Why Toxic Employees Can Cost Your Company More Than $12,000

New research from Harvard Business School suggests that companies may be misallocating their hiring efforts. Rather than focusing primarily on recruiting exceptionally talented “superstar” employees, organizations stand to gain more by avoiding toxic hires altogether.

The study analyzed employment data from approximately 60,000 workers across 11 companies, examining only cases in which toxic behavior resulted in termination. Toxic employees were defined as individuals whose hostile, manipulative, or unethical behavior degraded the workplace environment, while “superstars” were defined as workers in the top 1 percent of productivity.

The findings are striking. Avoiding the hire of a toxic worker saves companies an estimated $12,500 or more, whereas hiring a superstar employee yields savings of only about $5,300. In other words, preventing downside risk delivers more than double the financial benefit of maximizing upside.

“Avoiding a toxic worker (or converting them to an average worker) provides more benefit than finding and retaining a superstar.”

Toxic employees impose disproportionate costs because their behavior drives other workers to quit, forcing organizations to spend heavily on recruiting, onboarding, and training replacements. Beyond turnover, toxic behavior can reduce morale and productivity and, in extreme cases, expose firms to significant regulatory penalties and legal liabilities.

Complicating matters, toxic workers are often perceived as highly productive—at least in terms of output quantity. This can lead managers to tolerate destructive behavior longer than they should, particularly when the individual appears to be a “high performer.”

Despite this temptation, the authors argue that removing such individuals is still the optimal strategy. Their analysis shows that organizations that eliminate “big shots” and “tyrants” are likely to become more productive overall, even if those individuals were contributing above-average output.

The broader takeaway is clear: effective talent strategy is not just about hiring the best performers. It also requires actively identifying and mitigating behaviors that undermine teams, culture, and long-term organizational performance.