Quantifying the Costs of Workplace Conflict

Steve McGuire has an excellent, concise piece in Mediate.com showing how the “hidden” costs of workplace conflict can, in fact, be helpfully quantified.

Various indirect factors go into calculating the real (hidden) costs of workplace conflict. In addition to wasted time and opportunity costs, employees impacted by conflict have lowered job performance, motivation and productivity. Conflict can lead to absenteeism, vandalism, degraded decisional quality and often, a loss of investment in a skilled employee that suffers from the “I don’t care anymore” attitude. Often, conflict can lead to false whistleblowing allegations, lawsuits and of course, employees leaving the organization for other opportunities.

In addition, the direct costs of conflict are generally observable, measurable and accrue over time. Let’s take the following example of the cost of losing a single mid-level employee due to conflict within a hypothetical organization, applying the Dana Cost Calculator from figures generated by HR Magazine in February 2003:  1) employee’s annual salary: $80,000; 2) multiply by 1.4 (140%) as the investment you have in the employee: $112,000; 3) multiply by 1.5 (150%) as the cost of replacing the employee: $168,000; 4) multiply by .6 (60%) average role of conflict in voluntary terminations: $100,800. Now, multiply times the number of voluntary terminations in your organization annually. Say you have a 10% turnover rate in a company of 100 employees that’s 10 employees. 10 X $100,800 = $1,008,000.

Conflict in the above hypothetical organization of 100 employees is costing the organization over a million dollars a year! What other line-item loss in an essential corporate process would be treated so cavalierly by management?

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