When one of his key employees left, a client of mine in Silicon Valley asked her two direct questions. We were about a year into working together, and she was one of his first hires and one of his favorites. Was she planning to take his clients with her? “Oh no, of course not,” she said. “I wouldn’t do that. They’re your clients, and you’ve developed them over the years.” Was she going to start a competing business in the same part of Silicon Valley? “Oh no, I would never do that.” Thirty days later he found out she had opened a competing organization and taken his clients.
The stolen clients hurt, but the costlier damage was inside the business. Over the following months my client slowly realized that she had been poisoning a lot of the other employees, and many of them were glad to see her go. That damage had been building long before she walked out the door.
Researchers have put a price on that kind of damage, and the number surprised me. Harvard Business School’s Dylan Minor and Michael Housman (opens in new tab) studied more than 50,000 workers across 11 firms and found that roughly 1 in 20 were let go for toxic conduct. They estimated that avoiding one toxic worker saves about $12,489 in turnover costs, the expense of replacing the other people who leave because of the person on their team. Replacing an average worker with a top 1% performer was worth $5,303, less than half as much. Most owners put their energy into hiring a star, yet this study says the bigger win comes from keeping the other kind off your team.
You need to have a strong company culture and a strong definition of where your expectations lie in order for people to follow you.
— Gary Henson, Founder of Gary Henson Group
Here’s what makes it hard. In that same research, toxic workers were more productive than the average worker. A toxic employee rarely looks like a problem on a report. She closes the sale, keeps the client happy, and shows up early. She’s often someone the owner has trusted for years, which is why the owner is usually the last to see it. Owners tend to trust the people who have been with them longest, and trust without written expectations has nothing to measure behavior against. Without a standard, a favorite employee and a saboteur look the same from the owner’s chair.
The cost shows up in the people who stay, too. MIT Sloan Management Review research by Donald Sull and Charles Sull (opens in new tab), drawing on more than 1.4 million Glassdoor reviews from large companies, found that a toxic culture is 10.4 times more powerful than compensation in predicting a company’s attrition rate compared with its industry. Workers feeling disrespected and unethical behavior ranked among the leading elements. When people start leaving, the first instinct is usually a raise. The research says to look at what it feels like to work in your building.
Could you name, right now, the one person on your team everyone else works around? If a name came to mind before you finished reading that question, you already know where to start.
Harvard Business School researchers estimated that avoiding one toxic worker saves about $12,489 in turnover costs, versus $5,303 from replacing an average worker with a top 1% performer. Harvard Business School (Dylan Minor and Michael Housman, "Toxic Workers") →
I didn’t predict that she would leave. What I told my client, long before, was that something would happen, and that he needed every piece in place before it did. For us that meant putting in writing what I call company commitments, along with a vision, a mission, and job descriptions with written standards of performance, so expectations were clear in writing and out loud. Once those exist, accountability stops being personal, because you’re holding a favorite employee to the same commitments everyone else signed up for rather than confronting her about her attitude. If you want a place to begin, writing company commitments employees will remember walks through it.
The second piece is hiring, and this is where most owners get impatient. They need someone to fill a seat, so they hire the first decent candidate. My experience says you have to kiss a lot of frogs to find the prince, which means taking your time and over-interviewing. This client now runs three layers of interviews: the owner, then the management team, then the general manager, and each layer weighs in on cultural fit. The goal is to make sure new people understand the culture before they bring their own personality into it. The third piece is regular meetings built around three questions: what’s working, what’s not working, and what’s missing. A person who is souring a team has a hard time hiding in a room where those questions keep getting asked.
That client started with 25 employees and now has about 45. We’re in year five, the business has grown 20% to 25% year over year, and we’re talking about 30% to 40% next year. The employee left about a year in. What he’s running on today is the infrastructure he built around that point: the employees, the hiring process, and the meetings. In 35 years of working with more than 500 organizations, I’ve learned that something always happens. The only choice is whether the business is ready for it. If you aren’t sure yours is, start with Most Leaders Think Their Culture Is Stronger Than It Is, and see how GH Group’s Inside-Out Method™ starts in exactly this spot.
