Cost of Conflict in the Workplace
Have you identified how much unresolved conflict is costing your organization?
US$2,000 to US$7,000. That is how much conflict may be costing your company right now based on a study conducted by the International Labor Organization (ILO) in 2018 which included the Philippines, Vietnam and Cambodia. This cost is based on a per-conflict situation so it may multiply based on the number of departments, size of the company and number of employees. In our experience during the past 6 months, we observed an increase in workplace complaints being filed for mediation assistance. Managers between managers, managers between staff, staff between staff, departments versus other departments. These workplace conflicts have similarly resulted to a decline in productivity, unrealized organizational goals, diminished motivation, stress or burnout, harassment or bullying.
Converting the dollar amount to Philippine peso. That’s roughly Php100,000 to Php360,000 per conflict situation! In an SME that we recently assisted, we were able to map at least 6 different conflicts (the 6th conflict counted all employees) in a small office of 20 people. People were afraid to go to the office and would often opt to work from home. There were costly mistakes involving delayed or faulty service deliveries to clients that the company had to pay for. Salespeople are demotivated so they only reached 50% of their targets last year. The company invested only a fraction of the cost of 1 conflict for a mediation service. This year, they are back to achieving their sales targets.
It is not easy to identify how much conflict is costing the organization. There are overt costs that you can measure but there are also covert costs that are hidden but potentially be bigger than any operational cost. Here are other research done on the cost of conflict in the workplace:
The Society for Human Resource Management (SHRM) conducted a survey in 2019 on workplace conflicts and found that the average cost of a workplace conflict was $7,500. The survey also found that conflicts involving managers or executives tended to be more costly, with an average cost of $19,000.
The Association for Talent Development (ATD) conducted a study in 2013 that found the average cost of conflict in a workplace to be $359 per employee per year. However, this figure only includes the direct costs and does not take into account indirect costs.
A study by the University of California, Irvine found that the average cost of a workplace conflict was $65,000. However, this study included both direct and indirect costs, so it's not clear what the breakdown is for direct costs alone.
Workplace conflicts can arise from a range of factors, including differences in personalities, values, and work styles, as well as disputes over resources, work assignments, or job roles. The direct costs of conflict can include expenses such as legal fees, medical costs, and compensation for injured or traumatized workers. Indirect costs, on the other hand, are less tangible and harder to quantify, and can include lost productivity, decreased morale, and increased absenteeism.
Studies have shown that workplace conflicts can have a significant impact on organizations and their employees, including increased stress levels, decreased job satisfaction, and higher staff turnover. In addition to these human costs, workplace conflicts can also have a financial cost to organizations in terms of lost productivity and other direct and indirect expenses. By understanding the costs associated with workplace conflict, organizations can better appreciate the importance of preventing and addressing conflicts as they arise. This can include measures such as improving communication, providing conflict resolution training, and establishing clear policies and procedures for addressing workplace disputes. By investing in conflict prevention and management strategies, organizations can help to minimize the costs of conflict and create a more harmonious and productive workplace for their employees.