Cost of Conflict

The Cost of Conflict
the Financial Cost of Organizational Conflict

The mantra of today’s marketplace is “Better, Faster, Cheaper!” Businesses must continually find ways to produce a better product or service, to market it faster, and at a lower cost. Anything that undermines innovation, slows product development or service delivery or adds to its cost is bad for business!

Conflict is bad for business. It damages the relationships of employees who must collaborate in the innovation process to create better products and services. If unacknowledged or unmanaged, it stimulates unhealthy competition, polarizes employees into intractable positions, and creates stressful working conditions – all of which undermine productivity. See the Conflict Dynamics Model to better understand how conflict works against your business.

Conflict is costly. Litigating a workplace dispute can easily cost tens of thousands of dollars and a class action law suit can reach hundreds of thousands of dollars. In addition, to standard court costs and filing fees, an employer bears the expense of attorney’s fees for legal defense and, if found liable by a court, could incur the cost for the plaintiff’s attorney’s fees, back pay for the employee, and the cost of monitoring the employer’s future compliance with the court’s judgment. These costs total hundreds of millions of dollars annually for U.S. businesses.

The cost of conflict is not limited to the cost of litigation. The legal costs do not include the soft financial costs of workplace conflict which include the costs of employee turnover and absenteeism, the cost of managerial time spent in conflict resolution or defense against complaints and law suits, increased health insurance costs attributable to stress-related health problems (including drug and alcohol abuse), and ineffective decision-making due to deliberate withholding of information and/or malicious compliance with management directives. Dan Dana, PhD, founder and President of the Dana Mediation Institute, has developed a formula – The Dana Measure of the Financial Cost of Organizational Conflict – that may be used by organizations to calculate the soft financial costs of conflict to their organizations. These costs are typically overlooked because they are not immediately associated with conflict and are accounted for as part of the normal cost of doing business.

The foregoing list addresses only the financial costs of conflict. There are other less tangible costs which tend to be the cumulative result of unmanaged conflict in the workplace, such as damage to the company’s brand, the diminished ability of a company with a questionable reputation for treating its employees fairly to attract top talent, the drain of the company’s intellectual capital as a result of turnover, and the loss of key business relationships. These incremental costs are damaging and could have a long-term adverse impact on the productivity of the workforce, the company’s ability to attract or sustain business relationships and to retain and attract valued customers.

Calculating The Cost of Conflict

How much is conflict costing your organization? Click the "email" button below to get the password to an on-line calculator of the financial cost of organizational conflict. You'll get a reply within 60 seconds. If you wish to receive a telephone call to interpret your results and to learn how your results compare with those of others, include your contact information in the out-going message that is created in your email software when you click this button: This resource is made available in cooperation with the Mediation Training Institute International.