ANNE LIGHTSEY
Mediator
Corporate Trainer & Coach
Professional Organizer
Some Costs of Workplace Conflictsi
Not all cost factors are relevant to every conflict, but every conflict incurs several of
these costs.
1. Lost work time
Managers’ Time:
Studies show that 42% of a manager's time is spent on conflict related
negotiations among employees.ii
Over 65% of performance problems result from strained relationships
between employees, not from deficits in individual employee's skill or
motivation.iii
Individuals’ Time:
Studies show that 52% of employees have lost work time worrying about how
they have been treated. 22% have deliberately slowed down their work in
response to rude or insensitive behavior.iv
Tension and stress reduce motivation and disturb concentration. A loss of
25% (doing things other than work related activities, such as discussing the
dispute, playing computer games, finding reasons to get out of the area)
reduces an average work week to fewer than 20 hours.v
2. Absenteeism and Illness
Absenteeism has been shown to correlate with job stress, especially the
stress associated with anger toward co-workers. Science has determined
that nearly every physical illness and injury, from viral infections to cancer to
workplace accidents, is partially "psychogenic." That is, caused in part by
psychological or emotional conditions.
3. Heath costs
It is estimated that 75 – 90% of all visits to primary care physicians are for
stress related problems. Since the rate of claims affects the premium paid by
an employer to its insurer, insurance is an indirect cost of workplace conflict.
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An estimated 16% of employees feel that poor interpersonal relations are a
source of stress at work.vi
The total value of lost work time due to stress is estimated to be $1.7 billion.vii
Workplace stress and work-related conflict are among the top eight reasons
why employees request counseling assistance.viii
4. Reduced decision quality
Decisions made under conditions of conflict are inferior to decisions made
when cooperation prevails. The best decision-making happens when there is
a free-flowing of information. When there is a conflict, it is not uncommon for
information to be withheld or distorted.
If conflict is present between people who share decision-making authority, as
in the case of team-based decisions, the resulting decisions are likely to be
contaminated by the power struggles between those people.
5. Restructuring
Often, design of workflow is altered in an attempt to reduce the amount of
interaction required between employees in conflict. Often the restructured
work is less efficient than the original design.
6. Loss of skilled employees
Studies show that 12% of employees have quit a job to avoid a rude coworker. Seventy five percent of people who felt they have been bullied at
work have left their jobs to make the bullying go away. ix
Chronic unresolved conflict acts as a decisive factor in at least 50% of
departures.x
7. Cost to replace employee
Conflict accounts for up to 90% of involuntary departures, with the possible
exception of staff reductions due to downsizing and restructuring.xi
It’s estimated that the real cost of turnover is equivalent to one full years pay
(finding and training replacements, customer satisfaction and retention,
lowered efficiency for all who work with new hire).xii
8. Sabotage/theft/damage
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Studies reveal a direct correlation between prevalence of employee conflict
and the amount of damage and theft of inventory and equipment. Often covert
sabotage of work processes and of management’s efforts occurs when
employees are angry at their employer.
9. Lower morale
From time to time, most employees experience erosion of job motivation due
to the stress of trying to get along with a "difficult person." To figure the
financial cost, as a baseline figure, use the productivity that would have
occurred had no conflict occurred. Then, estimate a percentage decline of
that productivity. Multiply that percentage times the dollar value of the total
compensation of the person(s) affected.
10. Legal costs
Corporations that have developed collaborative conflict management systems
report significant litigation cost savings: Brown and Root reported an 80%
reduction in outside litigation costs, Motorola reported a 75% reduction over a
period of six years, NCR reported a 50% reduction and a drop of pending
lawsuits from 263 in 1984 to 28 in 1993.xiii
11. Other?
Conflict is a good example of how harm can be produced in the workplace
and of how this harm "spills over" into families and communities. Such harm
includes both inner-directed harm (suicidal behavior, recklessness, agitated
depression and abuse of alcohol, drugs) and outer-directed expressions
(threatening behavior, emotional and/or verbal abuse, bullying, harassment,
assault, domestic violence, road rage).xiv
Summary Workplace stress costs US industry $300 billion a year in
absenteeism, turnover, diminished productivity, medical, legal and insurance
fees.xv The greatest stresses come from interpersonal conflicts.
Much of the information in this document comes from “Measuring The Financial Cost Of Organizational Conflict” by
Daniel Dana, http://www.smartbiz.com/article/view/26
ii Watson, C and Hoffman, R, Managers as Negotiators, Leadership Quarterly 7 (1) 1996.
http://www.conflictatwork.com/conflict/cost_e.cfm
i
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Dana, Dan, [online] The Dana Measure of Financial Cost of Organizational Conflict, 2001
http://www.conflictatwork.com/conflict/cost_e.cfm
iv “Creating Respectful, Violence-free, Productive Workplaces: A Community Level Response to Workplace Violence”
by Donald L. Gault http://www.co.ramsey.mn.us/NR/rdonlyres/0C7F6C87-532A-492A-9F8D37167B4776B7/829/JournalArticleNonviolentandRespectfulWorkplaces.pdf
v “The Cost of Conflict in the Workplace” by James A. Cram and Richard K. MacWilliams, Cramby River Consultants
http://www.all-things-conflict-resolution-and-adr.com/All-Things-Conflict-Resolution.html
vi WarrenShepel [online],Health & Wellness Research Database, 2005
http://www.conflictatwork.com/conflict/cost_e.cfm
vii WarrenShepel [online], Health & Wellness Research Database, 2005
http://www.conflictatwork.com/conflict/cost_e.cfm
viii Warren Shepel, Workplace Trends Linked to Mental Health Crisis in Canada, 2002
http://www.conflictatwork.com/conflict/cost_e.cfm
ix The Bully at Work, by Gary and Ruth Namie, page 8
x x Dana, Dan, [online] The Dana Measure of Financial Cost of Organizational Conflict, 2001
http://www.conflictatwork.com/conflict/cost_e.cfm
xi Dana, Dan, [online] The Dana Measure of Financial Cost of Organizational Conflict, 2001
http://www.conflictatwork.com/conflict/cost_e.cfm
xii Working with Emotional Intelligence, by Daniel Goleman
xiii Ford, John, Workplace Conflict: Facts and Figures, [online] Mediate.com website, July 2000
http://www.conflictatwork.com/conflict/cost_e.cfm
xiv Health Canada, Best Advice on Stress Risk Management in the Workplace, 2000, pp 15-16.
http://www.conflictatwork.com/conflict/cost_e.cfm
xv American Institute of Stress http://www.stress.org/topic-workplace.htm
iii
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