Research shows that poor management damages organisational and economic performance, and an inevitable consequence of managerial failure is workplace conflict. More than 1 in 3 workers experience conflict at work at a cost of £28.5bn per year in the UK as a whole – an average of around £1000 for every UK worker.

ReWAGE's new publication: The cost of conflict at work and its impact on productivity uses CIPD research and Acas analysis to break down the costs and explains why early intervention and investment in managerial skills are the key to bringing them down.

Although conflict is a normal part of organisational life, it can be difficult to convince leaders and policymakers to take this problem seriously, in part because conflict (and its management) tends to be opaque. Around 1 in 5 of all UK employees who experience conflict do nothing about it, while two-thirds of those who resign as a result of being involved in conflict do so without first discussing it with their line manager. When workplace conflict is successfully resolved, it tends to be behind closed doors – neither recognised nor measured.

In addition, existing data sources, such as the Workplace Employment Relations Study (WERS) and Survey of Employment Tribunal Applications (SETA) do not measure the less formal and less visible processes of conflict management and resolution. However, online surveys conducted for the Chartered Institute of Personnel and Development (CIPD) using a representative sample of individuals from the YouGov panel can help us to estimate the ‘hidden’ impacts of conflict.

Overall, we estimate that 9.7 million employees experience conflict at work in the UK each year.

Breakdown of costs:

Informal resolution / early intervention: 40% of those involved in conflict discuss the issue with a line manager, 11% discuss the problem with HR and 6% talk to an employee representative. Total estimated cost: £120m each year.

Mediation: the data suggests that 5% of employees in the UK take part in some form of workplace mediation at a total estimated cost of £140m. It is notable that nearly three-quarters of those who underwent mediation (74%) also reported that their conflict had been fully or largely resolved.

Loss of productivity: conflict has a negative impact on the well-being of employees and consequently on their performance. Nearly 6 out of every 10 workers who experience conflict in the UK report suffering from stress, anxiety or depression as a direct result. The vast majority neither take time-off nor resign but just over one-quarter report a consequent drop in productivity. We estimate a reduction of 12% for a period of more than two weeks, which equates to a productivity loss per employee of 2.06 days at an average cost of £237.14 per day. Total estimated cost: £589m per year.

Time off work: around 9% of employees take time off work due to stress, anxiety and depression linked to conflict. Absence for such reasons tends to be longer than absence for physical sickness (around 17.2 days) leading to an overall loss of 15 million days per year. Total estimated cost: £2.2bn per year.

Formal procedures: WERS data suggests that there are an estimated 374,760 formal employee grievances. If we take a conservative estimate that each grievance takes an average of five days of management time, the average cost in management time is approximately £950.50. Total estimated cost: £356m per year. Disciplinary action is much more common in UK workplaces – just under 1.7 million disciplinary cases per year, costing £2bn in lost management time.

Dismissal and resignation: although relatively rare, we estimate that 485,800 employees resign each year as a result of conflict. Costs of recruitment, induction training and lost productivity amount to over £30,000 per employee, with a total estimated cost of £11.9bn connected to resignations and £10.5bn to dismissals in UK workplaces.

Litigation: Although the legal costs associated with workplace conflict are significant, litigation is rare with very few claims progressing to a hearing or settlement. Overall, the annual cost of employment litigation to employers amounts to approximately £800m, which is just 4% of the cost attributed to resignations and dismissals.

Author of the policy brief, Professor Richard Saundry of the University of Westminster, says:

“Our analysis shows that investment in effective and early resolution designed to repair the employment relationship may have a very significant return. Too often organisations fail to address and resolve problems with performance or behaviour and instead resort to dismissal or managing staff out of the organisation. The costs of replacement and bringing new employees up to speed are often hidden or at least opaque.

“The scale of these costs means that it makes much more sense to develop sound recruitment and performance management strategies to avoid such problems in the first place. But perhaps most importantly, managers need to have the core people skills to be able to have quality interactions with their staff and to have difficult conversations when necessary. There is also a strong argument to rebalance policy away from legal compliance and the effectiveness of the tribunal system towards the resolution of conflict within organisations.”

Given the high costs of workplace conflict and its impact on productivity, a number of recommendations follow from our analysis:

1. Organisations should improve their recruitment and performance management practices to minimise conflict in the workplace and encourage early intervention.
2. UK employers should ensure that managers, particularly line managers, are trained to acquire good people and conflict management skills as a matter of course.
3. Managerial capability should be a core component of government policy to boost UK productivity. It should focus on supporting the flexible and accessible provision of the skills needed to build, maintain and repair high quality employment relationships in the workplace.