Kennst du die Konfliktkosten, die dich Monat für Monat Konflikte in deinem Unternehmen kosten?

Überall, wo Menschen mit unterschiedlichen Ansichten und Zielen aufeinandertreffen, sind Konflikte vorprogrammiert – sie gehören schlichtweg zum Alltag und sind normal. Ob unklare Verantwortlichkeiten, unterschiedliche Wertvorstellungen, mangelnde Wertschätzung oder fehlende Informationen: Konflikte können in jedem Unternehmen schnell aufkeimen. Besonders brisant wird es, wenn solche Spannungen ignoriert oder unter den Teppich gekehrt werden – vielleicht mit einem beiläufigen „Bleib mal sachlich“. Ein wesentlicher Grund, warum viele Unternehmen Konflikte nicht offen angehen, liegt im Unbehagen, das das Thema bei Führungskräften auslöst. Konflikte gelten oft als negativ und bedrohlich für das Arbeitsklima. Außerdem ist fast niemand klar, welches die damit verbundenen Konfliktkosten sind.

What is often overlooked:

Conflicts are not only emotionally stressful, but also a real cost factor that can consume time, energy and a lot of money.

According to a 2009 KPMG study, a company with 100 employees can have up to 500,000 € per year be.

But that doesn't have to be the case. In this article, you can find out why silence is often silver and talking is gold. I will shed light on the different types of conflict costs and show you how you can reduce them in your company.

2. expensive conflicts: where your money really seeps away

When I talk about conflict, I mean any impaired realisation of your company's economic goals. Conflicts tie up resources - especially time that managers and employees waste in unproductive discussions or damage limitation. The more inefficient teamwork is, the higher the cost of conflict.

A look at a few bare figures may give you an idea of the financial dimension of company-related conflict costs:

• 15 % of the daily working time in German companies is tied up in conflicts (Hernstein Institute).

• For managers, it is even 30-50 % of their time that are directly or indirectly wasted on conflicts.

• Companies with up to 100 employees lose between 100,000 and 500,000 euros through conflict. And since time is money, it is not surprising that...

• According to estimates by the German Economic Institute an incredible 50 billion euros in costs per year in German companies due to conflicts alone.

If you want to make a quick estimate: simply calculate the personnel costs* of your managers and multiply them by the estimated percentage of time spent on conflicts. And that's just "waste of time" - it doesn't even include cancellations, absences or legal disputes.

*Personnel costs are made up of gross salary, statutory social security contributions, holiday and Christmas bonuses, further training, downtime and/or setting up a workplace. For the sake of simplicity, take gross salary + social security contributions for a quick rough calculation.

3. the three dimensions of conflict costs: people, team, organisation

A study conducted by KPMG and the University of Regensburg in 2009 provides a good insight into the various cost drivers. I will briefly introduce them to you, even if not all categories will apply to your company. hey have developed a model with three dimensions: Person, Team and Organisation. Each of these dimensions has its own conflict cost categories, which influence each other. Here is a brief overview:

I am adding another category to the model, which I consider to be important. "Waste of Time" This is time that is "wasted" on unproductive activities in connection with the conflict and that does not contribute to a better handling of the conflict.

The in the Person" dimension The costs listed are caused by the employee's own conflict behaviour. The conflict costs in the Team" dimension result from inadequate cooperation between employees. The third Organisation" dimension" finally takes into account conflict costs caused by operations, such as legal disputes.

3.1 "Person" dimension

3.1.1 Waste of time (added by myself)

Unproductive or wasted time includes

• to worry about the conflict,
• complain to third parties about the conflict,
• Spending time avoiding others involved in the conflict,
• Absence from work to avoid the conflict.

You will find this in companies of all sizes.

3.1.2. Employee turnover

It is in the nature of things that we feel comfortable where we are welcome. However, the reverse is also true: nobody likes to stay in a toxic working environment. You may have lost talented employees to the competition unnecessarily - especially if you work in a sector characterised by a "war for talent", this is particularly painful. After all, 50 % or more of resignations by employees themselves are due to unresolved conflicts! In the case of dismissals by the employer, the figure is as high as 90 %.

The Costs for subsequent recruitment and Familiarisation can be considerable. They essentially consist of the costs of advertising, fees for recruitment consultants, bonuses, activities of the HR department and the specialist department for the selection of new employees. For lower-level employees, conflict costs can amount to several thousand euros. For higher-ranking employees and managers, the costs are usually between 100 % and 200 % of salary of the departing person.

Also not to be underestimated are the conflict costs that arise from the increased workload for the remaining employees and their reduced work performance, often also caused by a drop in work motivation.

3.1.3. Illness

We are talking here about illness caused by the stress of the conflict (Klachefsky, 2008; Spector and Lee, 2013).
Dysfunctional conflicts mean stress for many people: a constant loop in their heads, poor sleep, bad moods. The result is employees who are unable to work and, in the worst case scenario, are absent for an indefinite period of time and whose workload has to be absorbed by the remaining employees, which in turn reinforces the vicious circle. There is a proven link between long-term conflicts and days of absence. In the long term, the motivation of the workforce suffers as a result of this development.

The costs of conflict can be immense due to time spent visiting the doctor, being unable to work or going to the spa. Even in companies with up to 1,000 employees, costs of over 500,000 euros are reported. Absenteeism due to workplace anxiety and bullying costs companies 30 billion euros a year.

3.1.4. Counterproductive or operationally damaging behaviour

This category includes the embezzlement of operating resources and office supplies as well as the misuse of working hours. Both can result from a lack of employee motivation and loyalty to the company. Costs arising from the misuse of working time can include private internet use, private telephone use or sleeping in the office. If you look at the figures from the latest Gallup study (Gallup Engagement Index Germany 2023), which show that 19% of employees have already resigned internally, it can make you feel a little queasy as an employer, even if not all those who have resigned internally necessarily display actively detrimental behaviour. Many tend to limit themselves to passive behaviour such as "working to rule".

3.2 Dimension Team

3.2.1 Customer fluctuation

Conflicts, especially when they become public, can cause lasting damage to a company's image. This can have long-term effects on customer relationships (and attractiveness as an employer). The loss of customers - through damage to image or poorer service - can quickly become more expensive than maintaining them in the long term. Even small companies with up to 100 employees have estimated costs of up to 500,000 euros in this regard.

3.2.2. Delays in projects

Conflicts in the founding team or management team often lead to delayed or protracted decision-making processes. As a result, important and trend-setting decisions for the company and projects are not made or are repeatedly discussed. Some entrepreneurial teams delay decisions if they fear that it could lead to arguments. Projects drag on unnecessarily, which drives up costs.

3.2.3 Missed orders

This category includes lost orders, for example due to misallocation of employees, finances or machinery caused by a lack of information that is not passed on in good time.

3.3 Organisation dimension

3.3.1 Labour law sanctionsConflicts that have legal consequences cause high costs - be it through court proceedings or labour law consultations.
Also to be considered in this context are the costs of employee appraisals conducted between managers and employees, employees and employees or between employees and the works council due to breaches of duty under labour law. In addition, there are often costs for advice on labour law sanctions from lawyers and management or HR consultancies.

3.3.2 Over- and under-regulation category

In both cases, additional costs are incurred through discussions about existing or missing rules. Provided that the discussions lead to sensible regulations or the abolition of such regulations, these costs are entirely positive, as they contribute to improving the organisation. A topic that is more relevant in larger companies

3.3.3. Category Incentive systems in need of improvementThis category includes the costs of additional work for decision-making and implementation of incentive systems, e.g. due to additional meetings, discussions and complaints (from managers, employees and the works council). This is an issue that is more relevant in larger companies.

You now have an initial overview of the different categories of conflict costs in companies. Does some of this sound familiar? If you are now nodding in agreement with some trepidation, then rest assured, that conflicts in companies are the rule and not the exception are. It is therefore worthwhile for you to take a closer look here.

4. minimise conflicts, reduce costs: this is how it works

After all these figures, one thing is clear: conflicts not only cost nerves, but also hard cash. But there are ways in which you can reduce these costs in your company.

1. promote a culture of open communication - yes, I know, it sounds banal...

It almost sounds like a truism: transparent communication is the key to avoiding misunderstandings. Why? In some cases, the biggest cost of conflict is poor decision-making. In order to make good decisions, managers need information. When dysfunctional conflict occurs, employees typically talk less to each other, which in turn leads to less information being shared. As a result, this leads to poor decisions and missed opportunities.

• Ensure transparent information flows so that all employees have access to the information they need.
• Organise a regular dialogue in which problems can be addressed at an early stage before they escalate. An extra meeting for the team (team talk, team retro) is best suited for this, in which you only focus on collaboration and
• Include a clause in your shareholders' agreement in which you stipulate how to deal with conflicts and how to proceed in the event of escalation.

And remember to "walk the talk" - you set a good example.

2. define clear roles and goals
If each of you knows exactly what is expected of you, there will be fewer misunderstandings. Define clear responsibilities, roles and goals to avoid uncertainties and conflicts.

3. team building

Team building activities promote understanding and co-operation between your employees. A strong team based on trust and respect can often resolve conflicts independently before they escalate. With regular team building events, you promote mutual understanding and appreciation, which reduces the likelihood of conflict in your company. In interdisciplinary projects, you could bring together employees from different departments and promote the exchange and understanding of the respective tasks and challenges.

4. regular feedback rounds

Regular, constructive feedback helps to recognise and address dissatisfaction at an early stage. This gives your employees the opportunity to voice their concerns and work together to find solutions. Feedback meetings help to recognise dissatisfaction at an early stage and address it in a targeted manner. Recognising and appreciating good work motivates your employees and reduces the potential for conflict as they feel valued and heard.

5. build conflict competence
Recognising your own conflict style can help you to navigate conflicts more elegantly. Developing conflict skills in your founding or shareholder team can help you to understand conflicts, distinguish between functional and dysfunctional conflicts and thus resolve unnecessary conflicts at an early stage. Conflict management training for employees also helps to resolve tensions independently and professionally.

5. examples from practice:

In 2012, KPMG and Unternehmerschaft Düsseldorf published a best practice paper on the topic of conflict management, which shows how conflicts can affect costs in practice.

Specific examples were used to illustrate the sums that can be involved:

Example 1: In a small creative agency with only four employees, a lack of structure led to considerable tension. The conflict costs in the year of the conflict amounted to an impressive 66,000 euros.

Example 2: A bullying conflict between a manager and his team dragged on for around three years and caused 433,500 euros in costs. Mediation, on the other hand, which finally resolved the conflict, only cost 30,000 euros.

Example 3: Years of disputes between the works council and management over pay scale classifications led to annual costs of 225,000 euros (with 16 managers and works council members involved). The mediation, which ultimately brought about the breakthrough, cost the company just 21,000 euros.

Another example shows an entrepreneur with foresight (CFO of an automotive supplier with 1400 employees) who assumed that Conflict competence in the company a positive ROI has:

In 2013, he initiated a conflict resolution centre within the company because he was convinced that he could reduce downtime by more than two per cent by resolving a number of known conflicts. Assuming a loss of €300 thousand per % of downtime per year, the following years resulted in Savings in the order of around € 900 thousandafter the Downtimes constant from 18% to below 15% per cent could be reduced.

Conclusion

Conflict costs are an often underestimated but significant burden for companies. They not only affect the productivity of your company, but can also jeopardise its success in the long term. Through proactive measures such as an open communication culture and the development of conflict skills, you can minimise the negative effects of conflict and therefore the costs. Invest in the prevention and management of conflicts - and create not only a better working environment, but also a more productive and profitable company.

Would you like to get to know your conflict style or do you want to tackle a conflict? Then get in touch here simply contact me.

Sources:

https://mediationworks.com/wp-content/uploads/2016/11/cost-of-conflict-whitepaper-.pdf

https://www.ccl.org/articles/leading-effectively-articles/the-cost-of-conflict-incompetence/

https://www.betriebsrat.de/news/konflikte-kosten-geld-20241#:~:text=Ein%20paar%20durch%20Studien%20belegte%20Zahlen&text=Konflikte%2C%20die%20zu%20Behandlungskosten%20und,Kosten%20f%C3%BCr%20Fehltage%20durch%20Mobbing.

https://www.henning-landers.de/konfliktkosten-in-unternehmen/

KPMG study from 2009: https://www.stephan-lindner.de/wp-content/uploads/2009_Konfliktkosten_Reibungsverluste_in_Unternehmen.pdf

https://www.dzkk.de/PDF/konfliktkosten-management2012.pdf