white paper: cost workplace conflict

Copyright 2011 Center For Resolution, LLCCFRMediation.com

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Conflict In the WorkplaceThe One Thing Costing Every Employer money

Center for Resolution, LLC CFRMediation.com

Workplace Conflict - What Is It?

Conflict is present in every workplace. It is, in fact, the single most preventable cause of lost revenue for businesses of all sizes although the scope of the issue is seldom fully recognized.

Conflict is to be expected: It is not possible for two people to work together, no matter what their role or personal investment in an organization, and always agree. The potential for disagreement and clashes only increases as a work team grows.

Conflict is not always a negative in a work team. Disagreements as to process, service, design, or other work related issues allows business to evolve. As a positive influence, it challenges employees to push themselves to create and develop new innovations for the benefit of the employer. Positive workplace conflict pushes teams to collaborate, develop new ideas, and improve.

If team members consistently avoid bringing up new ideas or making suggestions for any reason ideas cannot evolve. The work product will stay the same. Business will not evolve at the pace needed to keep up with today’s marketplace. This form of workplace conflict is productive – it is focused on the “product” not the “person”. In this case the conflict is forward moving and change oriented. It increases revenues and fosters an exciting work environment.

However while at times conflict can be a positive change agent in the workplace, most often the conflict experienced in the workplace is not positive. Instead it is a negative and costly occurrence for both employees and employers; hindering engagement, productivity and creativity for both employees and the workplace. This is a result of conflict is taken or experienced personally.


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ACME Insurance - Arnold & Emily

Arnold, a longtime employee at ACME Insurance Co. was irritated by new colleague, Emily, after she gave a somewhat dismissive response to his instructions as to how to conduct a task. His response was immediate. He told her not to ask him any more questions and refused to speak or acknowledge her unless absolutely necessary, never getting to know or establish a productive working relationship with her. Eventually Arnold assigned Emily a case that required specific procedures be followed that she did not know. Emily followed Arnold’s limited instructions to handle the case, but did not complete some needed administrative steps. She badly mishandled the case, triggering outside auditors to repeatedly review the organization’s practices and adherence to legal standards. In addition, her handling of the case exposed the employer to liability and litigation as well as jeopardizing a multi-million dollar contract.

Although the entire team was aware of the difficulties between Arnold and Emily, everyone – including their manager – simply tolerated the situation. The conflict was not addressed, as it did not seem that significant and both employees appeared to be meeting expectations. However, this simple interpersonal conflict cost the organization tens of thousands of dollars both directly through the mishandling of the case and lost revenue due to the impact of the conflict on Emily’s productivity. The cost could easily have been much higher – and often it is.

Workplace conflict focused on a person or experience is costly and seldom productive in the workplace. Although often not recognized as a significant issue, it easily escalates to become a significant problem for every employer and business: one that must be addressed as efficiently and positively as possible.

An Ignored Issue

Business owners and managers have a lot on their plate. As a rule, they might find it difficult to focus on issues that are not obviously pressing. Deadlines must be met and responding to something that is not urgent can seem like a distraction. Some even view addressing interpersonal conflict as inappropriate. They view the spats and disagreements of their employees as not belonging in the workplace in the first place: “I’m running a business here, not a daycare!”

Yet ignoring the conflict, for whatever reason, is akin to not addressing a leaking oil pipeline. Revenues keep slipping away, while the conflict pollutes the organizational culture. Animosity, distrust, hostility, and rivalries between employees become standard. The full effects may not be clear at first, but can leave a lasting stain on the environment. And the leak, left unplugged, grows.

Typically conflict must escalate to a point where it cannot be missed before it is recognized or addressed. Oftentimes this means that the conflict has expanded to a point where productivity is clearly disrupted, and litigation may threatened. Many assume that no obvious work disruptions or threatened litigation mean no conflict. However, it is much more prevalent than the impossible-to-ignore cases and is present in every workplace.

Whether recognized or defined, it negatively impacts every business and employer, even when occurring under the radar of employers and management. Conflict in the workplace is typically subtle: a quiet occurrence between employees. It may be a single eruption that appears to end as quickly as it began. There may not be a clear onset.


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There can be any number of conflict triggers, work related or not, but often it is the result of:

• Personality conflicts

• Simple misunderstandings between employees

• Contrast between expectations and other variables

• Problematic or poor communication skills

• Other interpersonal interactions

Regardless of how it began, left unaddressed it can quickly grow to consume valuable employer resources and perhaps permanently destroy business relationships and reputations.

It’s Just Business - What’s the Problem?

Despite the business-nature of the relationships and interactions, issues that occur in the workplace are typically experienced as a personal attack. Even when the conflict is about a strategy or business direction, it often is understood to be a questioning of personal skills or abilities. As a result, the reaction to the interpersonal conflict, even when it centers on a business-related interaction, is very much a personal one.

In truth, the rationale behind the negative impact on the workplace is not that surprising: People do not like conflict. Even those who seem to be high-conflict or competitive, find a dispute or conflict that they are personally involved in to be uncomfortable. Situations that cause discomfort cause pain. Pain is avoided. Left unresolved, the conflict bleeds into every thought and every interaction; other employees are affected and involved. The conflict grows, becoming more uncomfortable and obvious. Employees and managers feel less able to satisfactorily resolve the issue. Employee engagement is affected as individuals look for other solutions..

It is not unreasonable to say that decreased productivity and engagement among the larger team as a direct result of one employee’s discomfort in interacting with another. For the


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individuals directly involved in a conflict, small behavioral adjustments are typically made to cope with and prevent interaction with the source of their personal discomfort.

Employees alter schedules and behaviors to avoid impromptu run-ins

Employees stop speaking to one another except as is absolutely required

Employees brood about the conflict, distracting themselves at work

Absenteeism increases, as the employee opts to use all available PTO to avoid dealing with a co-worker

Employees may even sabotage one another

These behavior and communication adjustments may seem slight and may even lessen the appearance of conflict, actually making it less likely that employers and managers will take action. However, responding to conflict this way can actually feed the negative interactions between the employees and significantly increase the negative impact of the conflict. Silence or limited interaction tends to fuel bad feelings rather than alleviating them.

In addition, ongoing conflict between workers can increase the likelihood that colleagues will misread one another resulting in hurt feelings, ineffective communications, or even gross errors. Employees who have difficult relationships with one another expect difficult interactions versus positive productive ones with the involved employees. Expecting difficult interactions tends to increase the likelihood that they will occur.

Employers and managers may not pay much attention to conflict at this point as work continues to get done and no formal complaints have been made. In fact, many managers believe that conflict in the workplace is not something to be bothered with if it is just making some “uncomfortable” – if it does not appear to be a significant problem. However, even at these initial, often hidden, stages workplace conflict is negatively impacting productivity and revenue: the conflict is costing employers money.


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In the earlier case example, Emily expected that Arnold would not answer her questions as how to properly handle the case that he had given her. She insists that she told him that she did not know what procedures were expected; while Arnold insists that he thought she had handled it fine and was not aware of her questions. It later became clear that Emily had started to expect a certain level of response to her questions from Arnold, as a result of his behavior towards her, and may not have clearly stated to him that she did not have the knowledge to handle the case on her own. Both employees’ response to the conflict between them perpetuated it and contributed to the costly error.


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Computer Sales Company - Pete & Peggy

Pete and Peggy work together at a computer sales company as support personnel. Over their first few months as colleagues, they appeared to develop a strong working relationship. They shared breaks and lunch with one another, and were often seen laughing and joking together. Although their friendship was close, it was clearly platonic and centered around their work life.

No one was more surprised than Pete when Peggy complained to her supervisor that she felt harassed and bullied by Pete. In this case the supervisor initially met with both employees separately and suggested that Pete avoid as much interaction with Peggy as possible. This did ensure that there was no apparent conflict, however both Pete and Peggy experienced varying degrees of distraction and distress at work – and increased stress in general – as a result of the unresolved issues surrounding their relationship.

The situation was further complicated once organizational policies dictated that, because she reported feeling harassed and bullied, the complaint be reopened and an official investigation conducted regarding Peggy allegations. The investigation involved the ongoing participation of four employees (HR staff and managers) in addition to Pete and Peggy. The investigation moved relatively quickly and participants were limited as Pete and Peggy worked on the same team. Despite this, the six employees spent a significant number of work hours on the investigation. No actionable fault was substantiated.

With the participation and agreement of both Pete and Peggy, a resolution was documented detailing how both parties would continue to function in their roles with the organization and interact with one another.

Despite the positive outcome, all employees and managers involved in the investigation diverted a significant amount of work hours in the investigation and experienced work related stress and distraction as a result of the conflict, investigation, and ongoing interaction. In effect, this simple personality conflict between two employees cost the employer thousands of dollars.

The Revenue Drain

Conflict in the workplace costs US employers well over a billion dollars every year. In fact, it is the single most preventable cause of lost revenue in business.

The actual cost of conflict is seldom fully recognized. Many wrongly assume the costs come from the high fees and settlements generated through harassment and wrongful termination lawsuits. Although some certainly come through litigation, the vast majority of lost revenue goes unnoticed. The costs are the direct result of lowered employee engagement and productivity, increased absenteeism and employee turnover, diverted resources, and increased stress-related health costs. Ongoing conflict significantly reduces an employee’s commitment to an organization and reportedly is a contributing factor in the vast majority of employee separations.

Those employees who have a significant level of conflict in their work relationships find that the problems working together increase as long as the conflict is left unaddressed. Meanwhile the conflict bleeds over to other employees. Even in cases where managers are not aware of problems between employees, their co-workers are and often take sides. Additionally, they inadvertently enable ongoing conflict while trying to work around the existing problem. The end result? Distrust and suspicion grows among the team as a whole: every action and behavior seeming suspicious and purposeful.

Some Facts About Workplace Conflict:

• Although the numbers vary, a typical manager spends anywhere between 20 to 40 percent of their time responding to employee conflict – that is 8 to 16 hours a week.

• Workplace conflict is a decisive factor in more than half of employee departures and over 90% of cause-related terminations.

• Employee turnover results in costs related to recruiting training, lower productivity of new hire, and secondary morale effects on managers, peers and subordinates.

• Unresolved, workplace conflict can end up in litigation, easily costing a company $50,000 to $100,000 in attorney fees and 3 to 5 years to settle.

• Customers avoid working with employees or organizations with high levels of conflict. • Conflict significantly increases personal stress levels. Personal stress decreases employee

engagement and costs employers over $1.5 billion annually.


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Creating Culture Of Proactive Conflict Resolution

Creating a Culture of Proactive Conflict Resolution defines problematic workplace conflict more broadly and encourages all employees to respond to conflict as it occurs. Everyone actively engages in practices that prevent workplace conflict in the first place and reinforce positive communication. Consequently, the negative effects and costs associated with conflict in the workplace are eradicated and employee engagement within the organization is enhanced.

It is not enough for policies and procedures to be created that address workplace conflict. It is a start, but to be successful, all employees must be given the tools and skills to communicate more effectively as well as to recognize and respond to conflict in a proactive assertive manner. Employers, managers, workplaces, and team members as a whole must integrate this culture into their method of doing business inside and outside organizational walls.

There are always going to personality conflicts between coworkers. Likewise, there will always be disagreements about expectations and processes. Creating an organizational culture of proactive conflict resolution means:

1. The workplace promotes and encourages conflict to be addressed constructively and immediately.

2. All employees are given the tools to better communicate with one another including those with whom they have a conflict.

3. Employees experiencing ongoing conflict with coworkers have a clear means to address the issues in a safe, neutral and confidential environment before it escalates.

4. Managers address recurrent conflict situations with specific employees, looking for a constructive resolution for the employee, team, and employer organization.

5. Conflicts between employees are first mediated, if at all possible, versus “judged” through investigation.

6. The organization seeks an optimal resolution to disputes where those in conflict work together to create a workable solution to their issues.


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In a culture of proactive conflict resolution employees bothered by the words or behaviors of another are better equipped to communicate their discomfort to the other employee before a significant incident occurs. Employees who are experiencing an ongoing conflict have a clear path to seek support from managers and HR before having to identify a situation as “harassment”, “bullying”, or “hostile work environment”. Employees who need extra coaching or communication skills building are identified and provided the needed supportive services to better enable them to positively contribute to the workplace - as soon as the need is recognized.

In an organization with a culture of proactive conflict resolution, our two examples of conflict in the workplace would have had very different outcomes:


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In Emily and Arnold’s case, both employees (and the team as a whole) would have been aware of and encouraged to access available assistance to address their difficulty in working with one another effectively. Their manager at the insurance company would have been tipped off to the difficulty allowing a facilitated communication between the two. If needed, Emily and Arnold would have worked with a neutral third person to talk out and resolve their conflict before it became a liability and to create a plan to avoid triggering these issues in the future. Expectations for one another would be clearly delineated. The employer’s expectations of both employees would be clarified, while both Emily and Arnold would be supported as valuable members of the organization.

In Pete and Peggy’s case, Peggy would have been aware of options to communicate her discomfort to Pete before reaching the point of distress that occurred. The employer would have provided her with tools to better communicate her expectations and general comfort level to her colleague. In addition, if for some reason, she was not comfortable doing this alone, she would have been able to seek the confidential services of an third party to facilitate the conversation. In the example given, Peggy and Pete did initially work out a solution to their interpersonal conflict with the assistance of their manager. The best case scenario would be one where both employees participated together to discuss and mediate a resolution to their conflict, which was not yet part of the managerial policy, but a solution was reached nonetheless. More important however, is that Peggy felt that she no option to address the problems she was experiencing in her relationship with Pete until she defined as harassment. In fact, as is the case with the majority of employers, there was no stated assistance for Peggy prior to that point. What company policy did dictate (as is appropriate) was that an immediate and aggressive investigation of all harassment complaints occur. Once the term “harassment” was included in Peggy’s discussion with her manager, simple conflict resolution focused intervention was no longer an option. Therefore the initially resolved complaint had to be reopened and go through the official and costly process.

Role Team Building Programs In Reducing Conflict

As a part of creating the infrastructure to foster a culture of proactive conflict resolution, a schedule of training to promote the ongoing development of conflict resolution and positive communication skills is needed. An effective training medium are team building programs that clearly focus on directly building conflict resolution and communication skills. Such a program allows organizations and teams to improve communication and conflict resolution skills while in a fun non-competitive environment - increasing their ability to work together productively. As an added benefit, employees have an opportunity to get to know one another in a different environment, build relationships, and develop their communication and problem solving skills with a trained facilitator. An effective team building program significantly reduces the negative effects of conflict in the workplace, at a fraction of the cost of a single workplace incident.

Not all team building programs are the same - there are a variety of programs that are available, with varying degrees of effectiveness. It is important to make an informed choice to ensure that the desired goals are accomplished. In general, the team building activities can be classified into the following categories:

Activity-Based Team Events – These are a common type of event sponsored by employers. The activities vary from golf outings, scavenger hunts, entertainment based outings, volunteering, physical challenges such as wall climbing, and competitive games including dodge ball and laser tag.

Although these events are generally fun for some – they are not positive events for others. With doubt, many employees dread team building events and participate, or make an appearance, only as required. In addition, many of the most common events have an inherent element of competition. Although such team building events are widely accepted as the norm, there is scant evidence to support their effectiveness. Effective team building requires more than morale boosters.

Most importantly, such an activity-based event itself can trigger latent conflict within team members: conflict that is brought back to the workplace and can actually impede teamwork defeating the purpose of the event.


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Insight Oriented – There are many team building programs that use psychological tools to assist workers in better understanding their, and sometimes their teammates, personalities, communication styles, and approach to conflict. The available tools are many, but some common ones are: MBTI® Myers-Briggs Type Indicator, FIRO®, TKI, and the DiSC®.

Using any one, or a combination, of these tools can be a helpful part of a team building program, as they can be very helpful in terms of gaining a better understanding of how a person works. However, the information gleaned through these tools is really little more than insight into a specific individual, and does not provide clear tools for implementing the insight. Insight alone has a limited benefit and often does not translate into improved interpersonal or professional interactions.

In addition, caution should be taken to ensure that the individual employee’s privacy is respected. Discussing the specific results openly in a group setting can result in an employee being uncomfortable with the personal exposure. Especially in a workplace already dealing with problematic conflict, such vulnerability is likely to increase issues versus resolving them.

Practical Tools – Team building programs that focus primarily on teaching practical methods to respond to conflict situations as well as to facilitate positive communication in any interaction have the most immediate impact on individuals.

Such practice tools programs combine the teaching of specific skills and techniques with experiential exercises allowing for direct practice in a safe simulated environment. A skilled facilitator is particularly important to lead these programs to ensure effectiveness and to mitigate employees discomfort with the exercises.

These programs are best conducted on-site by a neutral outside facilitator, as the participants typically find the experiential exercises difficult to do under the eye of a fellow staff member much less a supervisor. In addition, related non-competitive ice-breakers and group activities should be integrated into the program.

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ABOUT CFRCenter For Resolution, LLC is committed to Peaceful • Positive • Resolution: encouraging the active resolution of interpersonal conflicts as well as the fostering of a culture of proactive conflict resolution in organizations. Our services, available throughout the US, encompass conflict resolution designed to prevent the presence of conflict – through training and education – along with the resolution of active interpersonal conflicts through mediation.

All workplace training and team building programs are designed by Erin Johnston, MSW, LCSW. All exercises are structured to enable employees to develop their skills in a safe and non-competitive environment. Our programs are designed so that every employee can leave with tools they can use immediately to improve productivity as well as relationships as a whole.


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white paper: cost workplace conflict

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