THE POTENTIAL COSTS OF CONFLICT IN THE WORKPLACE
GHRS has successful managed hundreds of workplace conflicts. Conflicts may be costing you more than you realize.
Absenteeism & Turnover
Figures vary, but the turnover cost of one employee can be anywhere from 30% to 150% of the employees annual salary.
A more conservative estimate suggests that the cost of replacing an employee ranges from 29% to 46% of the person’s annual salary.
The Bureau of Labor Statistics use 30% as the base cost of replacing a worker and calculates the rate of turnover by dividing the number of employee separations during the month with the total number of employees at mid-month.
Absenteeism Rate = (Number of lost working days due to absence) x 100 (Number of employees) x (Number of Workdays) U.S. Department of Labor Formula
What is a healthy turnover rate?
34.09% for the bottom 10% of corporations 20.87% for the top 10% of corporations
The figure for defending a wrongful termination lawsuit in 2010 was $150, 000 per case. Risser, R “Stay out of Court: The Manager’s Guide to Preventing Employee’s Lawsuits,” Prentice Hall.
“Even when the employer prevails on summary judgment, he has usually spent $50,000 or more in attorney’s fees, in addition to the organizations time and resources.” McDermott, E Quorum Books.
CPP Inc.–publishers of the Myers-Briggs Assessment and the Thomas-Kilmann Conflict Mode Instrument found the following in a study they conducted:
Findings from the CPP study should be enough to spur any “wait and see” business owner into action. For example, 25 percent of employees said that avoiding conflict led to sickness or absence from work. Equally alarming, nearly 10 percent reported that workplace conflict led to project failure and more than one-third said that conflict resulted in someone leaving the company, either through firing or quitting. Those negatives translate into real financial losses for small businesses.
If a worker uses five sick days a year to avoid conflict, that’s a direct cost of over $700 to your business (calculated using hourly earnings of $35k per year), not to mention the cost of covering the employee’s missed work (e.g., overtime pay for another worker or hiring a temporary employee). Multiply that by 50 workers, or even 10, and you can immediately see the kind of money drain conflict creates. Replacing an employee will cost you 150 to 200 percent more than that employee’s salary and benefits. This means that losing even a mid-level employee making $30,000 a year could cost your company $70,000 or more to replace. In a small business conflict can become viral. In a larger company, the conflict may be contained to a workgroup. But in a small business, it’s everyone’s problem.
New Brunswick lawyer Kelly VanBuskirk’s doctoral research suggests that employees who do not have an alternative mechanism to resolve workplace conflicts are more likely to consider taking or actually take legal action.
“The reason people sue is often not rooted in money as much as the person does not feel they are being treated fairly. Many organizations have gaps in their ability to facilitate conflict resolution. These gaps include a lack of mediation process, gaps in managers’ competency to resolve conflict in a collaborative manner, and policies that promote social justice and fairness. As a result, the employee may come to the conclusion they have no choice but to look outside the workplace for a solution. However, if more employers focused on resolving conflict pro-actively from within their organizations they would be positioned to reduce their risk for costly and many times unnecessary lawsuits,” VanBuskirk, says.
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Sample Return-On-Investment Scenario
Entry / Learning
Competent / Well-Motivated
Mastery / Mentors
Unmotivated and incompetent workers begin to leave or are forced out. Or, worse, they quit and stay—that is they are no longer producing at a high level but they continue to collect a paycheck.
If an organization has a team or workforce of just 50 members, with average salaries of $30,000, the cost of compensation equals $1.5 Million. If 30% of the workers are at Stage 4, or worse, Stage 5, and are beginning to lose or have lost motivation and competence, the potential for loss runs up to $450,000.
If one of our COACHING OR PERFORMANCE IMPROVEMENT PROGRAMS (PIP) could save half of the 15 people at stage 4 by moving them back to stage 3 or stage 2, where they were motivated and competent, the company would save up to $225,000 in lost productivity, drag on the motivated workers, negative impact on customers, and replacement costs of lost workers.
With a $9,000 investment in PIP, as much as $225,000 could be saved for a Return on the Investment (ROI) of $25 to $1 on the money invested in the PIP implementation.
With an ROI of 25 to 1,or $225,000/$9,000, what do you say? (With a $15,000 investment, the return is still $15 to every $1 invested.)