A £24 Billion Pound Secret

Not many people are aware of a quite frightening business secret. Believe it or not - the estimated annual cost of conflict in the workplace to the UK economy is a staggering £24 billion pounds!!

 

This isn’t my figure - those clever people at the Chartered Institute of Personnel and Development have come up with this number after carrying out extensive and careful research.

 

We all know that disputes at work cost money through lost management time, lower productivity, higher sickness and absenteeism and higher employee turnover, and this is just the direct cost to the UK economy.  Indirect costs, which are harder to value, include:

 

·         Reduced employee engagement

·         The likelihood of projects being delivered on time and on budget

·         Increased theft and sabotage

·         Lower employee attraction

·         Potential interruptions to the supply chain

·         Poor customer service delivery

·         Poor staff morale

 

And the list goes on . . .

 

So, at a time when there is pressure on every organisation in the UK to look for cost savings, why then are companies not looking to achieve cost savings and a competitive advantage by reducing conflict in the workplace?

 

Although I hate to admit it, we often have to look at what is happening in the United States of America before we can then look to follow examples set by our American brothers and sisters. So here is a bit more information which you might find interesting.

 

A survey conducted by the American Management Association some years ago found that Chief Executives, Directors and Senior and Middle Management spend, on average, 24% of their time resolving conflict in the workplace.

 

Again, looking at American companies and in research undertaken by Karl Slaikeu and Ralph Hasson in ‘Controlling the Costs of Conflicts’ the following are examples of what can be achieved in practice:

 

·         In the first year of comparison, Brown and Root reported an 80% reduction in outside litigation expenses by introducing a systematic approach to collaboration and conflict resolution regarding employment issues.

·         Motorola Corporation reported a reduction in outside litigation expenses of up to 75% per year over six years by using a systematic approach to conflict management in its legal department and including a mediation clause within its contracts with suppliers.

·         National Cash Register Corporation reported a reduction in outside litigation expenses of 50% and a drop in its number of pending lawsuits from 263 to 28 following the systematic use of alternative dispute resolution.

·         The US Air Force reported that by taking a collaborative approach to conflict management in a construction project, it completed the project 144 days ahead of schedule and million under budget.

 

And it is not just in America that enlightened organisations have introduced pro-active systems for dealing with conflict in the workplace.

 

East Sussex County Council (‘ESCC’) & Globis Ltd collaborated with trade unions to introduce a workplace mediation scheme that was ultimately short-listed for an award at the Chartered Institute of Personnel and Development 2009 Awards in the ‘Change Management through HR Impact’ category.

 

ESCC report that the introduction of Mediation has:

 

·         Prevented workplace disputes from escalating out of control.

·         Reduced the cost of resolving conflict (financially and emotionally).

·         Contributed to a positive and productive working environment.

·         Reduced the stress and anxiety of all parties involved in the process.

·         Provided a ‘safe place’ for all to be heard.

·         Placed the power and responsibility directly with the parties rather than HR or trade unions.

 

ESCC measured the impact of its Mediation Service in the years 2008 and 2009 and reported that:

 

·         100 % of cases (34) referred to mediation were successfully resolved.

·         The number of formal workplace disputes fell by 47%.

·         ESCC recouped its initial training investment within one month.

·         ESCC reduced the average time taken to resolve disputes using a formal grievance procedure from 60 days to 3 days for a mediation.

·         An increase of 5,814 productive days.

·         The cost of resolving an average mediation was measured at £2,400 compared with an average cost of £18,000 to go through a traditional method.

·         3 employees returned from long term sickness immediately after mediation.

 

So what does all this mean for the UK economy?  Can we really dent this £24 billion pound problem simply by doing a better job of managing conflict in the workplace? I am sure we can. We just need to think about how we can collaborate and develop systems to get the best from our most important resource (people), and have systems for resolving conflicts in the workplace in a private, quick and economical way.

 

Mediation in the workplace is here to stay!

 

Peter Vinden is a practising commercial, workplace and employment mediator.  He is Managing Director of The Vinden Partnership and can be contacted by email at pvinden@vinden.co.uk