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How Much Will You Pay For Conflict?

Date Posted: Aug 23, 2016

Effective conflict management is a largely unrecognised resource for every business 

The cost of conflict in the workplace is highly underestimated. This may be linked to the fact that it is not accurately measured or monitored as part of most companies’ management systems. Data is commonly gathered in relation to absenteeism, sick leave, under performance etc.. But seldom linked to the underlying causes relating to conflict. In addition, many of the costs of conflict are never measured. How many management reports include the costs of presenteeism, of unproductive management team meetings, or time wasted in dealing with the fall out of poorly managed conflict?

Unsolved conflicts in business have one thing in common: They are all expensive! Please take a moment to answer this question: “How much of your time do you spend dealing with conflict at your workplace?” This includes not only conflict itself but the consequences of it, for example, destructive behaviour, staff turnover, and poor performance management. I think you will agree that most managers spend a significant amount of time managing conflict. Therefore, it is obvious that conflict competence is a key skill required of every manager.

How much do conflicts cost?

Daniel Dana, an American expert in Mediation was one of the first dealing with financial consequences of costs. According to him: “Unmanaged employee conflict is perhaps the largest reducible cost in organisations today- and probably the least recognized” (Dana 2006: 13). It is assumed that strained relationships at work lead to about 65% of performance problems. Research has shown that between 20% and 40% of a typical manager’s time is spent dealing with conflicts.

Dana categorised eight types of conflict costs:

  • Wasted time
  • Reduced decision quality
  • Loss of skilled employees
  • Restructuring
  • Sabotage/theft/damage
  • Lowered job motivation
  • Lost work time
  • Health costs 

The most significant conflict cost factor – with up to 50% - he mentions is “time wasted” by each person who is or was affected by an unmanaged dispute (Dana 2006: 15-19).

But how can conflict costs be measured? And what impact does this have on the strategic management of a business?

A study of business by KPMG reveals that only 50% of the organisations interviewed could quantify their costs incurred by counterproductive or any kind of destructive behaviour. It shows that it was uncommon within companies to systematically and constructively manage conflict, not only when it occurred but also as a preventative strategy. At this point Peter Duckers statement: “Only what gets measured gets done.” becomes relevant. Therefore getting a sense of the extent and nature of conflict costs is highly important.

One way of conflict-cost-controlling was developed in 2011 by KPMG. In a conflict costs study they divided costs in 3 categories and 9 sub-categories. These dimensions interact with each other, in the so-called Circle of Conflicts:

Cirlce_of_Conflicts_OAK_Conflict_Dynamics.png

They also make a distinction between dysfunctional and functional costs. Dysfunctional costs relate to harmful conflict costs where cost reductions can be identified. On the contrary functional conflict costs have a positive impact because they are linked to the long-term aims and values of an organisation.

Conflict Cost Calculator

The_Cost_of_Conflict_OAK_conflict_dynamics.png

 

But how to deal with dysfunctional conflict costs? To evaluate inefficiently managed conflicts, the business mediators Oliver Ahrens and Christian Heidkamp developed an online conflict cost calculator. It is a tool for measuring the dysfunctional costs that occur due to lack of conflict competences, focusing on identifying the different impacts of conflict in the workplace.

Managing conflict as a development resource

As has been shown above, evaluating the cost of conflict is very complex and it’s difficult to set a clear line, where to start and where to end. The reasons why costs of conflicts are not measured in a larger extent are a lack of available data and transparency. Getting more information about conflict dynamics, cannot only help you to measure their costs, but also tell you where to start with implementing an efficient conflict management system.

Looking at the huge impact conflict is having on costs can also demonstrate the significant cost and other benefits that can be gained by creating a conflict competent environment.

Besides the cost reduction with managing conflicts, it is also much more productive and innovative working in an appreciative and pleasant working environment.

I would be delighted to hear your comments on that! 

Lisa Steindl


Read more about cost of conflict here!


Sources:

Dana, Daniel (2006): Managing Differences. How to Build Better Relationships at Work and Home. Kansas.

https://assets.kpmg.com/content/dam/kpmg/pdf/2013/01/best-practice-conflict-cost-management-2012-kpmg.pdf

http://www.konfliktkostenrechner.de/

Images:

KPMG / Circle of Conflicts: https://assets.kpmg.com/content/dam/kpmg/pdf/2013/01/best-practice-conflict-cost-management-2012-kpmg.pdf

 

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