Reducing the Cost of Conflict: Workplace Dispute Resolution

Work-related disputes devour a business’s time, money, and productivity. But facilitative dispute mediation is a cost-effective way of managing—and even completely avoiding—the cost of workplace disputes. Facilitative mediation is a fancy name for the process of a third party sitting down with disputants and assisting them in communicating solutions to their own conflict. The process is gaining traction with the legal community; many judges even order parties to mediation before trial. But can workplace dispute resolution (WDR) be used pre lawsuit, and if so, why bother?

1.     Workplace Disputes Create a Plethora of Costs

Some workplace-conflict costs can be traced. Employees spend about 2.8 hours per week (about 7% of a 40-hour work week) dealing with conflict. It’s estimated that managers and supervisors’ daily duties are 30% conflict related. All those hours of company time add up. Fifty percent of employees cite workplace conflict as a motivating factor in their departure. This results in costs to recruit, hire, train, and retain the replacement!

Everyone is familiar with lawsuits, another traceable cost of conflict. According to one study, U.S. businesses have about a 12% chance of an employee filing EEOC charges. About 20% of charges result in costs to defend and settle, about $125,000 on average. Employment practice liability insurance likely costs over $2,000 per year in premiums with an average deductible of $35,000. Anyone out there self-insured? Guess who’s picking up the additional $90,000 to defend and settle the case?

If the traceable costs aren’t enough of a concern, there are also disguised costs of workplace conflict. For example, how can an employer trace the decreased motivation and productivity resulting from conflict? Twenty-five percent of employees in one survey said that workplace conflict led to absence from work. About 10% of employees in the same survey said that workplace conflict was a direct cause of project failure. Think of all the ailments this can lead to within an organization: poor customer service, decreased productivity, increased absence from work, and more!

Last but not least, it’s time to air the legal community’s worst-kept secret: plaintiffs don’t always care about the law; sometimes, they just want to set the record straight! Sure, for many it’s a financial decision. But let’s not discount the power of emotion in decision making. According to a case -evaluation survey reported in the Journal of Dispute Resolution by Peter Toll Hoffman, decisions to proceed to trial, rather than settle, were influenced by a desire to be vindicated, be declared the winner, to punish the other party, and because of feelings of anger towards the other party. As Hoffman importantly notes, “humans are not merely economic machines, motivated solely by reasons of profit and loss.”

2.     The Solution: Mediate the Risk Away

As the losses pile up to the not-so-subtle “tick tock” of the clock, know that WDR programs can mitigate or avoid some of these losses. The U.S. Department of Labor Commission on the Future of Worker-Management Relations, in fact, recommends WDR. According to the commission, “Effective procedures for communication and workplace problem solving help to build the trust needed to solve problems before they escalate into complaints.” Therefore, by allowing employees to “participat[e] in creating and running the dispute resolution mechanism,” employers can mitigate workplace conflict and address problems before they escalate into costly employee absence, apathy, conflict, and lawsuits.

Law suits are the most noticeable risk exposure related to workplace disputes. HR-focused website ERE Media featured an article by employment attorney Branigan Robertson, who noted five reasons why employees sue their employers. Two reasons were because employees felt they were “treated like garbage” or “their manager was allowed to behave badly.” The article actually suggests treating employees with respect will drastically reduce the chances of being sued.

But let’s take that one step further. Give disgruntled employees a forum to discuss a workplace dispute. Let them have a hand in crafting a solution that falls within HR policies. Now there’s ownership. Call it a win-win. Employees feel their voices are heard. They feel respected. Hopefully, those 2.8 hours per week can migrate to the profit column along with some of the other costs, both traceable and hidden.

Take it from Brown and Root, who implemented workplace dispute resolution procedures, including mediation. In the first year they implemented the program, 500 employees availed themselves of the benefit. Seventy-five percent of the cases were resolved within four weeks. Any idea how long the average lawsuit takes? Two years? Three? (Fortune 500 executives spend roughly 20% of their time in some type of litigation activity.) Finally, the cost of Brown and Root’s program was “substantially less than what one large court case would cost.”

3.     Try the Cost-Effective, Risk-Avoidance Solution

What’s the best way to manage risk? Avoid it entirely, of course. No amount of mediation or workplace dispute resolution can guarantee complete avoidance. But WDR is a critical way to address the respect issue, which really boils down to the human elements of decision making, poor performance, call-ins, resignations, complaints, and lawsuits.

In conclusion, workplace dispute resolution should be used to avoid risk, reduce stress, and make the workplace an overall better and more productive environment.

I originally published this article on LinkedIn. Check it out here!

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