What is Unhealthy Conflict Costing You in Organization, Operations, and Financial Results?

You also may be asking yourself, WHY, should I care about unhealthy conflict in my organization. One reason you should care is because, according to Workfront’s report on the State of Enterprise Work in the U.S. conflict is rising and costing organizations millions of dollars.

In today’s organizations, expectations to perform have rapidly increased – in other words, doing more work with fewer resources and less time to meet organizational, operational, and financial goals. However, the focus on doing more with less can lead to increases in unhealthy conflict at all levels within every organization. In the global competitive landscape, every organization is playing to win and they are not necessarily addressing unhealthy conflict. Unhealthy workforce conflict creates explicit and hidden human capital costs and sabotage getting results.

This article focuses on what you can do to acknowledge costs of unhealthy workforce conflict and what could occur when you create High Contribution Cultures.

A future article will deal with the concepts of healthy ‘conflict’ and the investments needed to ensure cost effective conflict management. While creating High Contribution Cultures you will unleash employees’ potential and increase employee engagement within your organization.

SOME FACTS ABOUT UNHEALTHY CONFLICT

Here is a disturbing fact about unhealthy conflict costs from Global Human Capital Report published by the Consulting Psychologists Press (CPP – Myers-Briggs Company)

“While every small-business owner knows that such workplace conflicts affect productivity and morale, the hard money drain of office drama is not as obvious.”¹

“The report indicated that in 2008, U.S. employees spent 2.8 hours per week dealing with conflict. This equated to $359 billion in paid hours, or the equivalent of 385 million working days.”²

According to CPP’s report, employees at all levels must learn to accept conflict as an unavoidable part of his/her work environment. However, the real issue for management is not whether conflict can be avoided; the real concern is how unhealthy conflict is dealt with.³

When conflict is managed improperly, business productivity, operational effectiveness, and morale take a major hit, as evidenced in CPP’s finding that 27% of employees have witnessed conflict that morphs into some sort of a personal attack, while 25% said that the avoidance of conflict resulted in sickness or absence from work.⁴

Table 1 below identifies the types of unhealthy conflict in the workplace, and how conflict affects an organization’s costs and the bottom line:

Table 1: Types of Costs Associated with Unhealthy Conflict to Your Organization

Category	Result
Customer Service	Poor customer service
Customer Relations	Delay in product delivery, poor communications, and incomplete information
Turnover	Unresolved conflict acts as decisive factor in at least 50% of employee departures. Conflict accounts for up to 90% of involuntary departures.5
Loss of Productivity	Temporary shutdown of operations Disruption to production – delays and absenteeism Poor quality of product and/or services output Project failures and delays Lost opportunity for new projects Tension and stress reduce motivation and focus Poor decision making
Absenteeism	CPP’s study reported that 25% of employees said that avoiding conflict resulted in sickness or absence from work.6 Another impact is the relationship between employees and managers. Employees who perceive his/her manager as “sensitive” missed an estimated 3.7 workdays, whereas employees who perceive their managers as “insensitive” missed an estimated 6.7 workdays.7
Employee Engagement	A Towers Perrin study of 80,000 employees worldwide found that 21% of employees felt fully engaged with their work and about 40% felt disengaged or disenchanted. This negativity directly affected the bottom line.8 Personal insults and attacks and verbal abuse Cross department conflict Bullying People leave the organization People fired Employees moved to different departments Poor morale and high stress related effects 30%-40% of supervisors’ and managers’ daily activities are devoted to dealing with conflicts in the workplace.9
Health Insurance	Depression and high level of stress have the greatest impact on employees’ health care costs. In 2005, it was estimated that $1.7 billion of employees work time was lost due to stress.10
Theft, Sabotage, Violence, and Property Damage	Many studies show a direct correlation between employees’ conflict and theft of equipment and inventory. In addition, sabotage of work processes has been indicated.
Lawsuits and Litigation	Unresolved workplace conflict issues can end up in litigation and lawsuits with the following costs:11 $700,000 is the average jury award in wrongful termination lawsuits $162,000 is the average cost of litigating an EEO (Equal Employment Opportunity Commission) claim $80,000 Equal Employment Opportunity discrimination charges are filed annually 55% of employment claims result in money awards to employees $2.7 million is the average amount of punitive damages awarded in employment cases

It is obvious from Table 1, that not attending to conflict has unintended consequences and significant associated costs. Shoving conflicts away or just allowing conflicts to simmer can affect a company adversely in so many ways.

Here is an example of how much conflict cost one particular company:

A large New England hospital decided to determine what conflict cost it in one year (2001). It hired outside analysts to do this work, looking at everything from length of unresolved conflict, wasted time and energy, reduced decision-making quality, loss of skilled employees, sabotage, restructuring, lowered job motivation, lost work time and health costs.

In one conflict alone involving a doctor and 2 nurses, the cost to the hospital was $60,916.77. This was around the average cost of each conflict at the hospital. And the hospital had over 200 conflicts in that year for a staggering conflict cost of $12,183,200.¹²

WORKPLACE CONFLICT AND YOUR BUSINESS

Most organizations do not acknowledge the cost of conflict and they do not take the time to calculate those costs and the impact on the bottom line. Additionally, most leaders prefer to ignore conflict. This happens because leaders do not have the tools to deal with unhealthy conflict. Leaders often are personally ill equipped to deal with it. However, once you calculate unhealthy conflict costs, it becomes very hard to ignore the effects on the organization and the bottom line.

The fact is that leadership has tools available to calculate the costs of unhealthy conflict and equip themselves with methods to deal with conflict situations.

Here is an assessment questionnaire to help you calculate the costs of unhealthy conflict in your organization.¹³

Table 2 – Questions about Unhealthy Conflict

Questions	Responses
How many people are on your team experiencing conflict?	☐    ☐    ☐    ☐    ☐    ☐    ☐    ☐    ☐    ☐ 1     2      3     4     5      6     7      8      9    10 No conflict                                      Paralyzed
How would you rate the level of conflict in your team?	☐    ☐    ☐    ☐    ☐    ☐    ☐    ☐    ☐    ☐ 1     2      3     4     5      6     7      8      9    10 Trusting                                         Mistrusting
Have any team members lost trust in one another?	☐ Yes   ☐ No
How many team members have been affected by this conflict?	☐        ☐        ☐         ☐          ☐        ☐ 1-2      3-5     6-8       9-11    12-24     >25
How long has the conflict been going on?	___ Hours, ____ Days, ____ Months
Has the root cause of conflict been identified?	☐ Yes   ☐ No
Has the root cause of conflict been addressed?	☐ Yes   ☐ No
Has anyone quit, been suspended, or terminated because of this conflict?	Quit     ☐ Yes   ☐ No Suspended     ☐ Yes   ☐ No Terminated:     ☐ Yes   ☐ No
Has inside or outside legal help been used?	☐ Yes   ☐ No
Has inside or outside non-legal support been used?	☐ Yes   ☐ No

Here is an example of how this works:

Example Scenario: There has been an ongoing conflict involving 5 employees on the same team and their manager that has taken place over a 6 month period.

The Table 3 questions supplies all the information to determine the unhealthy costs for a particular on-going conflict in this division:

Table 3: Example of Costs of Unhealthy Conflict

Questions	Responses
How many people are on your team experiencing conflict?	☐    ☐    ☐    ☐    ☐    ☑    ☐    ☐    ☐    ☐ 1     2      3     4     5      6     7      8      9    10 No conflict                                      Paralyzed
How would you rate the level of conflict in your team?	☐    ☐    ☐    ☐    ☐    ☑    ☐    ☐    ☐    ☐ 1     2      3     4     5      6     7      8      9    10 Trusting                                         Mistrusting
Have any team members lost trust in one another?	☑ Yes   ☐ No
How many team members have been affected by this conflict?	☐        ☐        ☑         ☐          ☐        ☐ 1-2      3-5     6-8       9-11    12-24     >25
How long has the conflict been going on?	___ Hours, ____ Days, __6__ Months
Has the root cause of conflict been identified?	☐ Yes   ☑ No
Has the root cause of conflict been addressed?	☐ Yes   ☑ No
Has anyone quit, been suspended, or terminated because of this conflict?	Quit     ☐ Yes   ☐ No Suspended     ☑ Yes   ☐ No Terminated:     ☐ Yes   ☐ No
Has inside or outside legal help been used?	☐ Yes   ☑ No
Has inside or outside non-legal support been used?	☑ Yes   ☐ No

Here are the steps to calculate the cost of this particular conflict:

1.   Cost Incurred to Date: number of workers involved in the unhealthy conflict * hourly rate * number of hours per day involved in conflict = $273.00 per day
Number of workers 6 * average cost/hour $18.20 * 2.5 hours = $273.00 per day

2.   Ongoing Cost Per Month: (Answer from #1 above*5) * 4.2 = $5,733.00
$273.00 * 5 days/week * 4.2 weeks/month = $5,733.00

3.   Future Cost Per Quarter: (Answer from #2 above * 3 (months) = $17,199.00
$5,733.00 * 3=$17,199.00

4.   Annual Cost for this conflict: (Answer from #3 above * 4 (quarters) = $68,796.00
$17,199.00 cost for this ongoing conflict per quarter * 4 quarters/year = $68,796.00 annual cost for this one unresolved unhealthy conflict per year.

Now complete this form for your organization:

Questions	Responses
How many people are on your team experiencing conflict?	☐    ☐    ☐    ☐    ☐    ☐    ☐    ☐    ☐    ☐ 1     2      3     4     5      6     7      8      9    10 No conflict                                      Paralyzed
How would you rate the level of conflict in your team?	☐    ☐    ☐    ☐    ☐    ☐    ☐    ☐    ☐    ☐ 1     2      3     4     5      6     7      8      9    10 Trusting                                         Mistrusting
Have any team members lost trust in one another?	☐ Yes   ☐ No
How many team members have been affected by this conflict?	☐        ☐        ☐         ☐          ☐        ☐ 1-2      3-5     6-8       9-11    12-24     >25
How long has the conflict been going on?	___ Hours, ____ Days, ____ Months
Has the root cause of conflict been identified?	☐ Yes   ☐ No
Has the root cause of conflict been addressed?	☐ Yes   ☐ No
Has anyone quit, been suspended, or terminated because of this conflict?	Quit     ☐ Yes   ☐ No Suspended     ☐ Yes   ☐ No Terminated:     ☐ Yes   ☐ No
Has inside or outside legal help been used?	☐ Yes   ☐ No
Has inside or outside non-legal support been used?	☐ Yes   ☐ No

Now complete your calculations

1.   Cost Incurred to Date: number of workers involved in the unhealthy conflict*hourly rate*number of hours per day involved in conflict = $

2.   Ongoing Cost Per Month: (Answer from #1 above*5)*4.2 = $

3.   Future Cost Per Quarter: (Answer from #2 above*3 (months) = $

4.   Annual Cost for this conflict: (Answer from #3 above*4 (quarters) = $

As you can see from the hard numbers, you calculated above, here are your unhealthy conflict costs! The question you have to face now is what can be done to manage your costs?

 

HOW DOES HIGH CONTRIBUTION CULTURES (HCC) FIT INTO ALL OF THIS?

A High Contribution Culture (HCC) deals with a variety of different human behaviors that can lead to improved human capital returns and performance. If unhealthy conflict is not addressed, employees disengage – they are “turned off” – which then leads to reduced productivity in the workplace. The Business Development Group works with leaders to develop an organizational culture that encourages employees to be engaged, accountable, and assertive with one another. Practicing the C3 activities (collaboration, cooperation, and communication) which the Business Development Group will significantly reduce “unhealthy” conflict in your organization.

When establishing High Contribution Cultures, the initiative must start at the top – the leadership. It starts with you! Leadership at must be in a state of readiness to handle conflict. Leaders set the model for those they lead. Readiness means that you as a leader is prepared to deal with the realities of conflict, which means taking responsibility for ones’ own behaviors and communication style, managing conflict style preference and its impact on your people. In other words, what you do and how you do it, affects the people around you. The way you manage conflict determines whether you foster people working together.

Once leadership is in a state of readiness and commitment, – has learned what to do to manage conflict (it takes some time to learn how to do this) – then the lessons of conflict management optimize the organization. These lessons need to cascade down from leadership to employees with the message of the commitment and seriousness in dealing with unhealthy conflict.

CONCLUSION

Conflicts are unavoidable and inevitable in any organization. They will happen. It is important to identify conflicts as soon as they happen and have individuals resolve their differences (or genuinely try to do so). As you can see from the example (and your own exercise), unresolved, unhealthy conflict is costly. Managing unhealthy conflicts properly will help engage your employees, reduce expenses (usually seen in a decrease of productivity and/or quality). Managing unhealthy conflicts is one of the first steps needed to create a High Contribution Culture.

The next article in this series about conflict will focus on healthy conflicts within High Contribution Cultures.

For more information about how to address unhealthy conflicts that affect your company, contact us by emailing or calling at 248-358-0121

For further information and help from BDG, please complete the form below.

---

Notes

1 Consulting Psychologists Press (CPP) Global Human Capital Report, Workplace Conflict and How Businesses can Harness It to Thrive, July 2008

2 ibid.

3 ibid.

4 ibid.

5 Dana, Daniel, The Dana Measure of Financial Cost of Organizational Conflict (2001)

6 ibid.

7 J. L. MacBriade-King and K. Bachmann:  Solutions for the Stressed-out Worker, The Conference Board of Canada (1999)

8 Shwartz, Tony:  The Productivity Paradox:  How Sony Pictures Get More Out of People Demanding Less (2007)

9 http://www.cscsb.org/mediation/cost_of_conflict.html

10 Johnston, Erin, MSW, LCSW: Workplace Conflict is Expensive (July 5, 2011), CFR Mediation Blog.

11 http://www.cscsb.org/mediation/cost_of_conflict.html

12 ibid.

13 http://tools.resologics.com/conflict-fullreport.html

---