily be measured. It’s harder to document the damage they do in other areas.
Reason 3 – Companies keep bad records
Jack Welch is a huge proponent of forced ranking. While its overall benefit is disputed, the system does make it clear where weaknesses lie. Most companies in the Caribbean possess no such clarity. Instead, one manager after another dodges the bullet, giving toxic employees passing grades simply because it’s the path of least resistance. Over time, reality becomes separated from the written record. The executive who finally decides to do the right thing finds that the laws in the Caribbean are quite strict: no employee who has a record of adequate performance can be summarily dismissed.
The researchers didn’t specifically go into the effect toxic employees have on high performers but we can imagine. A high potential who believes she’s being rewarded exactly the same as a toxic colleague is likely to depart for a saner environment. She may say it’s “for more money”, but that’s sometimes a cover-up. The truth is, she’s gotten to the point where the company’s lunacy has become unbearable.
What then should your company do to prevent itself from filling the ranks with toxic employees?
Step 1 – Analyze your human resource records to see whether there is a separation between high and low performers. Compare your company’s performance with the story told by these records.
Step 2 – If there’s a mismatch, move to identify toxic employees. Work to remedy the skills of their managers in giving feedback and hold them to account so that the separation becomes clear.
Step 3 – Monitor the gap between high and low performers over time, using company performance as a guide. It’s better to do this long before there’s a crunch so that the right adjustments can be made.
Think of a top football club. There is universal recognition that players come and go: it’s a requirement of their system which is different from a family with its life-long blood relationships. Instead, a club is actually a temporary coalition of high performers striving towards the same goal. So is your company.
Attracting star performers may be a more sexy solution than dealing with toxic workers, but you have a higher obligation to keep your company healthy. It’s not the easy path to take, but it’s the one that pays off in the long-term.
Francis Wade is the author of Perfect Time-Based Productivity, a keynote speaker and a management consultant. To receive a free summary of links to his past articles, send email to firstname.lastname@example.org