New insights on the costs of workplace conflict

As more of us return to our previous places of work, there are predictions that levels of workplace conflict, which dropped back during the pandemic, will rise again. Change and insecurity provide fertile ground for tension.

Timely independent research published in May 2021 by ACAS provides a much clearer picture of what (and when) workplace conflict costs UK employers. Estimating the costs of workplace conflict aims to encourage more effective responses to it.

Below, we’ve picked out some key points that HR specialists and business leaders may find useful.

What’s new about this report?

It is the first to put together data on the incidence and response to conflict at work with data about its impacts, and to provide estimates of the cost to employers.

A helpful feature is that as well as itemising costs, the report models them into four typical ‘real life’ responses to conflict. (More on this below.)

This helps employers to weigh up the cost-benefit of options for dealing with conflict in practice. It also shows the potential for cost savings by acting early to prevent conflict escalating.

How are the estimates produced?

The authors use the latest evidence from a wide range of sources. They set out their workings to show their cautious and pragmatic approach and to aid debate.

A key source is survey data gathered for the CIPD in 2019. 35% of respondents to the survey (equating to almost 10 million people in the UK) said they had experienced conflict at work in the previous 12 months. Of these (including those who did not take any action to deal with it), more than 75% reported a demonstrable impact.

The cost of key impacts (average per employee)
  • Sickness absence: £2.5k. Almost 1 in 10 of those who experienced conflict took time off. Almost all of these also reported suffering stress, anxiety and/or depression. They were estimated to take an average of 17 days off at a cost of £148/day.
  • Presenteeism or lost productivity: £0.48k. 1 in 4 said their productivity was affected because of the conflict, at an estimated equivalent loss of 2 days per employee costing £237/day.
  • Resignation: £30.6k. 5% of people resigned because of the conflict. The costs of replacing an employee include recruitment, induction and lost productivity.
The cost of responses to conflict (average per employee)

This categorises how conflict experienced by respondents to the 2019 CIPD survey was handled, costing that and the impacts people reported.

  • No intervention as conflict not reported: impacts = £2.3k. This applies to almost half of those who experience conflict.
  • Informal resolution (discussion with manager, HR and/or staff rep) + impacts = £1.9k
  • Formal procedures + impacts = £6.4k
The cost of typical conflict resolution scenarios

The report sets out four typical paths through which conflict is managed (or not) in the workplace. It estimates the total average cost of these (impacts and interventions) to an employer, per case:

  1. ‘Unseen conflict’ where an employee does not seek help to address the issue, experiences presenteeism and eventually resign = £31.4k.
  2. Swift early informal resolution, including a workplace mediation process = £1.9k.
  3. Formal resolution through more prolonged grievance procedure = £8.7k.
  4. Employment Tribunal claim following failure of internal procedures = £44.9k.
What are the implications for employers?

The report shows that:

1.Investment in effective early resolution pays off.

2. Staff need multiple channels through which they can seek support for conflict. “Critical” to this are:

    • effective relationships between employee reps and HR
    • HR practitioners who ‘connect’ well with those they support
    • and, most importantly, managers with good people-skills.

The authors conclude that “investment in effective and early resolution” may have “a very significant” return. Identifying problems early is key. This is because costs in the early stages of conflict are relatively low but start to mount if employees continue to work while ill and/or take time off sick. Costs are pushed higher once formal processes are in play, but they escalate markedly once employees either resign or are dismissed.

3. Where conflict has occurred, employers should place much greater emphasis on repairing the employment relationship.

4. Taking early action to address concerns about an employee’s capability and performance is also important (as well as effective recruitment and performance management practices).

This is because of the scale of the hidden costs of replacing staff who have been sacked or ‘managed out’.

5. Employers should approach disciplinary issues with a focus on learning rather than blame.
Formal procedures, too often concerned with legal compliance and blame, are so costly in terms of resignations, dismissals, and sickness absence, “they should be the exception rather than the rule”. The authors acknowledge that employers may need to take “swift and decisive action” on rare occasions “to establish clear red lines around unacceptable behaviours”.

6. Policy, and the role of ACAS itself, should reflect the evidence.
It should focus on resolution of conflict within organisations rather than on legal compliance and the effectiveness of the tribunal system. This is because, contrary to perception, the total cost burden on employers of litigation is far less than that which accumulates in earlier phases of conflict.

Our view

A useful checklist

Showing how and when costs accrue from workplace conflict, and their scale, gives greater urgency to the need for smarter approaches. Conflict will always be a feature of working life. Identifying and dealing with it early is clearly in everyone’s interests. Some employers are further down this track than others, but the lessons drawn out by the authors of this report provide a useful checklist for all.

Normalise conflict

We think that part of the answer is also for employers to normalise conflict among staff and expect constructive responses. This means sending messages that tension between colleagues is likely from time to time. It also means giving staff the essential communication skills to address problems person-to-person before they escalate, and urging them to seek support where necessary. The research shows that providing multiple options for employees to get that support is important.

Reap the benefits of mediation

The trick then is to avoid drawn out internal procedures wherever possible. Grievances and disciplinaries have their place (rarely, according to the report), but so often we hear from clients how these have added to the stress of the conflict itself and further damaged relationships.

Where an employee has raised a grievance, employers can encourage constructive engagement first. If a 1:1 conversation isn’t appropriate or hasn’t worked, the next step could be a facilitated conversation and/or a mediation. Offering mediation early is considered good practice by ACAS, the CIPD and others. It is quick and cost-effective. Survey data shows that 74% of those who opted for it reported that their conflict had been fully or largely resolved. But with still relatively small numbers of people taking part in mediation in the UK, there is plenty of scope for employers and employees to reap the benefits.

Keep mediation informal

We think there are also messages in the report for mediators and those who refer employees to it. Although mediators describe the process as ‘informal’, it can sound and feel rather more than that to participants. One of the strengths of mediation is its speed, so any stress arising from it will be short-lived. But employers could do more to normalise the use of neutral third parties in addressing ‘stickier’ conflicts. For their part, mediators (internal or independent) need to ensure that they don’t overly formalise the process and that they provide strong, empathetic support to participants.

If you’d like to work out how and when mediation can help you manage a conflict effectively, feel free to call us for a no-obligation chat.

 

concord conflict solutions iconimage of colleagues talking - an early conversation can prevent conflict escalation