What does it actually cost to keep mediocrity on your team?

We are often asked about this topic, and the assumption that many people have is that although they have a feeling in their gut that they could make an impact through making difficult changes on their team, they don’t think there is any research or data that they can lean into for their evaluation and action.

That is not true at all. There is a robust body of research and industry analysis on the cost of not replacing underperforming employees, especially in terms of financial impact, team morale, productivity, and opportunity cost.

“These employees will likely conduct themselves in a similar fashion in their next organization, and we often see them lasting less than a year in their next position.”

We can start with an analysis generated through some renowned authorities on patterns of behavior and the resulting impact across many arenas.

1. Financial Cost of Keeping Under-performers

Gallup Research (2017):  Actively disengaged employees cost their organization 34% of their salary annually in lost productivity. For a $70,000/year employee, that’s $23,800/year in potential losses.

Corporate Executive Board: (CEB, now part of Gartner delivers detailed research on technology, business trends, and market forecasts across sectors like IT, finance, HR, marketing, and supply chain.) “Managers spend up to 17% of their time (nearly one day per week) managing under-performers. This equates to significant hidden managerial labor cost.”

SHRM (Society for Human Resource Management): The indirect cost of keeping a poor performer can be 3x their salary, considering the impact on turnover, engagement, and reduced team effectiveness.

2. Impact of Under-performers on Team Performance & Culture HBS (2016):

The presence of a single toxic or underperforming worker decreases team performance by 30–40%. Removing a toxic employee can have twice the positive impact of hiring a high performer. The truth is likely that once their negative behavior becomes a pattern (amplified by whispering in the ears of other team members) the damage is done and there is no path for constructive remedy.  These employees will likely conduct themselves in a similar fashion in their next organization, and we often see them lasting less than a year in their next position.

MIT Sloan Management Review (2022): Poor performers contribute to increased turnover of high performers, especially when leadership is slow to act. Teams exposed to low performers often experience cultural contagion, where bad habits and disengagement spread.

3. Opportunity Cost & Innovation Loss

Under-performers block innovation by consuming managerial attention and occupying a role that could be filled by a more productive contributor. In project-oriented or sales roles, they may stall revenue opportunities, delay timelines, or damage client relationships.

Example Calculation:

We went to the extent of offering a calculation that a leader can use that incorporates all elements of the research we have cited above. If an under-performer:

• Makes $150,000 annually
• Operates at 60% of expected productivity
• Drags 2 other team members down by 10% each

• Lost output: $60,000 (40% x $150,000)
• Drag on team: $30,000 (10% x 2 peers x $150,000)
• Management time: $38,250 (17% x $225,000)

While this information may seem surprising on the surface, the logic is solid, and the numbers hold up. If you would like to do more detailed research on the topic, these are excellent additional resources.

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Harvard Business Review: “How One Toxic Employee Can Derail Your Team”

Gallup: “State of the American Workplace”

SHRM: “Cost of a Bad Hire”

MIT Sloan Management Review: Workplace culture and attrition reports

Gartner/CEB: Managerial time studies and performance analytics

-John Lankford, President & Founder, The Parnassus Group