Cost of Poorly Managed Conflict

Poorly managed conflict is perhaps the largest reducible cost in organizations today ­and probably the least recognized or acknowledged.
 
It’s estimated that over 65% of performance problems result from strained relationships between employees –­ not from deficits in individual employees' skill or motivation.

Indeed, the hidden costs of poorly managed conflict include:

• Wasted time — Conflict distracts employees from otherwise productive use of their time.  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) revealed that up to 30% of a typical manager's time is spent dealing with conflict.  A more current study of practicing managers ("Managers as Negotiators" by Carol Watson and Richard Hoffman, Leadership Quarterly, 7(1), 1996) showed that 42% of their time is spent reaching agreements with others when conflicts occur.
• Poorer decision-making — Decisions made under conditions of conflict are always inferior to decisions made when cooperation prevails.
• Loss of skilled employees — Organizations invest in employees' skills by paying a premium salary upon hiring and by providing training thereafter. Exit interviews reveal that chronic unresolved conflict acts as a decisive factor in at least 50% of all such departures.  Conflict accounts for up to 90% of involuntary departures, with the probable exception of staff reductions due to downsizing and restructuring.
• Unnecessary and ineffective restructuring — Design of workflow is often altered in an attempt to reduce the amount of interaction required between employees in conflict. Unfortunately, the restructured work is usually less efficient than the original design, which would have been satisfactory if the conflicting employees had been able to work together.
• Lowered job motivation – From time to time, most employees experience erosion of job motivation due to the stress of trying to get along with a "difficult person."
• Lost work time – Absenteeism has been shown to correlate with job stress, especially the stress associated with anger toward co-workers. This stress, combined with disregard for how one's absence impacts others, leads to employees' choosing to take time off sometimes excused as a "sick day."  
• Increased health costs – Illnesses and injuries requiring medical attention are partially psychogenic, and conflict contributes to their psychogenesis. Since the rate of claims affects the premium paid by an employer to its insurer, insurance is an indirect cost of workplace conflict.  

In addition, poorly managed conflict contributes significantly to the fact that:

• Over 80% of the anticipated value from mergers and acquisitions typically fails to materialize,
• Three out of four joint ventures fall apart after the honeymoon period, and
• Hoped-for innovations often fail to materialize as the marketing function fights with the sales function about internal costing issues.

But it doesn’t have to be this way! CTS can help you, your company or your organization lessen the burden of unproductive conflict and help transform the energy of conflict into innovative, creative, and productive individual or organizational outcomes.