Leader Volume 7, Number 12
Many Costs of Conflict
Levine, a trainer, mediator, and lawyer is the founder of
ResolutionWorks, a management consulting organization (Alameda,
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.
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.
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.
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.
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
• 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
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.
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
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
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
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
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.
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
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.