When you confront a problem you begin to solve it. ~ Rudy Giuliani

I’ve noticed during my years as a business consultant that many organizations have become masters at ignoring the elephant in the room. These companies have one or more employees who perform poorly – and in many cases they’ve been under performing for years. Management tolerates it and completely ignores the tremendous cost to the organization.

The direct costs of bad performance are pretty obvious. For example, say that you’re paying an executive $100,000 a year and he/she is performing at about a 50% level vs. the 80% level you might expect. That’s a thirty percent reduction in productivity, so you’re actually only getting $70,000 of output from that individual.

What most organizations fail to consider, however, are the indirect costs. That executive’s reduced productivity trickles down and reduces the productivity of his/her direct reports. If 10 employees reporting to that executive earn a total of $500,000 in salary and their productivity is reduced by 10 or 15 percent, that’s an additional $50,000, minimum, in lost productivity. Depending on the number of levels within the organization, the productivity losses can trickle down even further.

Now consider the impact of that underperforming executive on other parts of the organization. His/her boss wastes time worrying about the problem and its effect on the bottom line. Peers who work with the executive may have trouble accomplishing their responsibilities. The company’s strongest performers may get fed up and leave. Other employees may figure that, since management doesn’t do anything about the problem, there’s no reason they should continue to work hard. Just one underperforming manager can cause productivity losses and upheaval throughout the organization and the costs can be astronomical.

Here are a couple of examples we’ve encountered:

• I recently helped a company’s executive team evaluate their sales force. Upon completion of the evaluation, we knew the force had two A players, three B players and one C player. The C player was producing about 60 percent of what the A players were doing. The C player was only making about $70,000 per year, compared to $100,000 for the A players. However, when the executive team began to look at the missed opportunity costs, they realized the C player had actually cost the company almost $500,000 to the bottom line over a three-year period. This was direct cost only, not the additional costs of the employee’s impact on the rest of the organization.
• In another company we worked with some time ago, there was a vice president whose poor performance was tolerated because she was the daughter of the president and owner. We were able to show the owner that his other employees were wasting a tremendous amount of time talking about and covering for his daughter’s poor performance.

Have you been ignoring the elephant in the room for too long? It’s tough to confront an employee who’s underperforming, especially when he’s a really nice person or she’s been with the company for a long time. Or perhaps you find the prospect of having to hire a replacement daunting. However, the consequences of ignoring poor performance can be dire. You owe it to your company, your employees and yourself to confront the problem and solve it.