Not all cost factors are relevant to every conflict, but every conflict incurs several of these costs.
1. Lost work time
Studies show that 42% of a manager’s time is spent on conflict related negotiations among employees.
Over 65% of performance problems result from strained relationships between employees, not from deficits in individual employee’s skill or motivation.
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.
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.
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. An estimated 16% of employees feel that poor interpersonal relations are a source of stress at work.
The total value of lost work time due to stress is estimated to be $1.7 billion.
Workplace stress and work-related conflict are among the top eight reasons why employees request counseling assistance.
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.
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 co-worker. Seventy five percent of people who felt they have been bullied at work have left their jobs to make the bullying go away.
Chronic unresolved conflict acts as a decisive factor in at least 50% of departures.
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.
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).
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.
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).
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.