CONFLICT COSTS for the EMPLOYER
2016 update to follow
£84 Million. Cost to the Tribunal System Yr 2010-11
Awards (a median) 2010 was £10,000, and the maximum was £227,208
In Yerrakalva v Barnsley (2011) the Employers Costs were £90,000
As soon as any form of conflict in the workplace takes place, the question of cost arises. Disruption to the business, loss of productivity, stress and absence issues, recruitment issues, management time etc etc. We haven’t begun to consider the cost of investigations, legal expertise and litigation in general. Hidden, additional costs, will include reputation. We all want to be ’an employer of choice’.
An employee is paid to work for a contracted period of time each day/week/month/year. Most employers understand that breaks occur such as sickness, maternity leave and leave of absence for compassionate reasons, etc. So, we understand that employers are unlikely to receive a 100% ratio of work output to salary.
However, when conflict occurs, this is ‘dead time’ as far as work output is concerned as nothing is being achieved. So the ratio alters and the employer is paying for no work output. A dead cost.
Is it easily measured? Probably not. Does it occur? Almost definitely.
£20,000 : Starting Costs – preparing a Tribunal Defence.
SCENARIO A: So let us take an example. Employees A and B are paid a salary of £24,000 each. A conflict in the workplace arises between employee A and employee B. Let us say that it affects the output of employee A by 10% and employee B by 5%. Employee A is more because he is the initial protagonist and he spends time thinking about how he can disrupt employee B (writing a diary, collating evidence, building a vexatious case). Employee B then suffers the actions of A and thinks about retaliation. Both employees are now performing at a reduced level of output for their employer (lost productivity).
In the case of A the output reduction we assume is 10%. £24,000 pa is approx £2000 per month and 10% is £200. Since B suffers only 5% reduction in work output the total cost to the employer is £300 per month. Should the employer be worried about a £300 per month cost to the business? Probably not, because a good line manager will be able to ’nip the situation in the bud’, bring the whole issue to conclusion – and that is the end of it for £300.
Ever heard of Collusion, or collective bullying? (See our Law section). Well this is where an issue escalates to a whole department, and bystanders become involved, probably involuntarily. Even the manager(s) can get involved as happened in a recent case that we have been working on. So now look at the scenario as it can quite easily play out.
SCENARIO B: A manager has a spat with his manager. Small to start with but escalation takes place. The senior manager reports to a weak manager who takes no action. The junior manager then incites the whole department (20 employees) to take his side of the argument and the whole situation escalates over a period of time.
In this scenario we have just investigated it escalated over a period of FOUR YEARS! You do the Math, but we believe this issue has cost that employer in the region of £350,000!
If you have a situation, just do the Math for yourself. We are only surmising salary levels in our example but you can get pretty good idea of a minimum cost any issue is taking off your bottom line.
WHAT TO DO
A barristers brief fee for a 5 day hearing might be anything between £2,000 and £15,000
Well, you can see from the above, the first thing to do is to acknowledge that there could be a risk to the business if discrimination, malpractice, unacceptable conduct or bullying and harassment is occurring in your organisation.
The first thing to do is investigate. Trigger your policies and procedures where necessary. Assuming your First Line Managers are competent in dispute resolution and have been on a workshop diversity training course – encourage them to ‘manage’ the situation. Plenty of organisations provide Leadership and Diversity Training (See our Training Section) – we do ourselves. A budget of circa £2,000 should easily cover the cost of 6 to 8 managers attending for one or two days.
Allow a barrister fee of between £5,000 and £23,000 (excluding the Solicitors fee).
We have found that where conflict gets out of hand it is because the first line manager won’t or can’t take action at the very early stage. With training this can be overcome – especially where the training is action oriented.
Next, if you know something is wrong so involve your HR Director/manager. If you are an SME (Small, Medium size Employer) and don’t have an HR manager, call us. We operate as an Outsourced HR Function for a number of organisatoins.
The first route to resolving the issue is through Mediation. The core competencies of a good line manager ‘match’ those of a Mediator (ie: good listening skills, motivational skills, leading and empowering skills). However, a third-party mediator can bring a great deal to the table – sitting between the protagonists to try to effect a solution. The key benefits of this are that it is a least cost method of resolution, it can take place over a very short period of time (days), and it is unlikely to leave a permanent scar on the employees. Nip it in the bud ! If that proves unsucessful, a fuller investigation may be necessary.
An independent investigation will cost between £5,000 and £20,000
Which brings us to the next level of involving a third party specialist organisation to come into your company and carry out a workplace investigation. A good investigator will provide you with a complete run down on what is happening, who is involved and what to do to bring the whole situation to a conclusion. Many will even carry out the recommendations for you as well.
It is difficult to estimate the cost of an investigation as each has different circumstances, and differening numbers of witnesses to interview.
For an informal discussion call us.
HR & Diversity Management Limited
Tel: 07734 701221 Email: firstname.lastname@example.org