Slide 2

Tag Archive | "workplace"

The Cost of employee turnover

Where there are issues of unresolved conflict in the workplace, organisations

run the high risk of losing valuable employees. Constructive, healthy working

environments are a fundamental necessity to the satisfaction of employees.

The cost it takes to replace an existing employee can run in the hundreds

of thousands. There is the cost of training new staff, paying recruitment

agencies, and interviewing time. Furthermore, time and productivity is

lost as the new recruits get accustomed to a new organisational culture,

leadership style, work ethics, and ‘feel’ of their new workplace. This cost

can vary depending on the size of the organisation and the position of the

employee, but Raytheon Corporation estimates their cost is 150 per cent

of a fully burdened employee.

‘Chronic, unresolved conflict acts as a decisive factor in at least 50% of

departures. Conflict accounts for up to 90% of involuntary departures,

with the possible exception of staff reductions due to downsizing and

restructuring’ (Dana, Daniel, Conflict Resolution, 2001, p. 22).

Companies lose out of the investment made in training their employees

only to have them leave as a result of conflict that can easily be avoided

through an effective conflict management system.

‘No matter what the cause, turnover has a number of undesirable

implications for organisations, including the costs of losing an experienced

worker, recruiting, and re-training a successor (retraining is estimated

to cost 1.5 times the employee’s annual salary), the lower productivity

of a new worker and secondary morale effects on managers, peers and

subordinates’ (Duxbury and Higgins, Work—Life Conflict in Canada in

the New Millennium: A Status Report, 2003).

‘The turnover costs for an employee is anywhere between 75% and 150%

of the annual salary’ (Phillips, D.T., ‘The Price Tag of Turnover’, Personnel

Journal, Dec. 1990, p. 58).

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The cost of organisational restructuring

Unresolved conflict in the workplace forces managers to implement

inefficient company operations in an effort to keep conflicting parties

separate. This evasive action compromises optimum processes and affects

productivity. Not only does it cause the restructuring of an organization

but it also removes opportunities where team members can come together

for collaborative problem-solving sessions. Additional staff may have to

act as intermediaries of the parties concerned, which will place a strain on

more company resources in order to keep both sides updated with current

affairs because of the ensuing cold war. The reality of conflict can also lead

to the premature promotion of difficult employees just to move them out

of the immediate situation. These restructuring costs can account for 10

per cent of the dispute.

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The cost of conflict and health

Health is a casualty of conflict in the workplace. This is highlighted in

the case of Yasmin Rehman, head of diversity for the Metropolitan Police

in the UK in 2008, who had been off sick for the one year due to stress

related problems in her workplace. Rehman earns a salary of £60,000 a

year which had been paid to her in full whilst she was on sick leave owing

to the consequences of unresolved conflict in her organisation.

A further cost results is the need to employ temporary staff to fill the

position of an employee who is suffering illness and injury as a result of

conflict. This means that not just one but two salaries are being paid during

periods of extensive sick leave.

The severity of conflict in the workplace resulting in health issues affects

the premium paid by an employee to its health insurance provider.

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Conflict in the workplace

Conflict in the workplace is one of the highest and most unrecognised

reducible costs incurred by an organisation. In a conversation with an

executive CEO, who owned a midsized company, he said, ‘I have no time

for all this soft stuff and people’s feelings and needs . . . The real issue is a

matter of talent and bottom line results.’ Even with the best talent, if the

environment is not conducive for drawing out this talent and focusing

on productive efforts, then this so-called ‘fluff ’ will cause the company

hundreds of thousands and, on several occasions, millions. A study based

on a Gallup survey showed that 31 per cent of staff is actively engaged

while 52 per cent are not. Subsequently, 17 per cent are actively disengaged

(over 23 million U.S. workers) as the result of unresolved conflict in the


It seems the soft issues of conflict are not so soft after all but are indeed

central to the business success of any organisation. According to a recent

survey from CEDR, the key conclusions drawn were:

  • Eighty per cent of disputes have a significant impact on the smooth running of business.
  • In a case that is a million pounds in value, a company will consume an average of over three years of manager’s time trying to sort it out
  • Over a third of managers would rather parachute jump for the first time (35 per cent) than address a problem with their team at work,and just under a third would rather shave their head for charity (27 per cent). Some even said they would rather eat bush tucker bugs for a week (8 per cent).

For more information see my book The Hidden Cost of Conflict in the Workplace for more information

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