What's the Actual Cost of Unproductive Employees? It's More Than You Think. In the business world, unproductive employees can be like pebbles in your shoe. They may not be immediately noticeable, but the impact on your organization's performance can be serious.

Picture this: You're running a marathon, and you've trained for months, but one of your shoes is suddenly filled with pebbles. Your performance suffers, and your personal best time slips away like sand through your fingers. In the business world, unproductive employees can be those pebbles in your shoe. They may not be immediately noticeable, but the impact on your organization's performance can be serious: the difference between a mediocre quarter and an outstanding one.

That's happening to many companies across the board: The United States is currently experiencing an unprecedented occurrence, with five straight quarters of year-on-year drops in productivity, as per a study conducted by EY-Parthenon using information from the Federal Bureau of Labor Statistics. This phenomenon has never been recorded in the available data, which dates back to 1948. The shoes of all companies are filled with pebbles now, but so many companies underestimate the costs of these pebbles.

Related: 5 Ways to Turn Unproductive Employees Into Superstars

Direct costs: The tip of the iceberg

To understand the impact of unproductive employees, we must first unravel the various threads contributing to their overall cost. It's not just about lost hours; there's a much more intricate web of consequences that can snowball into major organizational setbacks.

Direct costs of unproductive employees may seem obvious, but they're only the tip of the iceberg. When an employee isn't performing at their best, you're still paying their salary and benefits, essentially funding an underwhelming return on your investment. Like trying to squeeze juice from a rock, you're not getting your money's worth.

For example, if an employee making $60,000 per year is unproductive 20% of the time, that's a staggering $12,000 of wasted resources. Multiply that by a team of ten, and you're looking at a whopping $120,000 flushed down the drain.

Indirect costs: The hidden beast lurking below

While direct costs are easily quantifiable, the indirect costs of unproductive employees are the lurking beast that often goes unnoticed. It's the ripple effect that can spread throughout your organization like a contagious yawn in a boardroom meeting. Let's examine these hidden costs.

• Decreased team morale: When a team member isn't pulling their weight, it can create frustration and resentment among colleagues. Imagine being stranded on a desert island, and one person refuses to help build a shelter. Morale plummets, making it harder to maintain productivity and engagement.
• Lowered overall productivity: Unproductive employees can act as anchors, dragging down the performance of your entire team. With fewer people contributing effectively, everyone has to work harder to compensate, leading to exhaustion and potential burnout.
• Increased management burden: Managers often need to invest extra time and energy in managing unproductive employees, taking away from other crucial tasks. It's like tending to a garden: the more weeds you have, the less time you have to nurture the flourishing plants.
• Higher turnover rates: When high-performing employees get fed up with picking up the slack, they will seek greener pastures, leading to increased turnover and its associated costs.

Putting a price on unproductivity: A case study

To illustrate the real impact of unproductive employees, let's imagine a hypothetical company, "Widgets Inc." They employ 100 people, with an average salary of $60,000 per year. If 20% of their workforce is unproductive 20% of the time, the direct costs alone would be $240,000 per year. Now let's factor in the hidden costs:

• If team morale and overall productivity are lowered by 10%, that's an additional $600,000 in lost productivity.
• Assuming management spends an extra 10 hours per week dealing with unproductive employees, that's 520 hours per year. If we value that time at an average manager's salary of $80,000 per year, that's another $40,000 in lost resources.
• If turnover rates increase by 5% due to unproductive employees, Widgets Inc. would need to replace five high-performing employees. Factoring in recruitment and training costs, let's estimate a conservative $10,000 per employee, totaling $50,000.

Adding these indirect costs, Widgets Inc. faces a staggering $930,000 per year as a result of unproductive employees. That's almost a million dollars that could have been better spent on innovation, growth and rewarding top performers.

When I show this math to my clients, they are very surprised by these findings. They can't believe how much unproductive employees cost. That's because they tend to forget that unproductive employees undermine the performance, morale and retention of higher performers.

Related: 3 Ways You're Derailing Your Employees' Productivity

Cognitive biases: The hidden puppet masters of unproductivity

As we delve deeper into the realm of unproductive employees, it's crucial to recognize the impact of cognitive biases on this topic. These mental shortcuts can distort our perception, judgment and decision-making, leading to unproductive behavior in the workplace. Let's explore two specific cognitive biases and their influence on the issue at hand: the anchoring bias and the optimism bias.

The anchoring bias is our tendency to rely heavily on the first piece of information we encounter (the "anchor") when making decisions. This bias can cause managers to underestimate the costs of unproductive employees by focusing on initial impressions — failing to recognize the long-term impact on the organization.

Imagine a manager hires a new employee with an impressive résumé and a glowing recommendation. The manager becomes anchored to this initial perception, overlooking signs of unproductivity as they surface. Consequently, the manager underestimates the true cost of that employee's unproductivity, which may include decreased team morale, lowered overall productivity, and increased management burden.

To combat the anchoring bias, managers should continually assess their employees' performance, comparing it to objective standards and benchmarks. By challenging their initial perceptions and considering alternative explanations, managers can develop a more accurate understanding of the costs associated with unproductive employees.

The optimism bias refers to our inclination to overestimate positive outcomes and underestimate negative ones. This cognitive bias can lead managers to downplay the costs of unproductive employees, believing that their impact on the organization is minimal or temporary.

Consider a manager who notices an employee's unproductive behavior but remains convinced that it's just a rough patch. This optimism bias blinds the manager to the potential long-term consequences, such as increased turnover rates and the hidden costs of unproductivity.

To counteract the optimism bias, managers should actively seek out data and feedback that may contradict their positive assumptions. By adopting a balanced perspective and considering worst-case scenarios, managers can better comprehend the true costs of unproductive employees and take appropriate action to address the issue.

Battling the unproductivity monster: Effective strategies

Now that we've uncovered the true cost of unproductive employees, it's time to take action. By implementing effective strategies, you can transform your workforce into a powerhouse of productivity. Here are some proven tactics:

• Set clear expectations: Ensure your employees understand their roles, responsibilities and performance expectations. Providing a roadmap of success is like giving them a compass to navigate through their daily tasks.
• Invest in training and development: Equip your employees with the skills and knowledge they need to excel in their roles. Think of it as sharpening their metaphorical pencils, allowing them to write their own success stories.
• Foster a positive work environment: Encourage collaboration, communication and recognition of hard work. Remember, a happy hive produces the sweetest honey.
• Regular performance evaluations: Monitor employee performance and provide constructive feedback. It's like trimming the hedges in your garden, ensuring everything grows in the right direction.
• Offer flexible work arrangements: Remote and hybrid work options can boost productivity and job satisfaction, while a return-to-office mandate perceived as excessive by employees leads to quiet quitting. Empower your employees to find their perfect work-life balance, and they'll reward you with unwavering commitment.
• Get the wrong people off the bus: Sometimes, unproductive employees need to be helped find a better fit for them. Devise a performance improvement plan for one to three months — no longer — and if they aren't improving, you need to part ways with them. Otherwise, I can guarantee you'll part ways with your high performers.

Tying up loose ends: The bottom line

Unproductive employees are more than a mere inconvenience; they're a financial sinkhole that can drain your organization's resources and morale. By recognizing the true cost of unproductivity, overcoming cognitive biases, and employing effective strategies to combat it, you can transform your workforce into a productive powerhouse, propelling your organization to new heights. Don't let those pesky pebbles in your shoe slow you down—face unproductivity head-on and stride confidently toward success.