Written by Dr. Robert Hogan and Dr. Kimberly Nei
In a fascinating and counter-intuitive paper, two Harvard economists (Housman and Minor) suggest that it makes better financial sense not to hire toxic workers than to hire star performers. Toxic workers engage in theft, property damage, sexual harassment, and workplace violence and destroy the culture of the workplace. Not all toxic employees are delinquents, however. Housman and Minor examined data from over 50,000 workers across 11 firms and found that narcissistic, self-regarding people are also likely to be terminated for toxic behavior. They also note that toxicity in one employee breeds toxicity in others.
To illustrate how toxic workers impact organizations, consider the NFL, whose teams spend vast sums of money chasing top talent. The money mostly goes to star performers who are easily identifiable using objective metrics (e.g., yards per carry/reception, touchdowns, interceptions, sacks). However, few teams pay attention to how these stars will impact their organizational culture. Supremely talented but difficult athletes such as Terrell Owens and Greg Hardy run up their own individual numbers while decimating team morale. Even though Terrell Owens was fired by the San Francisco 49ers for being disruptive, the Philadelphia Eagles thought they could control him, and failed. Then the Dallas Cowboys signed Owens and had the same problems. The Cowboys made a similar mistake in signing Greg Hardy, who had previously derailed with the Carolina Panthers. Dallas’ willingness to put up with Hardy’s toxic behavior on and off the field (e.g., fighting with teammates and coaches, skipping practices) may have caused them to miss the playoffs in 2015. Further, Dallas continues to attract negative publicity for not controlling Hardy. Toxic workers are often highly productive individual contributors who force organizations to choose between toxicity and productivity.
Housman and Minor suggest these NFL hiring practices parallel the willingness of investment banks to recruit star traders who ignore trading rules when doing so is profitable. This has predictable consequences: one star, Bruno Iksil of JP Morgan, cost the firm billions of dollars. Similarly, Housman and Minor argue that Jack Welsh made a huge positive impact on General Electric as CEO from 1981 to 2001 by removing toxic workers despite their productivity.
Housman and Minor show that companies profit more from avoiding toxic hires (by more than 2:1) than from recruiting star performers. This demonstrates the value of screening out potentially toxic employees and highlights the benefit companies can derive from developing their current workforce.
Hogan created the Hogan Development Survey (HDS) to identify the toxic behavioral tendencies that derail performance. Recent research by Woo, Chae, Jebb, and Kim (2016) shows that the HDS strongly predicts deviant behavior (e.g., policy violation, theft, falsifying company records, missing work without notice). Using personality assessment, organizations can select productive but non-toxic employees, something not possible with measures of cognitive ability.