One of the last things organizations need is drama, and yet this happens more frequently than people think. In one study, over 80 percent of employees revealed dealing with some tension in the workplace.
Conflicts in organizations are normal. After all, people have diverse personalities, work ethics, and even values. Sometimes workloads, family problems, and other non-work-related issues can affect how people behave toward others.
When they are significant and enduring, however, these workplace issues can come with a hefty cost.
How Much Does Workplace Conflict Cost?
There’s a good reason many organizations now are willing to explore a variety of options to end office conflict as soon as possible. These include mediation and arbitration services to create a third neutral party during discussions and negotiations.
Engaging their expertise is not cheap, but it remains less expensive than dragging the matter into court. Not only can it lengthen the problem, but it also costs more because of lawyer’s fees.
But that’s not the only associated cost with workplace conflict. In fact, a study suggests that, overall, it costs businesses nearly $340 billion each year.
1. Employee Turnover Rate
Workplace conflict often leads to a toxic environment no one wants to be a part of. For this reason, others, even those who are not directly involved with the problem, may start to disengage.
Disengagement is a process wherein workers contribute less to the organization. The company may find more employees reporting late at work, not becoming productive or efficient, committing many mistakes, and eventually looking for another employment.
Tension in the office, thus, will potentially increase turnover rate, and looking for another person to fill in the job can be worth $1 trillion, according to Gallup. To be specific, the company may have to spend between 50 and 200 percent of the employee’s annual salary to replace someone.
Worse, the costs only increase when it comes to hiring people for executive positions. It can be around 20 percent of the yearly salary of a mid-level manager and a staggering 213 percent for higher-level jobs like a chief executive officer (CEO).
Where does the money go? There are direct and indirect costs. The direct costs include training the employee, recruiting people for the job, and probably bumping up benefits to attract more talent.
Indirect costs, meanwhile, may refer to productivity loss because there are not enough people to do the job or that the position remains vacant for a while. Usually, it takes about 30 days to hire somebody, but it could be much longer for higher-level jobs.
Workplace conflict remains one of the leading causes of stress for employees, contributing to poorer health and well-being. Companies shouldn’t be surprised to find their absenteeism rates soar when in the middle of a tense situation.
In one of the commonly cited sources about the costs of absenteeism, the data from Circadian revealed that it could be worth around $3,500 a year for hourly workers and at least $2,500 for salaried employees. The direct costs may refer to high turnover rate, replacement spending, and even wages paid to salaried employees.
But what about indirect costs? One of the biggest impacts of absenteeism is productivity loss. Some reports suggest that it could be as much as $225 billion annually. There’s also burnout as the remaining workers may need to do extra jobs while waiting for the replacement.
3. Bad Reputation
Uber may be one of the leading ride-sharing apps in the world today, but in 2018, it faced a huge crisis that resulted in significant damage to its reputation. Around this time, at least 50 people claimed sexual harassment.
The company eventually paid at least $20 million, but on top of that, several people, including those in key positions, left their jobs. In 2019, it was set to lose about $1 billion from its market capitalization after its report revealed that over 5,500 sexual assault cases occurred in its cars. Its market price fell by 2.2 percent during premarket trading.
A bad reputation may also stem from the possibility that a disgruntled employee may exact revenge by spilling “trade secrets” on social media or stealing company data to expose supposed wrongdoings or make the business more susceptible to cyberattacks.
Whether they want it or not, companies and employees need to accept that conflict will always be there simply because every person is different. However, the moment it drags on is the time that the issue requires utmost attention. Otherwise, both parties will find themselves in a terrible mess that they may not be willing to pay.