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A study in the UK reveals that inadequate conflict management costs businesses 33 billion pounds annually.

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UNITED KINGDOM - Centre for Effective Dispute Resolution [CEDR]

Last week at the CBI (Confederation of British Industry), the Centre for Effective Dispute Resolution (CEDR) revealed the results of its study into the amount business spends on conflict each year. From an unhappy customer to a disgruntled director, business can have the challenge of conflict come from any direction – a challenge that is not always adequately met. According to the research by CEDR, it is how you approach conflict that makes the difference and - as the 200 guests from top British companies heard - the UK is failing to manage its conflicts adequately.

In the UK alone, the CEDR calculates, conflict costs business £33 billion every year.

The cost of business disputes comprises not only amounts paid in legal fees but also the damage incurred by business as a consequence of those disputes – in fact the cost of this damage (£27bn) far outweighs the legal fees (£6bn).

The key conclusions from CEDR were:

  • British business conflict costs £33 billion a year.

  • 80 percent of disputes have a significant impact on the smooth running of business.

  • In a case that is a million pounds in value a company will consume an average of over 3 years of managerial time trying to sort it out.

  • Over a third of managers would rather parachute jump for the first time (35%) than address a problem with their team at work, and just under a third would rather shave their head for charity (27%). Some even said they would rather eat ‘bush tucker’ bugs for a week (8%).

  • Many managers do not feel comfortable addressing conflict. Half (49%) would rather attend an event at which they knew no one than tell a client a home truth and over two thirds (69%) would rather send back a bottle of wine in a restaurant than confront a boss’s underperformance directly.

The problem is compounded because many managers do not feel comfortable addressing conflict according to the research. In fact, few managers, only 37%, feel trained to cope with business conflict. The lack of confidence in managers feeling prepared to deal with disputes is worrying given that the significant consequences of conflict include the following business headaches:

  • Damage to company reputation
  • Exposure in the public domain
  • Effects on company morale
  • Effects on personal reputation
  • Damaged business relationships
  • Lost customers
  • Increased staff turnover
  • Failure to meet targets
  • Missed opportunities 

Half of mangers would rather attend an event at which they knew no-one than tell a client a home truth and seven out of 10 would rather send back a bottle of wine in a restaurant than confront a boss's underperformance directly

Over a third of managers would rather parachute jump for the first time than address a problem with their team at work, and just under a third would rather shave their heads for charity.

As part of the survey, managers were asked to rate against each other the following tasks that either involved conflict or were unpleasant:

  • Giving a speech in public

  • First parachute jump

  • Sing in public

  • Tell a colleague about poor hygiene

  • Tell a neighbour to cut down a hedge

  • Give blood

  • Swim the channel

  • Eat ‘bush tucker’ for a week

  • Sack a popular employee

  • Tell a boss to work harder

  • Tell a client they are out of line

  • Send back wine in a restaurant

  • Shave own head for charity

  • Go to an event where you know no one

  • Tell own team they are not performing

The cost of business disputes comprises not only amounts paid in legal fees but also the damage incurred by business as a consequence of those disputes – in fact the cost of this damage (£27bn) far outweighs the legal fees (£6bn).

These statistics were derived from a combination of sources.  Our estimate of expenditure on legal fees is based on published figures from The Office for National Statistics and the reported earnings of major law firms.  Our estimate of the additional damage caused to business is derived from an original research project conducted by CEDR in November 2005 in which we gathered data from lawyers and business people involved in over 300 separate business disputes.

Damaged business relationships and public exposure were the two most commonly cited adverse consequences of business disputes, but since different disputes have different characteristics it is not therefore surprising that no single consequence dominated.  CEDR identified that in 80% of the disputes surveyed, at least one (but frequently more) of these consequences were described as being “significant” or “very significant” to the business. 

The study is no yet available on line. For more information:

Andy Rogers

CEDR

Telephone:

+44(0)20 7536 6000

E-mail:

arogers@cedr.com

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