Cost of Conflict To An Organization

Cost of Conflict To An Organization

Aligning: Strategy, People, and Process Business Strategy BALANCE Process Methodology People: Talent and Capacities correctly used 2

Why is this important to you? The American Psychological Association estimates job stress costs American businesses $300 billion a year in absenteeism, diminished productivity, employee turnover and medical and legal costs. FACT - absenteeism and presenteeism can cost between 25% and 65% of a particular position s annual salary 3

Negative Effects of Conflict - Organization s Culture SENIOR MANAGEMENT 1. Inhibits the owners/ceo s positive work values and principals from being replicated throughout the company 2. Creates a distance between the main decision maker and sub-ordinate employees 3. Erodes employees trust and loyalty towards senior level management 4. Dissolves level of confidence in senior management s leadership capabilities 5. Creates illusion of betrayal by senior management 4

Negative Effects of Conflict - Organization s Culture BUSINESS UNITS AND TEAMS 1. Weakens and dissolves inter-company support networks Lessens knowledge-sharing and teamlearning behaviors 2. Creates an environment of undermining and espionage towards co-workers 3. Creates silos within business units and teams 4. Diminished workforce s contributions of creativity, decision making, risk taking behaviors 5

Employee loyalty: Trust, and confidence diminished due to mistreatment Strategic Planning Not being followed through by employees actions Impedes process alignment Stays Disgruntled Employees Leaves Company Branding People speaking negatively about their work experience Public Relations Employees speaking negatively without concern Aggressor speaking negatively about past employees Advertises unprofessionalism of company Corporate Intelligence Employee has information to share with new employer/competitor 6

There are nine factors to calculate the cost of conflict in the workplace outlined on the next slide in a chart. For this presentation we will focus on: Impact of Diminished Decision Making to understand how it impacts succession planning and strategic planning. Employee Health Costs to start to understand the how the financial factors come into play and create an economic impact on the business. 7

Nine Factors to Calculate Cost of Conflict Illustration Overview of Cost Factors 1. Distracted Team/Employee Time $28,000 2. Opportunity cost of Distracted / Unproductive time $14,000 3. Impact of Diminished Decision Making $120,000 4. Terminated/Resigned employees $50,400 1 5. Employee Restructuring $8,000 6. Intellectual and Property theft/damage $0.00 2 7. Diminished Motivation $11,200 8. Unproductive Work Time $1,792 9. Employee Health Costs $1,120 Total cost of only one conflict $234,512 1 Assumes one of the $40k employees resigned; conflict played typical role. 2 Illustration makes conservative assumption that this factor did not incur cost. 8

Impact of Diminished Decision Making If the Aggressor/Bully is conducting team/staff evaluations and performance reviews, it is possible they are providing biased evaluations and lower performance ratings. As a result: Promotions may be granted to a lower quality of worker because of subjective decision making. Opportunity and advancement may be stifled for creative and innovative employees. Decision makers may be shielded from identifying proactive and valuable resources/assets. 9

Senior Management / Manager / Supervisor is aggressor and involved in conflict Inaccurate Team Evaluations Poor Performance Reviews Strategic Planning Decision-makers not able to assess organizations actual capacities Decision Maker Succession Planning Improper promotions / demotions hinder progression and succession planning strategies Impact on Human Resources Unfair performance reviews hinder corporate growth impede employee career development Loss of employee self confidence, esteem lowers and motivation Loss of innovation, talent access and creative thinking 10

Employee Health Costs Factor Nine: Employee Health Costs Increased insurance premium payments due to claims for health services arising from psychogenic illnesses and injuries. Most illnesses and many injuries are partially psychogenic. Actual psychogenic factor is unknowable, but is not zero. * Guideline: 10% of Factor # 7 (Lowered Job Motivation), since both arise from job stress. X 10%* Lowered job motivation (Factor # 7) $11,200 Total cost of health cost $1,120 X 4 Number of employees affected Total Employee Health Costs $4,480 11

Effects on Employees Health The effects of mistreatment extend beyond direct targets to include witnesses. Impacting the financial resources allocated for health benefits, insurance and sick leave. 45 40 35 30 25 44 39 34 32 The findings show Currently bullied are well above the need for psychiatric treatment at 5.6 and Previously Bullied group also report high levels of physical (38.6) as well mental (3.73) ill health. 20 Bullying and Health Outcomes 15 10 5 0 5.6 Currently Bullied 3.7 Previously Mental (GHQ score) 2.8 Witness Bullying 2.2 Neither Physical (OSI score) Mental GHQ Score Physical OSI score Occasionally Bullied (Rarely/monthly) Regularly Bullied (Weekly/Daily) 5.45 6.68 43.26 46.34 12

Key elements of OSI scores (Occupational Stress Indicators) Sources of Pressure at Work Sources of Job Satisfaction Mental and Physical Health Factors intrinsic to the job Managerial role Relationships with others Career and achievement Organisational structure Home/work interface Achievement, value & growth Job itself Organisational design Organisational processes Personal relationships Mental ill health Physical ill health 13

Impact on Your Business - Overall American Psychological Association surveyed approximately 1,500 workers, of those surveyed 750 said they lost time from work: due to rude workplace behaviour directed toward them. Customer service suffers when employees are harassed at work: Their loyalty diminishes They view the company as not protecting them from the disruptive employee, as a result, the other employees take frustrations out on clients. (Orlando Business Journal) Organizations who manage people well, outperform those who don't by 30 to 40%. (Canada s Safety Council) Operational Costs: High turnover of employees Distracted time cost Negative impact on health Insurance premiums increase New/post-employee training cost Replacement costs Etc. 14

Impact of Disruptive Employee: To Business Teams When inappropriate work behavior is allowed to continue; The disruptive employee targets more employees Results: decreased employee self-esteem, health, and team productivity Research shows: One individual most often is NOT the only target. Often several people are targets. Entire workgroups report being mistreated and bullied. 15

Business Value-Add Harassment-free Workplaces have higher levels of: Employee satisfaction Productivity Collective communication Information sharing Creative brainstorming Organisational cohesiveness Developing a harassment-free workplace culture, is a wise investment. Enabling your business teams to achieve your goals and strategic objectives for years to come A GREAT VALUE TO YOUR BUSNESS! 16

Thank you for your time Please call us for a free consultation 416-548-4237 Please use our FREE Workplace Conflict Assessment

Sources 1. 2003 Report on Abusive Workplaces; by Gary Namie, Ph.D.; October, 2003. The Workplace Bullying & Trauma Institute (WBTI) 2. UMIST - Destructive Conflict and Bullying at Work, Sponsored by the British Occupational Health Research Foundation (BOHRF); By Helge Hoel & Cary L Cooper; Manchester School of Management; April 2000. 3. Harrison Psychological Associates; Workplace bullying's high cost: $180M in lost time, productivity; Orlando Business Journal - March 15, 2002 by Liz Urbanski Farrell; March 2002 http://orlando.bizjournals.com/orlando/stories/2002/03/18/focus1.html?t=printable 4. UNISON (1997) Bullying at work: Bullying survey report. London; by UNISON.; 1997 5. Bullying at work: Epidemiological findings in private and public organisations. European Joumal of Work and Organizational Psychology, 5, 185 201.; by Einarsen, S. Skogstad, A.; 1996 6. The incidence of workplace bullying. Journal of Community and Applied Social Psychology, 7, 249 255.; by Rayner, C.; 1997 7. Bullying in the Workplace. by Canada s Safety Council; September 2000; http://www.safetycouncil.org/info/osh/bullies.html 8. Proudfoot Productivity Report, An international study of company-level productivity. by Proudfoot Consulting; 2006 9. Dana Measure of Financial Cost of Conflict; by Dr. Dan Dana 1999, 2006 10. FASTOH project, Queensland University of Technology, Australian Maritime Safety Authority; 1996 18