The Cost of Conflict

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The Cost of Conflict

Conflict generates a significant, but often hidden, cost for organizations. For example, it has been estimated that over 65% of performance problems come from interpersonal issues between employees. (Organization Development Journal, Fall 1984)

Conflict in the workplace results in:

	Wasted time resulting from employee and management attention spent on resolving problems and clarifying expectations. Studies have shown that as much as 42% of a manager’s time is spent dealing with various aspects of confusion, disagreement, and conflict. (Watson, C. and Hoffman, R. "Managers as Negotiators," Leadership Quarterly 7 (1) 1996)
	Reduced decision quality due to ineffective communication and power struggles between employees or work units who are not getting along. Add to this the hidden emotional and relationship costs that result when individuals choose to remain in opposition to each other.
	Loss of quality employees who leave an organization to seek a place where they can work with less tension and greater satisfaction. Exit interviews show that at least 50% of employees leave an organization due to conflict – and usually the good ones are the ones who go. Replacing a skilled employee can cost 75% to 150% of their salary due to lost productivity, recruiting, orientation, and getting “up to speed” with a replacement. (Phillips, D.T. "The Price Tag of Turnover." Personnel Journal, Dec. 1990, p. 58.)
	The need to restructure work team composition or work schedules to separate employees who are having conflict with each other. Other personnel or productivity issues may develop as a reaction to this attempt to avoid problems, further complicating the situation at hand.
	Loss of property due to theft, damage, sabotage, and undermining. This may include physical and intellectual property.
	Decreased job motivation and morale problems generated by interpersonal stress in the workplace. This can lead to a decline in productivity and an increase in absenteeism, health care costs, and workman’s compensation claims based on stress related illnesses.
	In some cases conflict can lead to accusations of harassment and discrimination as well as violence or threats of violence. Grievances and law suits filed by employees to address unresolved issues are very costly to organizations, often reaching judgments of $100,000 or more when the case is lost. (Risser, R. "Stay Out of Court: The Manager's Guide to Preventing Employee's Lawsuits." Prentice Hall, 1993.) Even when the case is won the organization will typically spend $50,000 or more in attorney's fees and organizational time and resources. (McDermott, E. and Berkley, A. "Alternative Dispute Resolution in the Workplace: Concepts and Techniques for Human Resource Executives and their Counsel." Quorum Books, 1996, pg. xviii.)

Business organizations that have implemented policies, procedures, and training to address conflict management issues report significant reductions in litigation costs:

1. Brown and Root reported an 80% reduction in outside litigation costs.

2. Motorola reported a 75% reduction in costs over a period of six years.

3. NCR reported a 50% reduction in costs and a drop of pending law suits from 263 in 1984 to 28 in 1993.

(Slaikeu, K and Hasson, R. "Controlling the Costs of Conflict: How to Design a System for Your Organization," Jossey-Bass, 1998, pgs. 14, 15.)

Corporations are recognizing the value of addressing conflict proactively. A 1998 survey of 100 Human Resource executives in the U.S. indicated that:

1. 86% had created written HR policies and manuals to address conflict in the workplace.

2. 63% had implemented training programs for managers and supervisors.

3. 57% had developed employee grievance policies.

(EPL Survey Report, Assurex International, the University of Miami and the American Mediation Institute, 1998)

Time, energy, and resources spent on non-productive conflict are costly. However effective conflict intervention can have a significant return on investment. I can help you assess the cost of conflict in your organization and develop strategies for managing it. Contact Dale Eilerman at Conflict Solutions Ohio for a no cost consultation.

Appreciation to John Ford/Mediate.com and Daniel Dana/Mediation Training Institute International for sources of data regarding conflict in the workplace.

Performance Improvement through Management of Differences