Conflicts in the workplace are an underestimated cost driver. Not only do they lead to productivity losses, staff turnover and sickness-related absences, they also have a negative impact on employees’ mental health and the working atmosphere. Studies show that conflicts cost billions every year, while sustainable solutions not only relieve companies financially, but can also make a positive contribution in the area of ESG (environment, social, governance). Measures for conflict management in companies are increasingly being included in the social aspect of ESG reports – another reason why companies should pay more attention to this topic.

The cost of conflicts: Figures, data, facts

ACAS study: Conflicts cost 28.5 billion pounds a year

• Total costs: Conflicts cause annual costs of 28.5 billion pounds (approx. 32.5 billion euros) in the UK.
• Per employee: This corresponds to an average of 1,000 pounds (approx. 1,140 euros) per employee per year.
• Employee turnover: Around 485,800 employees leave their jobs every year due to unresolved conflicts. Recruitment and induction costs alone amount to 11.9 billion pounds (13.6 billion euros).
• Sickness-related absences: Conflict leads to 1.7 million extra sick days, costing businesses £2.2 billion (€2.5 billion).

Supplementary studies: Conflicts are a global problem

The ACAS results are supported by other international studies:

1. CPP Global Human Capital Report (2008)²:

• Employees spend an average of 2.8 hours per week dealing with conflicts.
• The cost of this lost time in the USA amounts to 359 billion US dollars per year.

2. Gallup study (2020)³:

• A poor working atmosphere and unresolved conflicts drastically reduce employee motivation. The global engagement deficit leads to an estimated annual productivity loss of 7.8 trillion US dollars.

3. Institute for Employment Research (IAB, Germany)⁴:

• In Germany, mental health-related absences, which are often triggered by conflicts, account for around 18% of all sick leave.
• Long-term absences due to mental illness have risen by 64% in the last ten years.

These figures make it clear that conflicts are not only stressful for individuals, but also entail considerable costs for companies and national economies.

ESG and conflict management: a lever for the social aspect

Conflicts and their management are playing a growing role in ESG reporting, particularly in the area of “Social”. A healthy working environment and a strong corporate culture that proactively addresses conflicts not only contribute to productivity, but also signal a sense of responsibility towards employees. Measures such as conflict management systems or mediatior pools promote:

• Employee well-being: This reduces absenteeism and staff turnover.
• Diversity and inclusion: Conflicts are often exacerbated by misunderstandings in diverse teams. Systematic conflict management can better integrate cultural and personal differences.
• Attractiveness as an employer: A positive working environment strengthens the employer brand and reduces costs due to high staff turnover.

Investments in conflict resolution strategies can therefore be included in ESG reports as long-term measures for sustainability and social responsibility.

7 strategies for reducing conflict costs

1st Strategy: Training managers in conflict management

Managers should be able to recognize and de-escalate conflicts at an early stage. Effective training content:

• Mediation techniques
• Early detection of potential conflicts
• Empathic conversation

2nd Strategy: Introducing KPIs for conflicts

In order to make conflicts measurable, companies should develop KPIs (key performance indicators):

• Number of reported conflicts per quarter
• Average duration of conflict resolution
• Costs due to fluctuation and absenteeism
• Employee satisfaction (e.g. Net Promoter Score)

The regular evaluation of these KPIs creates transparency and highlights any need for action.

3rd Strategy: Training conflict mediators

Internal conflict mediators are specially trained employees who act as moderators in the event of conflicts. Their tasks:

• Mediation in conflict situations
• Promoting a culture of open discussion
• De-escalation

4th Strategy: External mediation pool and conflict hotline

Serious conflicts often require external expertise. Companies should set up a pool of mediators with experienced mediators in order to be able to react quickly to conflicts. In addition, an anonymous conflict hotlinewhere employees can get initial assistance.

5th Strategy: Establishing internal conflict management systems

• Early warning systems such as regular employee surveys
• Mediation processes with clearly defined escalation levels
• Conflict management training for HR employees

6th Strategy: Promoting preventive measures and cultural change

An open corporate culture reduces the potential for conflict. This includes

• Transparent communication channels
• Regular feedback meetings
• Team building measures

7th Strategy: Using digital tools for conflict resolution

Combining economic success and social responsibility

Conflicts in the workplace are a significant cost factor that is often underestimated. At the same time, conflict management offers a great opportunity to strengthen both the economic efficiency and social responsibility of companies. Investing in conflict competence and conflict management in the company not only reduces direct costs such as fluctuation and absenteeism, but also promotes the mental health of employees and the corporate culture. These measures should be seen as a long-term investment in sustainability – and have their rightful place in ESG reporting.

Conclusion

Sources

1. ACAS study
2. CPP Global Report
3. Gallup study
4. IAB report