The Hidden Cost of Workplace Conflict

“Mark” a very competent and highly trained tech at “Jones Consulting,” a local mid-sized company, complained to his manager, “Jim,” in April of 2006, that he was being harassed by “Larry”, another veteran tech, because Mark refused to acknowledge or respond to Larry’s sexual advances. As installation techs on a number of job sites, including several out of town, the techs in the company spent a lot of time together. Both techs had received a great deal of expensive training and certifications paid for by the company and were considered valuable assets.

Mark asked that Larry be terminated. Jim refused and told Mark that he should simply tell Larry to “knock it off and leave [him] alone.” (Sound familiar?) Mark did that. Nothing changed. The unwanted attention continued unabated, often in front of other techs and sometimes even clients.

After two more months of complaining daily to Jim through email or face-to-face meetings, Mark asked Jim to at least make sure that the two techs were not assigned to the same job sites. Jim responded by saying that their expertise determined the assignments and that he could not promise to keep them separated. Jim did, however, call the two techs into his office to discuss the allegations. Larry denied harassing Mark and claimed that it was Mark who was denigrating him in front of the other techs due to his sexual orientation.

A plan was put into place that required both techs to keep all conversation work-related. That truce lasted for a week or two and then Larry began leaving sexually explicit notes in Mark’s truck, sending sexually explicit text messages etc.

Mark took the “evidence” to Jim and once again asked that Larry be terminated. Jim called Larry in, confronted him with the evidence, and Larry responded that Mark was generating the notes and messages in an effort to frame him and cost him his job. At the time, “Jones Consulting” was involved in an important contract and losing any techs would seriously impair the company’s ability to complete the project on time and on budget. Jim once again urged the two techs to just do their jobs. Larry left the meeting sure that he had convinced Jim of his innocence and the harassment escalated.

In February of 2007, Mark initiated a formal legal complaint for sexual harassment. At this point, the general manager at “Jones,” who had been largely unaware of the conflict, became involved because she had to respond to the filing. A number of hours were expended as the charge worked its way through the system. All parties continued to work at “Jones” largely because its wages and benefits are among the best in the area. Mark’s demand included only one provision---that Larry be terminated. ”Jones” refused to do that because the huge project required Larry’s particular expertise and certifications in order to be completed.

 In April of 2007, Mark quit, taking with him a valuable laptop with important documents relating to the project as well as endorsements and technical certifications that were contracturally required by the client. In addition, Mark was soon employed by one of “Jones” competitors who were delighted to take advantage of the excellent training Mark had received at “Jones” expense.

On the surface, one could assume that since the case hasn’t been through litigation and no settlement has yet been paid yet, “Jones” has not incurred any costs.

However, when the average hourly wage of the employees involved was $40, multiplied by the number of employees involved, plus the number of hours expended directly addressing the conflict, plus the number of hours of reduced productivity, plus the investment lost in losing a highly-trained Mark, the numbers begin to add up quickly. If we also add the indirect future losses because of Mark’s employment with a competitor, the number continues to climb over $50,000. And, remember, the legal case may still settle with the company having to pay damages and legal costs which could easily push this amount towards $100,000.  For a company whose net profits are $280,000, that’s a hit.

On the balance sheet of most companies, one can expect to find expenses such as health insurance, employee training, rent, utilities, vehicles, salaries, travel, etc. However, few, if any have a line item for conflict management.  Often companies feel that those costs are included under “human resources” or “legal.”

Yet, many executives concede that they just “hope” that they won’t find themselves taking days off to sit in mediations at the EEOC or in a courtroom defending the company against charges.  They “hope” that key employees, in whom they have invested large amounts of time and money, won’t get angry one day and leave. They “hope” that managers will not have to waste hours of time every week mediating between surly employees.

The Reality of Workplace Conflict Costs

Lawrie Cherniack, noted Canadian lawyer, arbitrator, mediator, and conflict coach, notes:

            “Every workplace that has more than one employee will have workplace conflict at some point. Simple disagreements among employees can turn into misunderstandings. Those misunderstandings can turn into resentments and fears. Those deep emotions lead to a breach in communication. Conflict follows as a matter of course. The smaller workplace can often have the deeper conflicts because the employees have to work together even more closely. The larger workplaces can often have the most disruptive conflicts because it is easier to allow the conflicts to hide and fester.”

 

            Workplace rules changed in the 1960’s when civil rights moved to the forefront of social consciousness. Workers now feel more empowered to speak up over situations that involve discrimination, or simply make them angry, frustrated or uncomfortable.

However, managers who are thoroughly trained in process and product skills often have minimal training in people skills.

What is the financial impact of workplace conflict?