The horrendous costs of workplace disputes

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The cost of workplace disputes across UK businesses is horrendous – both in terms of financial cost and loss of workplace well-being.

An in-depth study by Professor Richard Saundry of Westminster University’s School of Organisations, Economy & Society places the financial cost of work place disputes at £28.5 Billion per year. A study by the reputable Advisory, Conciliation & Arbitration Service (ACAS) puts it at £2 Billion higher.

The Professor’s research shows that one in three employees has experienced workplace conflict. Nearly half a million employees resigned their posts as a result of such disputes and nearly one in ten had to take time off work because of the associated stress. The financial burdens don’t end there. The costs of recruitment, induction training and lost productivity amounted to around £30,000 per employee. The cost of those who voted with their feet and picked up their P45s totalled £11.9bn and the cost of those who were dismissed (as a result, mostly, of disciplinary proceedings) totalled £10.5 billion.

The problem with being presented with ‘big’ numbers is that they can so easily be glazed over without acknowledgement of their enormity – and also without an understanding of the personal ‘cost’ to the participants on all sides and to the impact on energy and goodwill in the affected companies.
The one bright note arising from this otherwise depressing report is that more companies are beginning to see the value of early intervention and mediation of such disputes, well before they get to the formal ‘adjudication’ phase. Yet, according to leading law firm Menzies – who are specialist employment lawyers – still only 5% of companies are using professionals to intervene early in attempts to get to a resolution before disciplinary action or formal grievance/complaints procedures. And this is despite data clearly showing that where such informal processes are used there is a 74% success rate.

In business, money always talks. Right now, with a chronic staff shortage across several sectors, the full costs of recruitment are rising fast. Those companies failing to take action to create a Culture of openness and well-being will find themselves paying up to £70,000 – in recruitment costs, training costs and lost productivity – simply to replace a mid-level executive earning around £40,000 per year. To put it simply, it is going to cost a company nearly twice the salary of any departed executive to restore productivity and value contribution to the company. Programmes therefore to retain staff are a financial imperative – not just a nice-to-have addition to leadership development.

There have been a number of counter-arguments used in discussions around this topic.
‘Staff turnover of around 10% annually is actually healthy – it brings in fresh ideas and energy’. ‘If someone is disruptive, not a team player and not showing much promise, why would we want to keep him/her?’
I would counter the counter-argument with some better questions:

  1. What guarantee do you have that your replacement executives are actually going to be better than the ones that are leaving? On average, 50% of new executive hires leave in the first 12 months of their employment, mostly because of lack of Cultural rapport.
  2. A disruptive employee could be demonstrating unhealthy behaviours for countless reasons – personal, professional, financial, social. The fact they are disruptive clearly shows they have energy, even if it is of the negative kind. Would it not be both financially and socially better to “go the extra mile”, devoting the time to unpick the cause of the disruption, before either directly showing the door or (far worse), creating an atmosphere where they can’t abide by staying?

Those of us engaged in working to retain top talent, resolving disputes and creating positive, supportive and healthy company cultures, would always recommend going the extra miles. If three quarters of workplace disputes are capable of informal resolution – and I think the more companies who adopt this approach will push these numbers up – then taking the extra time and spending the extra energy just makes common sense.
A common sense approach to reducing the horrendous costs of workplace disputes may not be rocket-science – but it will make the Finance Director happy at least. Along with thousands of otherwise disgruntled and stress-laden employees.

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