The High Cost of Caustic Workers

A new Harvard Business School working paper set out to answer a question that many organizations intuitively understand but rarely quantify: how much does it actually cost to keep a toxic employee on the payroll? According to the research, the answer is far more than most companies expect.

In the study, economists Dylan Minor and Michael Housman, Chief Analytics Officer at Cornerstone OnDemand, analyzed data from nearly 60,000 employees across 11 firms. Their goal was to identify the traits and consequences of employees who engage in behavior harmful to an organization’s property or people—and to put a dollar figure on the damage.

The researchers define toxic workers as individuals whose actions lead to serious policy violations, harassment, fraud, theft, or other forms of misconduct. The term “toxic” is deliberate: such behavior tends to spill over, increasing the likelihood that coworkers disengage, quit, or even adopt similar behaviors themselves.

One of the paper’s most striking findings is a comparison between toxic workers and so-called “superstars.” A top 1% performer generates an estimated $5,303 per year in additional value through increased output. By contrast, simply avoiding the hire of a toxic employee saves an estimated $12,489 annually—more than twice the benefit—due largely to reduced turnover and replacement costs.

These costs stem from a predictable pattern: when a toxic employee joins a team, coworkers are significantly more likely to leave. Recruiting, onboarding, and training replacements creates a financial drain that quickly overwhelms the productivity gains of even highly effective individual contributors.

The study also identifies several traits that increase the likelihood of toxic behavior. Employees with high self-regard (or selfishness), excessive overconfidence, and those who claim rules should always be followed are statistically more likely to engage in serious misconduct. Importantly, these traits can often be detected before hiring through well-designed assessments and reference checks.

A core reason toxic employees persist, Minor explains, is that they are often strong performers. Managers may focus narrowly on output and ignore “corporate citizenship”— behaviors like helping others, acting ethically under pressure, and contributing to a healthy culture. This creates a form of survivorship bias, where only the productive toxic employees remain.

The authors argue that organizations must adopt a more multidimensional view of talent. Productivity alone is insufficient. Hiring, evaluation, and rewards should also account for citizenship, integrity, and the broader impact an employee has on those around them. When viewed this way, avoiding toxic workers is not just a cultural imperative—it is a clear financial one.