#377  from Innovative Leader Volume 7, Number 12          December 1998

The Many Costs of Conflict
by Stewart Levine

Mr. Levine, a trainer, mediator, and lawyer is the founder of ResolutionWorks, a management consulting organization (Alameda, CA; www.ResolutionWorks.org; 510-814-1010). This article is adapted from Getting To Resolution: Turning Conflict Into Collaboration (Berrett-Koehler, San Francisco, 1998). NOTE: The above website will calculate the cost of conflict for you!

In 1994, 18 million cases were filed in U.S. courts at a cost of $300 billion. I once read that 20% of Fortune 500 senior executives’ time is spent on litigation-related activities. Imagine the tally that adds up to. It’s commonplace for legal fees to exceed the value of the amount at stake. Years ago, if a situation had more than $100,000 at stake, litigation was a viable alternative. Today the benchmark is $1 million and growing quickly. Following the old paradigm is very costly!  The cost of conflict represents a resource drain of huge proportion and a source of great unhappiness and discomfort.

Why So Expensive?

Traditional court systems, what you may think of as the usual way of resolving conflicts, don’t foster resolution. Their operative premise is that someone will win. Our dispute- resolution machinery often fuels the fire of conflict and impedes resolution. Worse, while engaged in the conflict-resolution process, your productive activity, what your life is really about, is diluted. The system doesn’t foster resolutions that address the underlying sources of conflict--breakdowns in relationships. The process isn’t designed to get people back to an optimal state of productivity.

The current system embodies struggle, control, and a survival of the fittest mentality. It is based on dialectic, right/wrong, either/or patterns that originated in Aristotelian logic. Even though we live in a densely populated, rapidly changing, technological world that cries out for systems that foster collaboration, individuals and institutions tenaciously cling to old habits.

Elected representatives often believe that we can legislate ways of treating each other. Often they have a knee-jerk response to enact a new rule or regulation in response to a problem. This doesn’t work. The standards essential for a functional social fabric cannot be legislated. There’s little of the bedrock ethics and values that were taught by the educational community and religious institutions and were fostered in extended families.

Alvin Toffler, author of Future Shock, stated: “The place we need really imaginative new ideas is in conflict theory. That’s true with respect to war and peace, but also it’s true domestically. The real weakness throughout the country is the lack of conflict resolution methods other than litigation and guns.” Toffler is on the right track. Our current crisis is caused by both the aspects of today’s conflict resolution system and the way that it is administered, such as:

•   Increase in the body of statuary and case law reflecting the growing numbers of lawyers, and complex transactions requiring regulation.

•  Commercialization of the legal tradition fostered by competition and advertising.

•  Growing reliance on counselors and therapists who care for our internal conflict and feed our conflict-avoidance mentality.

•  Attorneys’ conflict of interest because their practice of hourly billing results in a devotion to process, not results.

•  The growth of the contingent fee and a class of cases in which there is nothing to lose by taking a chance.

•  The legal, economic, and emotional minefields of the litigation process.

•  The myth of finding truth and justice in a courtroom, a myth that has been perpetuated by the role models celebrated on TV.

These reasons are symptoms. They evidence a breakdown in the covenants of trust between people who are members of the same “community.” They point to a lack of communication. People are focusing on themselves. They are concerned about their “rights” and “entitlements” without thinking about their responsibilities toward others. This all flows from the win/lose systems and practices that are in place.

Let’s examine the cost of doing things the present way. As we review the many different costs, imagine how much more you might accomplish if you could harness the resources expended, the money and energy used in the battle of traditional conflict resolution. Imagine using those resources to produce the outcomes you want.

The Cost of Conflict

The cost of conflict is composed of: 1) Direct Cost--fees of lawyers and other professionals; 2) Productivity Cost--value of lost effort and time; 3) Continuity Cost-- loss of ongoing relationships including the “community” they embody; and 4) Emotional Cost--the pain of focusing on and being held hostage by our emotions

Direct Cost.  Because of an inability to face conflicts, many of you spend money you can’t afford on professional gladiators hired to do your bidding. A divorce between two people whose only asset is their home can transform that residence into legal fees. The process brings out the worst in people who thought enough of each other to marry, but now can’t even sit down and talk.

A few years ago I was called into a situation of two brothers who were business partners in a third-generation family business.  They had reached impasse over the strategic direction their company would take. They believed they had to engage in a battle about placing a valuation on their business.  Each hired a lawyer and each lawyer retained a forensic accountant to place a value on the business. By the time I was called they had stopped speaking to each other, based on their respective lawyer’s advice.  In just the preliminary stages of the “battle” they had spent over $60,000 on professional fees and they were barely at the beginning.

Productivity Cost.  Time is a valuable, but limited, commodity. When people are focused on rehashing the past, they cannot create and produce value in the present. There are two aspects of this cost: direct loss and opportunity cost. The direct loss is the value of a person’s time--what the person should be earning but isn’t being paid because they are engaged in the conflict. The opportunity cost is the value the person might have produced if their energies were focused on creation and innovation.

Doug and Frank designed two innovative forms of management technology. These processes were significant additions to the knowledge base about personal productivity and leadership. They battled for over a year about who owned the intellectual property they had developed. The productivity loss from their feud boggles the mind. Instead of many students and clients getting the value of what they discovered, their time was devoted to fighting. That direct loss was their loss in revenue. The opportunity cost consisted of the value of new innovations that might have been developed during the conflict.

Continuity Cost.  Continuity costs result from being stuck in the past--costs such as the loss of relationship and community.  Gary was on a fast-track management development program.  He was transferred to manage the branch office of a financial services company.  Unfortunately he could not get along with Brandy, the office manager. Gary objected to the way Brandy completed reports, and the way she socialized with coworkers and clients.  Even though she had been doing things her way for years, and even though Gary was made aware of the power she had in the local community, he was insistent on her following standard policy.  He would not back off  and they ended up in a nasty confrontation.  Gary’s youth forced him to test his power as “the boss.”

Two years later both Gary and Brandy are gone.  Brandy quit and went to work for the competition.  It takes two people to do what Brandy accomplished, and they can’t do it as well.  Revenues for the office are down 10%.  The cost: $230,000 per year.

Emotional Cost.  Sometimes there are situations you can’t let go of: a fight with a spouse, boss, coworker, neighbor, friend, partner, or the person who ran into your car. The emotions of anger, fear, and blame grip you and force a reaction that saps your current productive capacity. Instead of going about your business, you are riveted on the injustice done to you and the untoward behavior of the perpetrator. You are consumed with vengeance and desire to punish the wrongdoer. You expend energy on your anger in addition to the loss you already have suffered. All of this energy will never be recovered.

Randy finally received the promotion he was longing for. That was the good news. The bad news was his inability to focus on his job. He was going through a messy child custody battle with his ex-wife. That stirred up all of the anger he was holding about the past relationship. She wanted to mediate the dispute, but Randy was set on winning. Unfortunately he lost his job. It was a position that required all of his attention. He missed two important deadlines because his mind was focused on the past.