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Mediation in Dollars and Sense

If you’ve heard or read anything about mediation, you’re probably aware that some of the potential benefits include, ‘enhanced understanding,’ ‘relationship preservation,’ and ‘safe space.’ For some businesspeople, the natural response is that they need not be their employees’ best friend. For them, running a business means being focused on generating profit and ensuring the long-term success of the company.

The following sketches out of some of the hidden costs of conflict in an organization and how they can be mitigated. A conflict resolution mechanism, like pre-planned access to mediation, can assist with ameliorating the elusive costs associated with differences within an organization and improving it’s cohesion and productivity. 

To be clear, diverse people, perspectives, and ideas can be a source of tremendous energy within a team.  Though these differences can lead to ‘conflicts,’ they can also be the source of intensely creative and innovative solutions.  However, these conflicts differ from the counterproductive ones noted below, which can reduce or destroy organizational cooperation. In this framework, the cost of conflict in the workplace is differentiated into three stages: frictional costs, downstream consequences, and competitive vulnerability.

Frictional Costs of Conflict – We define frictional costs as those interactions between individuals and their teams that contribute to a negative workplace environment. Looking at an organization as a machine, these costs are comparable to waste heat.  And they signal that efficiency could be improved by improving internal communication mechanisms and the conflict resolution infrastructure.

These costs can be in the form of absenteeism, hours spent on unproductive workplace conflict, or low morale, and the accompanying productivity loss. Estimating the monetary value of these losses can be difficult, but research has shown: (1) that on average more than 5% of an employee’s work hours are spent on unproductive workplace conflict; (2) that avoiding these conflicts has led to sickness or absence from work for 25% of employees; and (3) that more than 65% of workplace issues stem from strained workplace relations.

The good news is that research shows that a positive workplace culture can permeate through an organization just as easily as a negative one. A robust system for conflict management in the workplace can reduce the number of hours spent on unproductive workplace conflict, minimize absenteeism due to those conflicts, and increase morale and productivity for employees.  An on-call third party mediator or ombudsperson can enhance feelings of being heard and respected and reduce the likelihood of employees feeling marginalized or ignored by their supervisor or manager.

Downstream Consequences – The above noted frictional costs are not isolated.  Left unmanaged, they can brew into larger and more pernicious threats to organizational cohesion, and compound damage to a company’s bottom line. We define these as downstream consequences. If an organization is a machine, these costs are equivalent to the breakdown of a cluster of component parts. 

Personnel are often noted as a company’s most valuable asset. Justifiably, a great deal of effort is tasked toward hiring the right people. However, many employers underestimate the costs of losing those people once they’ve hired them.  Replacing an employee can wind up costing twice that employee’s salary due to lost productivity until a suitable replacement can be found and retraining expenses. So retention is important to any organization looking to reduce costs and protect its internal knowledge base.

Though most managers believe employees leave for more money, surveys have shown that roughly three times the number of employees cite a toxic corporate culture, rather than compensation, as the reason for their departure.  And enhanced engagement in the company (defined by Gallup as an amalgam of performance, service quality, safety, and desire to stay with their current company) can reduce the portion of workers seeking to leave an organization by half.  In addition, one out of every ten employees has reported that infighting and unproductive workplace conflict has led to project failure. That means failed pitches, lost opportunities, late or delayed fulfillment of existing orders, and unhappy clients and stakeholders.  

Creating a space in which ideas can be shared and disagreements aired in a productive environment is critical to preventing frictional costs from turning into downstream consequences and the associated costs.  A trained conflict resolution specialist can help break down communication barriers and get members of an organization collaborating without stifling the creativity and expertise of the employees. That generates the kind of engagement that will keep the right people with a company longer.

Competitive Vulnerability:

The combination of frictional costs and downstream consequences, without a conflict resolution mechanism, can result in the final cost –  competitive vulnerability in the marketplace.  This is the mechanical equivalent of component parts of an organizational machine breaking down due to poor maintenance – resulting in repeated work slowdown or stoppage. 

Dealing with conflict is among the most important aspects of any executive or managerial job – and one of the most difficult. Temptations to avoid conflict, or address it with quick decisions to get past the problem, may only exacerbate these costs and compound the problem. A better solution is to develop a robust conflict resolution infrastructure to keep one’s team’s creative energy flowing while enhancing company cohesion.  And bringing on a professional third party ombudsperson and/or a trained mediator can allow supervisors to maintain their own neutrality while ensuring employees feel heard and that workable and sustainable solutions can be found for their issues. 

Mediation, as a dispute resolution mechanism, is an under-utilized tool that could be profoundly helpful in reducing frictional costs and ultimately avoiding competitive vulnerability.  This is a competitive advantage for anyone with the foresight to include mediation in their organizational conflict resolution model.  But the reverse is also true, once the market adjusts to the reality of the benefits mediation can provide – any business that is not proactive with conflict management, risks competitive disadvantage. And while an organization can change its mechanisms for dealing with conflict, business lost in the interim may be irretrievable.


Alnoor Maherali

Alnoor Maherali is a highly skilled diplomat, dispute resolution specialist, and certified mediator. He resides in New York City and mediates for the New York Peace Institute and Venn Mediation. A ‘student of the world’ his personal and professional travel has taken him to almost 50 different countries, making him… MORE >


Ehsan Ali

Ehsan Ali is a practicing New York lawyer, arbitrator, dispute resolution specialist, and mediator. He resides in New York City and mediates with the New York Peace Institute and Venn Mediation. He attained his B.A. from American University, majoring in Communications, Law, Economics, Government and Philosophy.  He went on to… MORE >

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