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What is Conflict Costing Your Organization?

Excerpted from Susan Hackney of The Mediation and Training Collaborative, Greenfield, MA.

"When an employee slammed a computer board down on his desk during an argument with his supervisor, it cost the company $1,700.00", relates Dr. Dan Dana of the Mediation Training Institute International. 1 While property damage is easy to see and quantify, other costs of workplace conflict can be more elusive. One study found that "42% of a manager's time is spent on reaching agreement with others when conflicts occur". 2 According to Working Dynamics, some "65% of performance problems result from strained relationships between employees -- not from deficits in individual employees' skill or motivation." 3 Consider the following factors when thinking about the cost of conflict to your organization. 4

Lowered Productivity. How many hours per week does each individual involved in a dispute spend participating in the conflict? (This includes time spent distracted, worrying about the conflict, or talking about it with other staff.)

Cost of structural changes. What job, reporting line, office, or other structural changes have been made in an attempt to manage the conflict?

Absenteeism. How many work days are missed because of conflict-related stress and illness?

Increased health insurance premiums. What percentage of premium increases is due to conflict and stress-related illnesses and accidents?

Conflict-incited theft, sabotage or equipment damage. What is the cost of damage or theft employees justify because of unresolved disputes with the organization?

Cost of replacing employees who quit or are fired because of a dispute. Finding, hiring, and training an employee is estimated to cost 75-150% of that employee's annual salary.

Litigation. Once a dispute reaches this point, it can cost millions.

Even using conservative numbers to estimate costs, the final figure for a single conflict can be staggering. Now multiply that times the number of conflicts your organization experiences annually.

So, what can be done about the high cost of conflict? Can employee distress and drain on the organization resources be reduced? Can conflict even become a source of vitality and increased cooperation for your organization? The answer lies both in how conflict is handled and in how it is viewed.

When asked what comes to mind when they think of conflict, nine out of ten people respond with words like anger, confrontation, argument, anxiety, violence, and withdrawal. With such negative associations, it's little wonder many managers and staff ignore conflict as long as possible.

A majority of supervisors and other employees say they support collaborative "win-win" conflict resolution. However, since most have more experience with "win-lose" ways of dealing with conflict in work, family, and school settings, they don't really believe in the possibility of everyone winning. So, they go into conflict believing that the other party's achieving his or her goals means they have to give up theirs. They are ready for confrontation or ready to give up to avoid confrontation.

Such adversarial beliefs must change in order to create organizations where anyone experiencing conflict can raise it, knowing it will be dealt with respectfully and responsibly. In addition, all staff must develop the skills needed to deal with conflict collaboratively.

Reducing the cost of organizational conflict requires not only effectively addressing conflicts as they arise but also creating a conflict-competent organization where "front end" investment is made to assure that supervisors and staff have the skills necessary not only to reduce the number of disputes but also to handle those that do arise in a way that strengthens relationships and the organization.

Some analysts suggest that every organization has as great a need for a Conflict Management Department or Manager as it does for a Fiscal Department or Manager, and some organizations are taking that advice to heart. The U.S. Transportation Security Administration (TSA), which employs over 50,000 airport screeners, has set up a conflict management systerm which includes communication skill building for employees, a commitment to collaborative problem solving, and support from the top down for conflict resolution. The Canadian government has instituted an even more far-reaching system, requiring the establishment of conflict management systems in every core governmental department. 5

What is clear is that investment in communication and conflict resolution training for managers and supervisors is essential to sound business practice.

Training all staff to increase communication competenece results in even greater benefits. When disputes do occur, the use of formal conflict resolution services such as mediation or arbitration early in the process results in reduced costs to the organization and less stress to employees.

1 - Dan Dana at (2/6/2006)

2 - Watson, C. and Hoffman, R. (1996) "Managers as Negotiators", Leadership Quarterly 7 (1) 1996, (2/6/2006)

3 - (2/6/2006)

4 - See Dan Dana, The Dana Measure of Financial Cost of Conflict: Discovering the Hidden Cost of Preventable Conflict in Your Organization at (8/18/2005)

5 - See Jennifer Lynch, Innovations in the Integrated Conflict Management System: Dispute Resolution Models at (8/29/05)