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What is the price of workplace conflict? £28.5 billion!

by | Nov 12, 2021 | Uncategorized


Is it time to mediate more in the workplace?
ACAS has published a fascinating report on the cost of workplace conflict.

 
The headline figure is that they estimate that the cost is £25.8 Billion Pounds!
https://www.acas.org.uk/estimating-the-costs-of-workplace-conflict-report

 
They estimate that 35% of employees have experienced conflict in the workplace:
35% of employees

“We know from 2019 CIPD survey data that just over one-third (35%) of respondents reported having experienced either (i) an isolated dispute or incident of conflict (26%); and/or (ii) an ongoing difficult relationship (24%) (including conflict with parties external to the organisation) over the last 12 months. If one narrows this to only include conflict with another member of the organisation, the overall incidence falls to 29%.

… we estimate that 9.7 million employees experienced conflict in 2018 to 2019. Although some of these individuals may have been involved in the same conflict, they are potentially impacted in different ways with discrete implications for organisational cost.

More than three-quarters of those who reported conflict also reported a demonstrable impact. Importantly, this includes the 22% who did ‘nothing’ in response to being involved in conflict, but nonetheless experienced negative impacts in terms of wellbeing and workplace engagement.”

They estimate that the cost of resignations amounts to £14.9bn per annum:
resignations = cost £14.9bn
 

“It is relatively straightforward to estimate the cost to the organisation of resignation. Using the 2019 CIPD data, we estimate that 485,800 employees resign each year as a result of conflict. Work conducted by Oxford Economics suggests the cost of staff turnover can be measured across 2 dimensions.

First, average costs of recruitment (and some ‘replacement costs’ such as induction training) are estimated at £5,433 per employee; whilst lost productivity, as new recruits ‘get up to speed’, is estimated at £25,181 per employee. Consequently, we estimate the cost of recruiting replacement employees amounts to £2.64 billion each year, whilst the cost to employers of lost productivity as new employees get up to speed amounts to £12.23 billion, an overall total of £14.9 billion each year.“

They estimate that the cost of sickness absence is £2.2 bn per annum!
cost of sickness = £2.2bn 
“874,440 employees (i) take an average of 21.6 days absence as a result of the reported workplace conflict; and (ii) assume that in the absence of this conflict, they would have taken 4.4 days, which is the average across all workers. Taking the difference (17.2 days) as the estimate of additional sickness absence attributable to the conflict, we estimate that 15 million days per year are lost through sickness absence as a result of conflict.”
“Applying the most recent estimate from these calculations (see endnote 27) of £148 for the cost of a working day lost due to sickness absence, we produce an overall figure of £2.2 billion.“
Moreover, the report suggests that some employees react to conflict by presenteeism, saying that:
“Of the 56% of employees involved in conflict who reported that they experienced stress, anxiety or depression as a consequence, 85% have the potential to exhibit ‘presenteeism’ as they did not take any time off work. “
They say that in terms of resolution the mediation option (including internal mediation) is £140 m per annum. 74% of mediations were successful:
successful mediations: 74%
In terms of the impact of mediation, it is notable that nearly three-quarters of those who underwent mediation (74%) also reported that their conflict had been fully or largely resolved
“Acas conducted 270 mediations in 2018 to 2019. Our assumption that Acas conducts approximately one quarter of all external mediations leads us to estimate 980 ‘external’ mediations at an average cost of £1,500. This suggests that the bulk of mediations are conducted by internal mediators (whether trained or not) – and in these instances, we would suggest the cost is 1.5 days of a mediator’s time. This is a conservative estimate, as it does not include the cost of training internal mediators, operating an internal mediation service, or the costs of parties engaging with mediation. However, given we suspect that many respondents may be referring to facilitated management discussions when they think of ‘mediation’, this seems like a more reasonable assumption. On this basis the total cost of mediation is £140 million.“
cost of mediation = £140 M
The alternative formal pathway is more expensive.
“The CIPD survey suggests that 12% of respondents who report a conflict either initiate, or are subject to, grievance or disciplinary proceedings. Importantly this can be triggered by the employee bringing a grievance, by management through disciplinary action or a mutually agreed decision to engage in mediation.“
“The average cost in management time of a formal grievance is approximately £950.50 and the total cost to employers is £356 million.”
“Overall, the estimated average cost of each disciplinary case is approximately £1,141, resulting in an economy wide total cost of £2 billion. “
disciplinary cases= £2bn 
Moreover, formal procedures resulted in a negative impact:

respondents who went through either grievance or disciplinary [formal] procedures also reported a range of negative wellbeing and productivity impacts, together with resignation and absence.

“In particular, more than 2-thirds also report reduced well-being. Whilst we must again take care when comparing conflicts that may not be of the same nature, 19% of respondents took time off work, compared to just 8% of those who had not been subject to formal procedure.“

only 1.4% of conflicts involve an employment tribunal claim being filed.

Overall, the total estimated cost of management time in relation to litigation is £282 million.

“ In total the estimated cost of this legal representation to UK organisations is £264 million each year.” (A conservative estimate)

“The total cost of settlements and compensation to employers is estimated at £225 million.

Adding together the various components above, the annual cost of employment litigation to employers amounts to approximately £800 million.”

cost of employment litigation = £800m

“The overall total yearly cost of conflict to employers (including management and resolution) is estimated as £28.5 billion. This represents an average of £1,028 for every employee in the UK each year, and just under £3,000 (£2,939) annually for each individual involved in conflict.”

So, it is easy to see that instructing a workplace mediator can save a substantial amount of cost.

mediation = costs saving!