The cost of conflict

Gill Dix: Hello and welcome. I'm Gill Dix from the Acas policy team. And today we're going to be talking about conflict at work as part of our future of work series.

The podcast follows a stream of work we've been undertaking at Acas on managing conflict effectively. And in particular, we're going to be looking at new work we've published on the cost of conflict.

I'm very pleased to have the authors of this analysis with us here today. Professor Peter Urwin is from the University of Westminster and Professor Richard Saundry is from the University of Sheffield. Peter and Richard have worked closely with Acas's excellent research team to complete this important study.

I'm sure it's no surprise to hear that Acas plays an active role in supporting employees and employers as they face dispute resolution journeys. This includes providing the right skills to address conflict informally, through to helping organisations setup formal procedures. And Acas is also there when cases progress to the tribunal system, offering the chance for parties to reach a mutually agreeable settlement with our conciliators.

So conflict resolution is very much of Acas's business. And the cost of conflict is an important consideration for everyone, as we design the best dispute resolution system for the future. So I'm going to handover first to Peter, to tell us a little bit more about findings on the cost of conflict. Thanks Peter.

Peter Urwin: So each year we estimate that conflict costs around £28.5 billion for companies, employers in the UK, and this averages out to about £1,000 per employee.

If we just focus on the proportion of employees around 9, just under 10 million employees who report that they experienced conflict in 2018/2019. That's about £3,000 for each employee. So this is a large cost. Remember that 1,000 figure is spread over 28 million employees. So, we'll perhaps unpick a little bit the fact that in some companies, that average figure of £1,000 is going to be much higher, and in some companies a lot lower.

Gill: Well first of all Peter and Richard, a great thanks from Acas for this piece of work. To put costs to this area of conflict that is so central for Acas's concerns and its mission is really important and really grateful to you for doing the work and the CIPD, for sharing some data to allow this to happen.

This overall figure is quite stunning that you've cited of £28.5 billion, but I was thinking about the £1,000 per employee and what that might mean to organisations – say for businesses where maybe they've a very low investment in their staff, or they're on very low secure contracts. Is that something to worry about, the £1,000 a year?

Richard Saundry: I think one can look at this two ways. If you take a small business, that say employs, I don't know, let's say 10 people, and you say well your... that the cost of conflict on an annual basis is £10,000. So a small, for example hospitality business, that's actually a lot of money. So I think one needs to take that into account.

I think the other thing is, Peter said that £1,000 isn't distributed evenly. And one of the things that the analysis shows very, very clearly is that costs really start to escalate when things start to go wrong. If issues aren't dealt with at an early point – if good quality conversations aren't had between managers and staff – then the costs potentially start to go up very quickly.

As soon as you start to have things like absences as a result of conflict, as soon as you start to invoke formal procedures – and that can have a significant impact on things like wellbeing and engagement of staff. So that step starts to have a negative impact on productivity.

So when we look at that overall average figure, £1,000 perhaps underestimates the real impact for an organisation. Going back to my smaller, for example hospitality organisation I was talking about a second ago, if a conflict between two members of staff for example is allowed to escalate, that can have a really catastrophic impact on a smaller business.

Peter: Just to kind of follow on from that, I mean one of the... Obviously the headline figure matters, we want to give some idea of the cost to employers in the UK. But I think Richard's kind of detail of this is very important.

One of the key ways that we've gone about presenting this work is to be very transparent. So, we want to give employees an idea of where these costs come from. If they are genuinely keen on becoming better at managing conflict and trying to reduce that cost that we've estimated is eminently avoidable. How do they go about that?

And one of the key things that we find, which I'm sure we'll pick up in a second is: when resignations and dismissals start to happen, that's when costs really balloon quite significantly.

But also in Richard's example, even if somebody doesn't resign or is dismissed, this idea that companies will think "well, there's nothing, there's no problem, I can't see any resignations or dismissals..." But that idea that in the report, we've got presenteeism, we've got various forms of anxiety, depression, which translates into sickness absence. These have an enormous impact on companies.

And the hospitality sector is a good example because the quality of the human interaction with customers is so important. And conflict really impacts upon that.

Gill: Yes, I definitely think that conflict makes you feel differently about the way you work, the way you relate to your colleagues and to customers, and service industries.

I'm thinking about informal resolution as a really important goal. Where do you think employers and unions should be putting most of their effort in order to reduce the kinds of costs that you've identified in your analysis, but also allow people to have that access to the entitlement to enforce their rights if they need to?

So I suppose I am concerned about – whilst I'm fully supportive of the informal resolution, obviously as the way forward – it shouldn't be to the point of eclipsing people's opportunity to express their rights. Where do you think the efforts need to lie next?

Richard: I think organisations generally speaking, have procedures in place to deal with issues that arise in the workplace. So to deal with conflict if it escalates.

So those procedures are in place in the vast majority of workplaces. Whether they are actually applied appropriately or effectively, I think is a key question. I think one of the things that we'd say is that the skills of managers, and potentially HR practitioners in bigger organisations, to make decisions and informed decisions about when to resolve things informally – or perhaps when things should perhaps go down a formal route – is very important.

I think a lot of problems are made much worse, because actually managers and HR practitioners, and those people who make these decisions are simply not sure what to do. So they might avoid making a decision, they might avoid addressing an issue altogether. And therefore, it escalates or it's sort of swept under the carpet.

But as we've seen from our analysis, even when issues are sort of not too visible, you still have a range of really negative impacts both for the individuals involved in the organisation. So having those formal procedures and policies is still very important. People need to have routes through which they can enforce their rights.

However, once you've got that as a basis, the bit that I think organisations are really missing on is having the capacity to resolve things at an early point. A key part of that is providing managers – and in particular line managers – with the skills to have high quality conversations. And I think in too many workplaces, those skills are not provided. And those line managers don't get the support and the time, and if you like, the environment where they're encouraged to have those sorts of conversations.

And finally, just to add another thing in there, you mentioned trade unions. I think the other issue which is very important, particularly for bigger organisations, is developing really good relationships. So that... I think where conflict management works well, is where you have high trust between managers, between trade union reps, employee representatives and HR practitioners. Because that enables you to have off the record conversations and discussions which enable you to create much more effective resolutions, and to avoid the sort of defensiveness and negativity that can creep into workplace conflict if you don't have trust between those key stakeholders.

Peter: Just to perhaps add one bit, the kind of companies that Richard is talking about and which Acas will be engaging with, are companies that perhaps have got challenges but are looking to do better. There is – and this kind of responds to your point about individuals having routes to rights – there are some companies out there that are not trying to do better. That are, we often call them, they're taking the low road. They're kind of assuming that they're going to have a very high turnover rate so they don't treat staff particularly well. That's their business model.

You know, formal procedures and formal statutory obligations are very important to ensure that – just in those companies – to have those minimum standards is very important. Because I think there is a need to think of different companies, and different kinds of categories of company, and some will not be trying to do a good job in those industries.

Richard: I think that in addition to sort of harder regulation, I think there's quite a lot of potential in  sort of softer forms of regulation. So for example, you're seeing – in a number of particularly urban areas and metropolitan areas – you're seeing the development of things like good employment charters. I mean, Greater Manchester is a good example of this. And that involves things like commitments to paying the real living wage, but also it involves helping organisations develop the skills to manage some of the issues we've been talking about more effectively.

So Acas I think are working with the CIPD up in Manchester, and with the local authorities there to try to develop what they're calling "softer skills for hard times". And I think that's a route through which you can start to change attitudes in some of these sectors, where perhaps the argument to invest in conflict management capacity is a bit more difficult.

Gill: Yes, I think the charter work that we're seeing across a number of urban areas provides potential, more holistic approaches to good work.

We've all talked about the value of the trade union, we've talked about the HR role, but it seems to me that quite a lot is landing on the shoulders of the line manager. And whilst I understand the conflict competency point, and we put a lot of effort in Acas to actually support line managers in this job – in this part of their job, importantly... Do we now think that too much is resting on the shoulders of the line manager in terms of conflict management?

Richard: It's a really, really good question. And I know that when I talk about this, amongst groups of managers, sometimes I've been criticised for sounding like I am being critical of managers. And that's the last thing that I'd want to be because I think managers have an increasingly difficult job.

I've been really struck over the last few weeks when we've been recording webinars and doing podcasts like this, there's almost every single employment issue in the workplace comes down to the line manager.

So for example, the CIPD have been having a big drive very rightly on flexible working. And again, the role of the line manager has been highlighted as being absolutely critical. And it places huge amounts of pressure on that line manager.

I think there's certainly an argument to say that... Rather than HR devolving everything to line managers, when things become more complex, particularly in relation to formal process... I think there's a question mark about whether line managers actually should necessarily have the responsibility for dealing with things through formal procedure.

But where I think line manager involvement is absolutely critical, is in those early informal stages. I think one of the interesting things about the survey data on which a lot of our analysis was based, is that as well as line managers potentially being involved in conflicts – so, conflict escalating from a conversation between a line manager and employee – is that employees tend to see line managers as their most likely source of advice or guidance if they get into a problem.

So line managers are in this really interesting, very complex, but critical position. So I think line manager skills are vital. But I think I would much rather, if you like, define the area of line managerial responsibility a little better, and make sure that they're given time and space to do the job properly.

I think at the moment we're in danger of asking line managers to do virtually everything around people management, both the informal bit and the formal bit. And I think that's probably too much.

Gill: Okay, I think it's really interesting. It's not so long ago that we worked together and were looking at strategic conflict management systems. We don't seem to be talking about that quite as much as we were.

And I'm thinking about the role of the line manager was definitely one of the ingredients in the recipe of strategic conflict management where there was a basket of options that organisations were developing. But I'm wondering where it left the board and leadership, and whether now we think that leaders and businesses take conflict seriously enough.

And I'm even beginning to think less about strategic conflict management systems, but thinking that strategic conflict management engagement is actually the precursor for anything. So I suppose I'm wondering about the line manager, and then the broader picture of the board or the councils or groups and senior leaders, where they see conflict sitting?

Peter: I think it's interesting to bring in a part of the literature, and a definite change in perspective, over the last few years in terms of that kind of difference between strategic management and operational management.

So traditionally in a broader sense than just conflict resolution, business schools have taught that kind of leadership, strategic management and so on. And there's been less of a focus on the day to day operational management; people management skills dealing with the kind of process of trying to align the employees that you're managing – their kind of activities – with what the company wants.

It's an easy thing to say, but it's a massively complex, and often seen as the kind of day to day... It's not dirty as such... But really quite challenging, and not as glamorous as the strategic, big ideas, broad brush approach and so on. So for me, I think what myself and Richard have definitely been focusing a bit more on is this idea of just skilling up operationally managers.

Now, obviously, they need to be in a context where ideally the company has a very clear, strategic approach to conflict resolution. But ultimately, even in context where they're not, they can do something to make the situation better.

Gill: Yes, that's the kind of big and the small piece on it. I suppose my question remains, and in that sense it could apply to your business school scenario, whether conflict is included in the business school curriculum for senior managers? And whether you think overall that conflict management is taken seriously at the most senior level in organisations?

Richard: No it's not. I mean, that's the reality. In most organisations, conflict isn't something that's even discussed or talked about. And hopefully I think that's one valuable contribution that the research on cost of conflict can make. Because I think that if you can put that financial estimate on that, then potentially you can get organisations and senior leaders in organisations to start to take notice.

Leadership is something which people aspire to. And saying, "well actually what you need to do is you need to develop the skills to manage conflict," just doesn't sound quite so interesting. It doesn't seem, you know... it's not quite so exciting.

But it's actually critical. And I think if you compare the UK to the US, and there's a lot of problems in the US and the US labour market et cetera. But one thing where they're certainly ahead of us is on conflict management. There's all sorts of reasons for that. But if you go into an Ivy League school in one of the big universities in the States and you're doing an MBA, you will do conflict management. You know, at a reasonably high level. And the fact that we don't in the UK is seen as quite strange.

So I think one of the things that I've noticed – in a lot of the research that we've done together with you and your colleagues Gill at Acas – is that where things work really well, quite often there is a leader or there's somebody very senior in the organisation who happens to get the idea that conflict is really important to organisational performance and the wellbeing of their employees.

The reason why they've got to that point is quite often happenstance. It's quite often because they've had an experience themselves or they've been involved in an organisation where there was a particular occurrence where something really bad happened and that made people take notice.

There's very little sense, in my view, still that conflict management is seen as this key part of organisational strategy and that conflict is seen as an inevitable part of organisational life. And I think that does have to change and hopefully the work that we've done is a small contribution to changing that.

Gill: Yes, I hope it is as well. I think this is going to be very useful. I wonder if another way of turning the tables if you like, is to begin to think about whether conflict is always bad? And in my view conflict, productive conflict that's well managed, can open the door to change in a way like no other driver could. And I was wondering if you've got evidence or what your own thoughts on that proposition is?

Peter: I think, perhaps starting, it's worth reminding that the kind of headline figure of £28.5 billion is our estimate of the conflict that can be avoided. So that, without going into massive detail, it assumes – our approach assumes – that some amount of conflict in the workplace is inevitable.

And again, without going into the semantics of what do we count as conflict and so on and so forth, it's ultimately that not everybody arrives to work completely bought into every part of the corporate ideal. They have bad days and good days. The company clearly desires some kind of activity from the individual employee, and the manager sits in the middle of that.

And in a very general sense, there is some amount of potential conflict there – or misalignment you could even call it. And the manager has a key role in trying to make sure that employees do, even when they don't come in completely bought into the day's work. That they kind of do align with the company, and that everybody has a good workplace and a productive workplace.

Richard: I think as well... From my perspective, I think there's a slight danger here, which is linked to our last points of the discussion about organisations taking conflict seriously. And I think there's a bit of a danger that we talk too much about conflict as a positive, that that gives a little bit of a cop out to organisations in terms of addressing it.

And I hear quite often organisations saying, "Well no, conflict is a positive thing, we like to encourage it, it's creative and therefore, you know... We don't need to get our hands dirty with some of the more day-to-day aspects of managing that, and managing that conflict". You need to be really careful.

So yes, creative tension is a good thing. Being able to disagree in a meeting is a good thing. Being able to raise an issue is a good thing. However, where conflict is unresolved and it's not addressed, when people raise issues and then that's ignored by the organisation... Where you have a lively discussion with your manager, and then your manager takes some action against you, rather than working with you to resolve that issue... That is never going to be positive.

There is a bit of research on this and where you talk about interpersonal conflict, the research tends to suggest that resolving that conflict can be positive, can have a positive impact, but the overall impact is going to be a negative one.

Gill: And talking of scenarios in workplaces that are particularly troubled, we've seen quite a lot in the last few years over very deep-seated problems around – the effect both workplaces and society, actually – around, say, for instance, sexual harassment or racial discrimination. And in fact looking at some of your analysis, one in five do nothing at all about conflict that they experience.

And I'm wondering if workplace conflict management approaches can address some of these very deep-rooted problems, or whether the solutions lie somewhere else?

Richard: I think the solutions are multifaceted. And certainly there is a need for wider societal change. But I think organisations can certainly do something about these things.

I think we talked about upskilling managers, and one of the things that managers don't have, necessarily – and I'm not just talking about line managers, I'm talking about senior managers, I'm talking about HR practitioners – they don't necessarily have the confidence to deal with some of these issues.

And so where you have a really clear cut example – for example, let's say sexual harassment in the workplace – I think too often in organisations those issues are fudged. People try to sweep them under the carpet. They create cultures where people don't feel confident that they're going to be listened to or that the issue is going to be addressed.

And I do think that comes down to two things. I think one is the managerial confidence that we were talking about earlier, so that people can have good conversations with people but also can have the confidence to make good decisions. I think that's important. Knowing when to perhaps take a more formal approach, I think that's important. And I think having conflict management systems, if you like, where there are clear routes to raise issues.

Let's take the health service, Gill. I mean, I know you're familiar with this from the 'Freedom to Speak Up Guardian' approach that is used in the NHS. And that's a great example where that works well, in concert with other processes, procedures, with HR, with trade unions, can provide a culture where people can raise some really serious issues and they can be addressed.

But having those multiple channels through which people can raise issues is an important basic concept within conflict management and something that I think a lot of organisations could replicate.

Gill: Yes, we've seen examples of fair treatment offices in other organisations and resolution offices as well, where individuals can go to raise particular concerns. Indeed, I've been involved in the pan-sector organisation associated with speaking out and you are seeing some really interesting examples of organisations that are looking for clear routes for people to speak out.

So just a final point really, Richard and Peter: I was looking back to the 2014 publication, the Oxford Handbook of Conflict Management. And I was looking at the chapter that in fact we contributed Richard, which identified the factors associated with conflict, and I noted down: recession (2014), the competitive emerging economies, the downward pressure on public finance. And also we speculated about more rigid performance management and curiously concerns around absence. And I'm wondering, from both of you really, what's changed? What's the same? And what impact in fact, do you think the pandemic might have had on the nature of conflict that organisations face?

Richard: So I think the impact of COVID is really interesting in relation to conflict.

I think there's very little doubt that potentially COVID, the pandemic, and as we're coming out of the pandemic, and perhaps people are moving back into workplaces and organisations are trying to find their feet around more flexible approaches to work. I think there is the potential for a significant increase in conflict or certainly that provides an environment where conflict can potentially escalate.

And I think a lot of the things that we've been urging on organisations during this discussion in terms of training managers, making conflict a strategic priority is going to become increasingly important over the coming months and the next couple of years, as we hopefully move out of COVID-19.

However, I think, on the other side of the coin, there is some evidence from some sectors, and certainly I've been doing some work in the NHS during the pandemic... And there's been some evidence there of increased camaraderie, of people working together and perhaps actually putting differences to one side, and working through conflict in a more sort of productive and effective way under huge pressure.

And while the NHS is probably the most extreme example of that, I think there might have been some lessons learned in organisations, both in terms of what people are capable of in terms of working together and working effectively. But I think also in terms of the importance of people. And I think that's one of the reasons why conflict is not necessarily taken seriously as a strategic issue is because people management isn't taken seriously in many organisations as a strategic issue.

Peter: It's certainly going to be that there are more people working at distance and I think there's lots of challenges there.

One can imagine that there is potentially more room for misunderstanding, when we've got more electronic communication or more communication at distance. One of the things that we've been looking at in recent kind of diversity and inclusion work – in the context of the pandemic – is the extent to which... You know, how do you have an informal chat with your manager when actually wandering into their room or catching them in the corridor is not possible?

Everything seems a little bit more formalised when you have to set up a Teams meeting, or Zoom or something like that. So, I think there are that kind of conflict... Opportunities for misunderstanding at distance are greater, but ultimately people are having less interaction as well. So it could go either way.

Gill: Okay, thanks for that. So we sort of heard some interesting dynamics around shifts we might see, as well as a window where we might see value and purpose change in the way businesses look at themselves and look at their objectives as well, as Peter says, on ways of working. All of these things coalesce around the potential for good relations and conflictual relations.

I think we've had some great insights today and there's an awful lot more conversations to be had, as well as exciting new research for us to carry out together. So thanks very much for joining us today.

Peter: Thank you very much for having us.

Richard: Yes. Thank you. It's been great.

Gill: Thank you for listening to the Acas podcast. If you'd like more information on our research on the cost of conflict please find the links in the episode notes. Thanks again for listening, and see you next time.