How should firms deal with a 'toxic employee'?

When Simon (not his real name) realised he had to deal with a "toxic employee", he knew he needed to act fast.

The boss of a small firm in New York, Simon says that while the worker had landed a major client his poisonous behaviour had started to infect the company.

Simon says the man in question had been wrongly trying to claim credit for other new business wins, and was deliberately ignoring members of his team.

At the same time the employee was said to be rebelling against the company by forming a clique, and threatening to start his own business.

"We needed to show our company that one person does not stand above the team," says Simon.

And so the alleged rabble-rouser was sacked.

Simon adds: "The money and time we spent handling this situation... well, it could have been a lot worse if he had stayed on.

"The internal politics would have been terrible. I don't know if we'd even have a company now."

Most of us have had to endure a corrosive fellow member of staff on one or more occasion during our working lives.

He or she may in fact be good at their job, but their bad behaviour - everything from selfishness, bullying, rudeness, being overly-domineering, or even just being constantly too loud and opinionated - and can have a devastating impact on staff morale.

In academic circles, such a problem employee is now more often described as "toxic".

And numerous studies have shown that they cost a business or government department money, due to the productivity of other workers plummeting, or people taking sick leave or even resigning.

One 2015 report by Harvard Business School estimated that keeping a toxic worker on the payroll can cost an average firm more than $12,000 (£9,400) a year. This is more than double the £5,000 of increased annual productivity it says a good employee can provide.

A separate study said that the annual financial impact of a toxic employee could be even more onerous. The 2012 survey of 2,700 firms by jobs website Career Builder found that a quarter of respondents put the figure at more than $50,000, while 41% said the number was around $25,000.

Prof Dylan Minor, co-author of the Harvard report, says that what can be frustrating for managers is that toxic employees "are usually very productive, because overconfident workers can be successful".

He adds: "But employers have to think about the other dimensions, the toxicity."

But with employment law in many countries making it far from easy to get rid of a damaging worker, how can companies best deal with the problem without necessarily seeking the termination of said employee? And how can firms best avoid such people in the first place?

Also, could the existence of toxic employees be blamed on the company itself, and a bad working culture that enables such people to behave the way they do in the first place?

Bruce Tulgan, a US management expert, says that company leaders need to be clear about what's permissible within the firm, and identify "low performers", which is what he calls toxic employees.

"If you don't fix the low performer problem, it sends a terrible message to the rest of the company," he says.

He suggests meeting with the difficult employee to "make the behaviour explicit, and break it down, monitor and measure it, and offer course-corrected feedback".

Mr Tulgan adds: "A lot of time that can correct the [bad] behaviour."

But if those corrected measures don't improve the employee's conduct, he recommends firing "those low performers, since you are paying them and they aren't following instructions, and that is insubordination."

Prof Wendy Hirsh, principle associate at the UK's Institute for Employment Studies, suggests that a boss or HR official should focus on trying to get a difficult employee "to listen to others again, including their families".

She adds: "When your wife and children tell you how bad you make them feel, it is harder to ignore than feedback at work."

While UK independent human resources expert Sarah Trota says "disruptive behaviour should be nipped in the bud", she adds that companies should work hard to prevent it in the first place by ensuring a happy workforce.

To help achieve this, she says that "companies should encourage a culture where employees are able to express their views in a constructive way".

Ms Trota adds: "Good communication channels, regular employee surveys, and employee forums provide an opportunity for an organisation to tap into the views of its employees, good and bad, and enable an organisation to take positive action.

"In my experience, real damage is done when employees go underground with their dissatisfaction, and this is much harder to deal with and indentify, and potentially much more toxic and damaging to the culture."

Companies also need to prevent senior managers from bullying, as some ambitious employees can determine - either consciously or subconsciously - that copying such bad behaviour is the way to get on at that company.

A boss who is a bully is also more likely to turn a blind eye to bad behaviour by his or her favourite workers.

The Trades Union Congress (TUC), the organisation that represents most of the UK's unions, says that while nobody likes dealing with a difficult or disruptive colleague, "it's important that everyone is treated fairly, with dignity and respect".

Hannah Reed, its employment rights expert adds: "Often these things are best dealt with informally, but employers should have a straightforward, transparent procedure for dealing with more difficult problems."

As part of their efforts to prevent potentially toxic employees, some firms try to weed out potential bad apples out at the interview stage.

At New York advertising company Gravity Media they prefer to meet candidates for a drink at a local bar, "in order to have a conversation, to see how they react to certain things".

Canadian business Loyalty One, which runs loyalty schemes for other companies, goes one stage further, and ensures that all senior job applicants meet with psychologists.

Bryan Pearson, the firm's chief executive, says the psychologists "are able to identify where there might be risk factors when hiring an individual".

Follow Business Brain series editor Will Smale on Twitter @WillSmale1