Siobhan Murphy
Posted on 29 Jun 2021

What impact does conflict with employees have on your organisation?

Conflict with employees within the workplace can often be seen as an inconvenience to organisations, rather than something on which focus should be placed. However, a recent report published by Acas (here) on 11 May 2021 ("Report") sets out the astonishing impact that workplace conflict is estimated to have on UK businesses, which may act as a wake-up call.

What does "conflict" mean?

"Conflict" is broadly defined and includes everything from a disagreement with a colleague or manager which results in reduced productivity, to more formal grievances or disciplinary procedures. The Report has a key focus on the costs involved for organisations resulting from:

  1. resignations, absence and presenteeism due to conflict;
  2. attempts to resolve conflict issues through informal discussion;
  3. formal process and procedure such as disciplinary and grievance procedures; and
  4. litigation.

What is the impact?

The Report found that conflict in the workplace costs organisations in the UK a staggering £28.5 billion each year, including:

  1. £2.6 billion spent on recruiting replacement employees for the 485,800 employees who resign following conflict;
  2. £12.2 billion spent on lost output as new replacement employees get up to speed with their new roles;
  3. £2.2 billion on the 874,000 employees estimated to take sickness absence each year as a result of conflict;
  4. between £590 million and £2.3 billion due to presenteeism and the impact this has on productivity;
  5. £231 million on informal discussions with employees about a conflict in the workplace;
  6. £356 million on formal grievances;
  7. £2 billion on disciplinary cases; and
  8. £282 million on Acas early conciliation and litigation, with a further £264 million spent on legal fees. In addition, the report calculates that £225 million in compensation is awarded against employers per year by the Employment Tribunal.

Perhaps unsurprisingly, the Report estimates that the largest proportion of the costs of conflict are connected to an ending of the employment relationship – either through resignation or dismissal. Costs in the early stages of conflict are relatively low in comparison. As such, the benefits of resolving conflict informally are significant.

What should employers take away from this?

As set out above, where an organisation is able to resolve conflict informally, significant costs are likely to be saved. Acas places a huge emphasis on prevention rather than cure.

The report highlights three 'takeaway' points for organisations to effectively manage conflict at work:

  1. Invest in effective and early resolution of conflict in a way that is designed to build positive employment relationships. This may include organising training for managerial staff to ensure that they are able to have effective conversations with employees, as well as having up-to-date policies in place to deal with issues such as bullying, performance, conduct, equal opportunities, and capability. The aim is that this will avoid matters escalating to the point of dismissal. The Report found that, where conflict spiralled into formal procedures, costs were more than three times those associated with informal resolution. 
  1. Implement a stronger focus on repairing employment relationships in the event of conflict, as opposed to "managing out" employees.
  1. Reduce the emphasis on legal compliance and effectiveness of the Employment Tribunal system and replace this with the resolution of conflict within organisations. To assist with this, the Report suggests that disciplinary procedures should focus more on learning as opposed to apportioning blame (albeit that this does not mean that individuals should not be held accountable for their actions). This is consistent with the Acas guidance that disciplinary procedures should aim to improve behaviour rather than punish.

For example, this might include a greater focus on the reasons why an employee committed misconduct and discussing ways in which this can be prevented in the future. To achieve this, managers need to possess the core people skills to have quality interactions with their staff.

This is not to say that there will never be occasions where an organisation should dismiss an employee. However, the Report emphasises that, ideally, this should be the exception as opposed to the norm. By placing an emphasis on resolving matters informally and trying to identify learning objective, the suggestion is that the costs savings for an organisation will be significant.

This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact Siobhan Murphy to discuss any issues you are facing.