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Cost of Conflict

An Invisible Cost

One characteristic of the cost of unresolved conflict in the workplace is that it is not directly visible. No line item on the organization's budget will say "cost of conflict." We tend to ignore what is not explicitly visible and therefore even if tension and discord are clearly experienced in the workplace - their cost is not. Management that is aware of this invisible cost, understands the value of transforming the organization's culture - from denial and suppression to dealing with the issue directly and effectively. A conflict competent workplace does nor fear dissent. Its workers are dynamic, energized and focused on getting the job done.

Distraction People spend more and more time distracted from work by the conflict.

EscalationThe number of people involved in the dispute expands over time, including supervisors and HR staff who spend hours trying to resolve the issue.

Quality Suffers Less work gets done and as tension mounts, the quality of work suffers.

Morale This suffers and absenteeism increases and when experienced workers leave, their absence disrupts work.

Replacements The cost of locating replacements and training them is estimated at 50% of the annual salary paid for the job that is being replaced.

Ineffective solutions such as restructuring the work flow to keep the conflicted parties apart, undermine work output.

Litigation Failed management of conflict in the workplace often leads to litigation. The cost of litigation easily rises to hundreds of thousands of dollar per case. The litigation trap can be avoided if conflict is managed well in the workplace.


Dr. Thomson's Rule of Thumb

Estimate the annual cost of conflict in your workplace.

Two hours per employee per week. This is a conservative estimate of the average time lost across all employees in a medium to large size company due to unresolved conflict. This means, every 20 employees represent 40 hours a week - the equivalent of one fulltime job - time that is lost from work.

Calculate your cost:

  1. Take the total number of employees in the company,
  2. Divide it by 20, to get the number of fulltime hours, which are in effect fulltime salaries that are wasted due to mismanaged conflict.
  3. Multiply this number by the average annual fulltime salary paid by the company and you will have an estimate of the annual loss in the company due to mismanaged conflict.

Example: In a company with five hundred employees and an average salary of $40,000, the invisible cost of mismanaged conflict is approximately one million dollars a year. This is an invisible loss of one million dollars off the company's bottom line.