Weighing Costs and Benefits

We have found that conflict typically dissolves quickly once the right techniques are adeptly applied. And the cost of resolving conflict is minimal relative to the benefits. Those benefits include the elimination of the following organizational costs associated with conflict.

Cost Factor 1: Time Spent by Managers Attempting to Address Conflict

Managers spend much of their time attempting to address conflict. A classic management study ("A Survey of Managerial Interests with Respect to Conflict" by Kenneth W. Thomas and W. H. Schmidt, Academy of Management Journal, June 1976) reported that typical managers spend up to 30% of their time dealing with conflict. A more recent study of managers ("Managers as Negotiators" by Carol Watson and Richard Hoffman, Leadership Quarterly, 7(1), 1996) demonstrated that 42% of their time is spent negotiating agreements to end conflict.

If the lower of the two figures reported in the literature is used, 30% of the total cost of employing managers is being diverted for managing conflict.

Cost Factor 2: Decreased Individual Productivity for Those in Conflict

Productivity is also impaired for those directly involved in conflict. This is because conflict is highly distracting, time-consuming and energy-depleting. The consequent productivity losses per employee are substantial.

Cost Factor 3: Decreased Decision Quality (Collective Productivity)

Collective productivity in the form of decisional quality is also impaired during conflict. Decisions made in conflict-laden situations are typically inferior to decisions made in contexts of cooperation. The reasons are twofold.

First, good decision-making requires sufficient and dependable information. But under conditions of conflict, information is often withheld or distorted.

Second, decisions made jointly by people in conflict are likely to be contaminated by the power struggles present.

Conflict, then, undermines the integrity of an organization’s decision-making processes. The resultant impact on strategic direction and tactical execution can be profound. The consequent financial impact will be equally weighty.

Cost Factor 4: Employee Morale

Conflict impairs morale which, in turn, reduces productivity even further. If the conflict is with one’s manager, the impaired morale may take the form of passive resistance to direction. The manager will then notice that "nothing seems to get done."

Cost Factor 5: Employee Turnover

Conflict is one of the primary reasons employees leave organizations. Employee turnover is costly because of (1) the lost productivity of departing employees; (2) the lost productivity of vacant positions pending the hiring of replacements; (3) the costs of recruiting and selecting replacements; and (4) the costs of training replacements. By limiting conflict and resolving it quickly, organizations can control the high costs of employee turnover.

Cost Factor 6: Absenteeism

Absenteeism results from job stress. And one of the greatest job stressors is conflict. The stress of conflict not only leads to absenteeism, but also tends to create illness and therefore even more employee absences. Reducing conflict will reduce stress, illness and overall absenteeism.

Cost Factor 7: Increased Health Costs

As just noted, people literally "get sick" from conflict. Increased illness translates into more health insurance claims and higher insurance premiums. These increased costs are avoidable.

Compare the Cost of Ending Conflict
The above tells you how much it costs your organization to allow conflict to continue. The cost of ending it is minor in comparison. This applies for all three of our conflict resolution services—mediation, team development and conflict resolution training. Contact us and we will help you find the most cost-effective approach appropriate for your situation.