BRIDGE  MEDIATION  LLC  

       

“COST  OF  CONFLICTS.      Do  you  really  know  how  much  conflicts  can  cost  to  companies  

and  individuals?    ”    

       

Author:  Alessandra  Sgubini  LLM  

       

         

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Introduction:    Do   you   really   know   how   much   workplace   conflict   can   cost   companies   and  individuals?    We  evaluated  and  calculated  the  cost  of  internal  and  external  conflicts  in  the  workplace,   including;   financial   loss,  health   issues  and  time  loss.    The  results  were  shocking!    Conflicts  arise  everywhere,  among  different  types  of  parties,  in  different  parts  of  the  world,  between  international  parties  and  for  different  kind  of  reasons.       In  the  last  decade,   we   have   promoted   conflict   resolution   methods,   such   as   mediation   and  utilizing   problem-­‐solving   skills   to   resolve   conflicts.     These   can   be   used   both  alternatively   and   complementary   to   the   traditional   legal   system   for   the   benefit   of  the  businesses  and  individuals.        Today,  we  offer  trainings,  lectures  and  actual  mediation  practices  around  the  world  to   resolve   civil   and   commercial   conflicts.     However,  we   continually   face   the   same  challenges:   the   skepticism   of   people   towards   these   concepts   on   the   benefits   for  them  as  businesses  and  individuals.    People  may  be  aware  that  conflicts  harm  their  businesses   and   lives,   but   they   do   not   know   the   actual   financial,   emotional   and  physical  consequences  of  conflicts.        Regardless  of  the  complexity  of  the  issue,  many  individuals  believe  that  litigation  is  the  only  option  to  bring  justice  and  peace  to  their  situation.    We  explain  that  in  the  majority  of  cases,  alternative  methods  will  save  them  a  lot  of  money,  time  and  health  issues.   Unfortunately,   many   individuals   don’t   realize   the   actual   consequences   of  litigating  the  matter  or  they  may  just  not  be  ready  for  a  fight  in  court.    Before  they  know  it,  litigation  of  their  internal  and  external  conflicts  are  out  of  control.    This  can  be  devastating  on  their  mental,  physical  and  financial  health.    Due   to  my   training   and   experience   in   conflict   prevention   and   resolution,   I   realize  that   there   are   always   at   least   two  parties   in   a   conflict   and  we  may   find  ourselves  dealing  with   unreasonable   people   and  we   have   to   fight   to   protect   our   values   and  rights.   Even   in   this   scenario   always   keep   in   mind   the   economical   and   health  consequences  when  you  start  or  respond  to  a  fight.  We  also  need  to  remember  that  each   of   us   have   different   personalities   and   may   handle   conflicts   in   completely  different   way.     The   consequences   of   conflict   on   our   health   may   also   be   different  based  upon  multiple  factors.    I   have   been   involved   in   resolving  multiple   conflicts   and   realize   how  much   it   can  costs.     I   decided   to   conduct   a   study   on   how   much   conflicts   actually   cost   for  businesses   and   individuals   on   the   economical,   time  waste   and   health   levels   and   I  decided  to  share  with  others.    The  results  were  shocking  and  reveal  that  regardless  of  the  work  position  or  individual,  we  are  responsible  for  our  own  success  or  failure  based  on  our  decisions  on  how  we  decide   to  resolve   the  conflicts  and  and  conflict  preparation.      

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   Our  research  and  the  results:    The  purpose  of  this  project  is  to  show  the  actual  economic  consequences,  the  time  spent/wasted   and   the   health   consequences   of   external   and   workplace   conflicts  (hereinafter   referred   to   as,   “Internal   Subtle   Conflict”).         All   of   those   aspects  combined  can  be  devastating  to  an  business  entity  and  can  result  in  bankruptcy  or  long-­‐term   financial   struggles.       Additionally,   it   can   create   an   unpleasant   work  environment  and  adverse  health  consequences.    These  aspects  combined  can  greatly  affect  our  workplaces  and  society.    We   took   into   consideration   2   types   of   conflicts:   External   Major   Conflicts   and  Internal  Subtle  conflicts.  The  external  conflicts  are  those  that  arise  between  two  entities  or  individuals,  and  internal  subtle  conflicts  that  arise  between  individuals  in  the  same  organization  or  group  (Internal  Subtle  Conflict).    We  spent  a  great  deal  of   time   calculating   the   related   monetary   costs,   the   loss   of   productivity   and   the  health  consequences  on  each  individual  involved.    We  conducted  our  research  by  reviewing  real  case  studies  and  hypothetical  studies  based   on   real   numbers,   real   time   loss   and   real   health   consequences   related   to  conflicts.    While  the  costs  and  time  of  the  External  conflicts  are  much  easier  to  find  out  because  legal  costs  and  time  spent  in  the  conflicts  by  attorneys  and  court  system  are  widely  available.  The  actual   Subtle   Internal   Conflicts   costs  were  much  more  difficult   to   collect.     There   are   multiple   reasons   that   these   costs   were   difficult   to  obtain,   including:   1)   people   don’t   communicate   and   share   issues   with   others  regarding   financial  and  time   loss,  and  2)   It   is  really  difficult   to  collect  numbers  on  financial  loss  due  to  internal  conflict  from  entities,  and  3)  Health  consequences  are  difficult  to  quantify  because  of  different  personalities  and  genders.      We  were   able   to   collect   this   data   based   on  previous   research,   questionnaires   and  hypotheticals  based  on  real  numbers.  The   results   were   shocking   and   revealed   that   both   business   and   individuals   are  responsible   for   preventing   conflicts.       We   created   charts   to   demonstrate   the  outcomes.     (Chart   #1:   cost   of   external   conflicts;   Chart   #2:   Cost   of   internal   Subtle  Conflicts;  Chart  #3:  Health  consequences.)    Cost  of  external  conflicts:    Appendix  Chart  #1:    Cost  of  external  conflicts    For  the  purpose  of  this  article,  we  generalized  and  identified  External  conflicts  as:    General   breach   of   contract,   Nondisclosure   agreement,   Trade   secret,   Patent   and  trademark,  Debt   collection,   Intellectual  property,   and  Disputes  about  merchandise  quality.    Those  conflicts  arise   for  various  reasons  that  we  were  able   to  summarize  in:   unfulfilled   expectations,   misunderstandings,   bad   negotiation,   cultural  differences,  and  competition.      We  started  to  study  the  actual  damages  and  the  consequences  of  those  conflicts  for  the  business.    We  asked  businesses  to  identify  the  consequences  of  external  conflicts.    

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The   results   are   summarized   as:     Negative   impact   on   the   reputation,   loss   of  productivity,  loss  of  good  customers,  bad  investments,  and  loss  of  time    and  money.      We   went   deeper   and   researched   the   financial,   emotional   and   physical   costs  associated  with  external  conflicts.    To  calculate  the  total  cost  of  litigation  in  the  USA,  we  multiplied  the  average  of  an  attorney  fee  ($  350  per  hour)  by  the  time  spent  in  litigation  yearly.  In  order  to  calculate  the  time  spent  in  litigation  we  estimated  an  average  of  2  hours  per  day  dealing  with  a  single  case  and  2.5  year  to  get  to  a  solution  that  it  means  1,050  working  hours  spent  in  litigation  yearly.  The  total  cost  of  litigation  at  the  end  will  cost  to  the  business  or  individual  $367,500.      We  also  took  into  consideration  two  major  alternative  dispute  resolution  methods  to  the   traditional   legal   system.     We   calculated   the   cost   of   both   Arbitration   and  Mediation.  We  researched  real  data  for  Arbitration  from  an  arbitration  organization  in  the  USA  and  we  estimated  that  the  time  spent  in  arbitration  is  60  hours.    Total   cost   of   arbitration   will   be   $49,000   (included   attorney   fees,   arbitrator   fees,  administrative  fees,  depositions,  and  experts).  We  followed  the  same  process  for  Mediation  and  we  estimated  an  average  of  8  hours  for  the  process  and  an  administrative  time  of  2  hours  for  a  total  of  10  hours.    Total  cost  of  mediation  will  be  $7,100  (included  attorneys’  fees,  mediator  fee  and  administrative  fee).    In  our  study  we  analyzed  the  overall  time  saving  and  in  order  to  calculate  the  time  saving  you  subtracted  the  time  taken  by  the  different  processes.  Time  savings  between  Arbitration  and  Litigation  is:  1,050  h  -­‐  100  h  =  950  h    Time  savings  between  Arbitration  and  Mediation  is:  100  h  –  20  h  =  80  h    Time  savings  between  Litigation  and  Mediation  is:  1,050  h-­‐  20  h=  1,030  h    We  finally  analyzed  the  overall  money  saving  in  using  the  different  processes.    Cost  savings  between  Arbitration  and  Litigation  is:  $  367,500  -­‐  $  49,000  =  $  318,500  Cost  savings  between  Mediation  and  Arbitration  is:  $  49,000  -­‐  $  7,100=  $  41,900  Cost  savings  between  Litigation  and  Mediation  is:  $  367,500  -­‐  $  7,100=  $  360,400    Our   real   case   study   was   based   on   trademark   infringement   and   intellectually  property  disagreements.    The  study  showed  that  if  just  one  of  the  parties’  acts  in  bad  faith,  it  creates  a  loss  of  time  and  money  for  all  the  parties  involved.    The  resulting  legal   battle   also   increases   time   and   money   loss.     In   our   real   case   the   parties  attempted  mediation  and   the  cost   related   to   this  procedure   including  attorney   fee  for  one  party  was  $3,500.    Because   the   one   party   was   not   in   good   faith,   the   conflict   didn’t   resolve   with  mediation  and  a  lawsuit  was  filed.    The  legal  cost  for  the  party  interviewed  by  us  is  over   $20,000,   the   case   has   been   ongoing   for   nine   months   and   there   have   been  multiple   health   consequences,   including;   stress,   productivity   loss,   and   sleep  deprivation.    

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 The   evidence   and   results  make   it   abundantly   clear   that   alternative   dispute  methods  greatly  decrease  financial  and  productivity  loss,  and  adverse  health  consequences.    The  responsibility   is  on  the  decisions  that  we  take  to  resolve  conflicts.    As  we  mentioned  above,   there  are  always  at   least   two  parties   to  a  conflict  and  when  we  face  unreasonable  people  we  need  to  fight  to  protect  our  values  and  rights.    Even  in  this  scenario,  always  keep  in  mind  the  economical  and  health  consequences  when  you  start  or  respond  to  a  fight.      Cost   of   Internal   Subtle   conflicts:  Appendix   Chart   #2   Cost   of   Subtle   Internal  Conflicts    For  the  purpose  of  this  article  we  identify  4  Types  1  of  Internal  Subtle  conflicts.    Group   A:   Intrapersonal   Conflicts:   can   be   defined   as   a   conflict   occurring   in   the  mind   of   the   single   individual.   We   identify   these   types   of   conflicts   as:     Conflicts  related   to   criticism,   conflicts   related   to   self-­‐esteem   and   conflict   caused   by   the  influence  of  medication,  alcohol  or  drugs.    Group  B:   Interpersonal   Conflicts:   can  be  defined  as  a  conflict  associate  between  two   people.     Based   on   our   research,   interpersonal   conflict   occurs   between   an  individual  and  other  people.  We  identify  these  types  of  conflicts  as:  Conflicts  related  to  delegation,  Conflicts  related  to  quality  of  the  final  outcome,  conflict  caused  by  the  influence  of  medication,  alcohol  or  drugs.    Group  C:   Intragroup  Conflicts:  can  be  defined  as  a  conflict  occurring  between  the  individuals  in  a  community  or  an  institution.  We  identify  these  types  of  conflicts  as:  Conflicts   related   to   Personality   differences,   Cultural   Differences,   Conflict   between  line  managers  and  their  reports.  Group  D:  Intergroup  Conflicts:  can  be  defined  as  a  conflict  occurring  between  two  or   more   social   groups.   We   identify   these   types   of   conflicts   as:   Conflict   between  employees   in  entry-­‐level/front-­‐line   roles,  between  different   levels  of  management,  between  middle  managers,  and  between  first-­‐line  management/supervisors.    All   those   conflicts   arise   for   various   reasons   that   we   were   able   to   summarize   in:  Competition  for  resources  (money  –  time  –  materials),  Opposite  personal  interests,  When   responsibilities   become   unclear   (Lack   of   clarity   about   accountability),  Interpersonal   relationships,   Differing   Values   (Lack   of   honesty   and   openness),  Personality   Conflicts,   Poor   communication,   Personal   problems   (Poor   selection/  pairing  of  teams),  Subpar  performance,  Harassment,  Limited  resources,  Ego,  Stress,  Heavy   workloads,   Poor   leadership,   Taboo   topics   (office   affairs)   and   Perceived  discrimination.      We   started   to   study   the   actual  monetary   damages   and   the   consequences   of   those  internal  subtle  conflicts  for  the  business  and  the  individual.    We  asked  real  employees  the  general  consequences2  and  the  following  is  a  summary  of   their   responses:   Waste   of   time   and   resources,   Sub-­‐Optimization,   Stress,  frustration  and  anxiety,  Anger  and  frustration,  Loss  of  Sleeping,  Loss  of  appetite  or  overeating,   Headaches,   The   feeling   of   being   unapproachable,   Violence   among  

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members   (Personal   insults   or   attacks),   Absenteeism,   Increased   client   complaints,  Disability   claim,   Sick   leave,   Loss   of   productivities,   Loss   of   good   employees,   Cross-­‐departmental  conflict,  Bullying,  Project  failure  ,  Demotivation.    We  researched  whether  it  was  possible  to  combine  real  numbers  to  these  concepts3.    We   started   from   a   hypothetical   salary   in   the   USA   for   one   employee   earning   $15  hourly  payment.  We  then  multiplied  $15  by  8  working  hours  per  day  to  determine  a  daily  salary.      For   our   hypothetical   example,   we   took   into   consideration   4   types   of   businesses  based  on  the  size  and  the  numbers  of  employees:    

• MICRO:  5  employees    • SMALL:  30  employees  •  MEDIUM:  150  employees    • BIG:  625  employees.  

In  order  to  calculate  the  cost  of  subtle  conflict,  we  took  and  combined  our  data  with  a  Research  Study  conducted  by  Jeff  Hayes  in  2008.    .  In  this  study  the  cost  of  conflict  for  each  employee  varies  between  140%  and  300%  of  his  base  salary.  Which  means  that   according   to   this   research,   the   business   pays   an   extra   of   40%   for   the   subtle  conflicts  up  to  the  200%,  in  addition  to  the  actual  salary.      Chart  #2:  Cost  of  Subtle  Conflicts.    In  one  year  one  employee  earns  $25,200  which  is  100%  of  the  cost  for  the  company  and  if  the  same  employee  is  in  any  kind  of  conflict  the  business  will  have  to  pay  an  extra  40%  of   the   salary   that   is  equal  =  $10,080   for  minor   subtle   internal   conflicts  per   year.   This   number   can   go   up   to   200%  of   the   salary   if   the   subtle   conflicts   are  more  serious  which  means  and  extra  of  $50,400  that  the  business  needs  to  pay  for  one  employee.  In   the  best   scenario  of  a   small   subtle  conflict  one  employee  cost   to   the  business  a  total  of  $35,280  per  year.    The  worst  scenario  for  a  serious  subtle  conflict  will  cost  $75,600  per  year.  These   numbers   are   only   refer   to   one   employee.     If   in   our   hypo   we   take   into  consideration  5  employees  in  conflicts  the  total  cost  annually  (salary  +  conflict)  will  range  between  $176,400  to  $378,000.    These  results  suggest  that  Internal  Conflicts  may  cost  a  business  between    $50,400  up  to  $252,000  per  year  for  5  employees    In   order   to   calculate   the   time   loss   in   conflicts   we   again   combined   Jeff   Hayes’  Research  Study  and  our  data.     In   this   research  we  see   that   in  2008,  2.8  hours  per  week   are   spent   dealing   with   conflicts   in   USA.       Annually,   117.6   hours   are   spent  dealing  with  subtle  internal  conflicts  that  will  translate  into  a  loss  of  productivity  of  $1,764  yearly.  To   calculate   the   total   loss   for   business   dealing   with   conflict   per   year   for   one  employee  is  between  $11,844  and  $  52,164.  

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 The  health  consequences  of  the  conflict:  Appendix  Chart  #3  Health  consequences      For   the   purpose   of   this   article   we   interviewed   individuals   and   researched   the  underlying  health  consequences  of  external  and   internal   subtle  conflicts.  We  were  able  to  identify  and  summarize  some  of  the  health  consequences:    Waste  of  time  and  resources,  stress,  frustration  and  anxiety,  anger,  loss  of  Sleeping,  Loss  of  appetite  or  overeating,   Headaches,   the   feeling   of   being   unapproachable,   violence   among  members  (Personal  insults  or  attacks),  Absenteeism,  Sick  leave,  Demotivation.      In  our  studies,  we  were  able  to  calculate  the  monetary  damages  that  the  individual  faces   while   in   the   conflict.   Often,   individuals   continue   to   face   additional   health  consequences  after  the  conflict  is  over  and  pays  them  out  of  pocket.  Those  expenses  need  to  be  added  to  the  general  expenses  that  we  already  showed.      Our  1st  Case  study:    This   workplace   conflict   involved   upper   management   and   involved   bullying   and  harassment  at  work.    There  was  no  trust  from  the  boss  and  another  manager  and  no  opportunities   for   growth   and   career.     They   questioned   her   ethics,   integrity   and  loyalty,   professional   skills,   leadership   ability,   performance.     Additionally,   it   had  become  an  “edgy”  work  environment.    The  conflict  lasted  about  1  year.      The  conflict  arose  when  the  former  boss  left  the  company  and  the  new  boss  feared  disloyalty.    The  situation  ended  with  a  negotiation  in  which  the  parties  negotiated  a  way  out.      Below  is  a  statement  of  some  of  the  consequences  experienced  by  the  individual:      

“I  couldn’t  function  anymore  and  couldn’t  have  a  normal  social  and  personal  life.  This  situation  at  work  has  created  a  very  unpleasant  work-­‐place  environment,  full  of  tension,  and  for  my  standards  it  has  been  unacceptable.  These  behaviors,  events  and  situations  have  been  having  a  huge   impact  on  my  well-­‐being,  my  health  and  created  a  lot  of  emotional  stress  and  tension.    I  also  started  to  get  very  sick,  vomit,  be  weak,  have  anxiety  attacks  and  I  couldn’t  function  anymore.  So  I  started  to  do  medical  exams  to  understand  what  is  wrong  with  me  (I  am  a  cancer  survivor,  and  I  even  thought  I  had  a  cancer  relapse,  which  increased  my  worry).  Thankfully  all  tests  were  negative  but,  as  my  oncologists  and  doctors   underlined,  my   illness   and   general   unwell-­‐being  were   linked   to   external  factors  such  as  the  ones  mentioned  before  that  have  impacted  my  immune  system  and  my  well-­‐being.  In  fact,  after  my  medical  history  I  have  to  be  extremely  careful  about  my  health  and  emotional  stress  is  the  worst  enemy  for  it.    Today  -­‐  based  on  medical   records   and   what   doctors   have   said   my   immune   system   (already  weakened  by  cancer  and  therapies)  is  completely  down  due  to  emotional  stress  and  tension   -­‐   as   u   know   I   have   been   now   sick   for  more   than   a  month,   which   is   not  normal.  

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I  have  tried  to  make  it  work  for  one  year  as  I  had  hoped  it  would  get  better,  but  the  situation  has  not  improved,  on  the  contrary  it  got  worse.”  

 Unfortunately,   even   though   the   actual   workplace   conflict   may   end,   other  consequences  remain.    Below  is  a  summary  of  the  additional,  out-­‐of-­‐pocket  financial  costs   that   occurred   after   the   workplace   conflict   had   ended.     These   costs   are   in  addition  to  the  costs  listed  above:      Therapist:    $200  /hour  and  I  see  her  twice  a  week  Psychiatric:  $500  the  first  visit  and  $175  the  following  one,  once  a  month  Doctors:  approx.  $1,500    Prescriptions:  $100/month  I  should  be  on  these  prescriptions  for  about  1  year  at  least  Attorneys:  approximately  a  total  of  $3,000      Our  2nd  case  study:    Our   second   case   study   involved   conflict   over   the   different   strategic   views   of   the  scientific   program   that   the  manager  was   leading.     The   conflict   last   for   a   year   and  involved   the   group   of   people   that   were   reporting   to   the   upper  management   and  myself.    The  most  relevant  cause  was  that  the  team  lost  the  support  from  the  VP.    He  was   laid   off,   which   led   to   an   internal   conflict-­‐of-­‐interests   within   the   upper  management.     Losing   his   support,   they   found   themselves   struggling   with   the  scientific   decisions   that   followed.     I   didn’t   understand   or   agree   on   the   scientific  reasons  and  decisions  that  were  made.  I  found  that  the  new  leader  of  the  group  was  not  scientifically  prepared  and  I  didn’t  agree  or  respect  a  lot  of  the  scientific  choices  that  were  made  at  the  time.    The  conflict  arose  because  of  personal  dislike,  lack  of  scientific  respect,  and  lack  of  trust.  After  few  months  of  negotiations,  both  parties  agreed  on  health  insurance  benefits  and  severance  packages  for  the  manager  departure.      In  this  case  no  legal  aspects  were  involved.    There  were  two  months  of  negotiations  between  upper  management  of  the  company  and  the  manager  directly.    The   consequences  of   the   conflict  was   that   the  employee   left   the   company  and   the  personal   consequences   turned   to   be   better   than   when   the   person   was   in   the  company.    

“I  was  happy  not  to  deal  anymore  with  scientists  that  I  did  not  respect  from  a  scientific  and  managing  point  of  view.  I  negotiated  a  severance  package  for  six  months;  all  vacations  not  used  paid,  a  year  and  a  half  health  insurance  paid.    No  consequences  on  my  health,  I  regained  my  tranquility  and  I  could  focus  

again  on  my  personal  priority.”      Those  are  the  health  consequences  that  no  one  talk  about  but  are  real  and  can  damage   the   individual,   their   family,   the  work  environment,   the  organization  and  the  entire  community.    

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   Conclusion:  After   we   conducted   this   research   and   found   the   shocking   results   on   the   actual  money   and   time   spent   in   dealing   in   conflicts   and   the   health   consequences   on   the  individual   (and   these   aspects   are   later   brought   in   families,   communities   and   the  world)   we   firmly   believe   that   in   today’s   world   managers,   professionals   and  individuals   need   to   have   problem   solving   skills   as   mandatory   skills   and  organizations  have  the  responsibility  to  implement  a  conflict  resolution  system.      With   this   study  we  are  able   to   show   the  damages   that   conflict   actually  bring  with  itself  with  focus  on  the  cost  of  external  and  internal  conflicts  from  a  business  point  of  view  and  how  conflicts  can  affect  the  business  on  the  productivity,  the  time  waste,  economically  loss  and  health  damages.      Our   recommendation   in   this   global   society   has   to   be  mandatory   for   a   business   to  implement   in   their   own   organizational   culture   the   conflict   resolution   system   and  problem  solving  trainings  not  only  as  a  system  but  also  as  requirement  skills  of  the  employee  of  all  levels  (including  upper  management)  those  skills  reflected  in  the  CV.  These   skills   are   vital   for   the   business   as  well   for   the   individuals   that  work   in   the  organization.   The   concept   of   alternative   dispute   resolution   methods   such   as  mediation   has   to   be   known   to   all   level   as   a   source   of   responsibility   of   our   own  success  or  our  own  failure.    Also  we  need   always   to   remember   that   each   of   us   has   different   personalities   and  background  and  when  we  deal  with  conflicts  in  a  completely  different  ways  and  the  consequences   under   the   health   aspect   are   different   based   on   our   personal  upbringing  and  personality.      

I,  Alessandra  Sgubini,  would  like  to  thank  all  the  researchers  of  this  article:  Petia  Dimova  Grozeva,  Stefano  Corradino,  Mohammed  Aldossari.  I  would  also  like  to  dedicate  a  special  thanks  to  the  people  who  so  kindly  and  openly  shared  their  data  and  experiences  with  us  to  benefit  the  rest  of  the  world.  A  special  thanks  to  Molly  Erickson  that  spent  hours  editing  this  article.    

   Bibliography:      1  http://smallbusiness.chron.com/examples-­‐4-­‐types-­‐conflict-­‐1207.html  2    http://www.psc.gov.nl.ca/psc/rwp/costofconflict.html    3  http://www.crsmediation.com/cost-­‐of-­‐conflict-­‐in-­‐business/    4  2008  "Workplace  Conflict  and  How  Businesses  can  Harness  It  to  Thrive"  July  2008  by  Jeff  Hayes,  CEO,  CPP,  Inc,  https://www.cpp.com/Pdfs/CPP_Global_Human_Capital_Report_Workplace_Conflict.pdf  (last  visited  May  14,  201)  

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Appendix #1 Cost of External Conflicts  

                                                                         COST  OF  TIME  AND  MONEY   TOTAL    COST  OF  LITIGATION  IN  HYPO  OF    $500,0001  

• Attorney  fee  goes  from  $  130-­‐800      

• Average    $  350  per  hour                                                              

   TOTAL:  $  367,500  

 LITIGATION  TIME  SPENT2  

• 2-­‐5  years  if  we  take  an  average  of  2.5  years    

• 1,050  working  hour  in  2.5  years    

 TOTAL:  1,050  HOURS  

                       MONITORY  COST  OF  ALTERNATIVE  DISPUTE  RESOLUTIONS4  

 

             ARBITRATIONA  

Time:  

v Estimated  60  hours  includes  the  attorney  time  total  of  100  h  

Cost:    

v Initial  case  filing  fee  +  case  handling  fee  =  $6,100  

v Hourly  fee  for  arbitrator  $350  v $21,000  split  by  both  parties  =  

$10,500  per  party  v Expert  fees  =  $5,000  v Deposition  costs  for  2  depositions  =  

$2,000    v Attorney  $  350  $  21,000  

       MEDIATIONB  

Time:    v Generally  mediation  last  for  average  

8  h  v Administrative  time  average  2  h  v Estimate  time  attorney  work  on  the  

case  10  h    v Estimate  10h  

Cost:    v Mediator  Cost  $350  v Administrative  fee  average  of  $100  v Attorney  fees  $350    

   

               ARBITRATION:    • TOTAL:  $49,000  • TOTAL:  100  hours                      MEDIATION:  • TOTAL:  $7100  • TOTAL:  20H  (between  

the  mediator  and  the  attorney)  

 SAVING  OF  TIME  AND  MONEY   TOTAL  

 TIME  SAVING  

• Time  saving  between  arbitration  and  litigation  is:  1,050  –  100h    • Time  saving  between  arbitration  and  mediation:  100-­‐20  • Time  saving  between  litigation  and  mediation  is:  1,050  h-­‐  20  h  

950  h  80  h  1,030  h  

 MONEY  SAVING  

• Money  saving  between  arbitration  and  litigation  is:  $  367,500  -­‐$49,000  • Money  saving  between  mediation  and  arbitration:  $  49,000-­‐$7,100  • Money  saving  between  litigation  and  mediation:  $  367,500-­‐$  7,100    

$  318,500  $  41,900  $  360,400  

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1 COST OF LITIGATION: In the USA the attorney fees goes from $ 130 to $ 800 per hour and we considered an average of $ 350 per hour. 2 LITIGATION TIME SPENT: In order to calculate the time spent in litigation we estimate an average of 4 hours per day dealing with a single case. Weekly: 2 h x 5 working days = 10 h per week Monthly: 10 h x 4 week =480 h per month Yearly: 40 h x 10.5 working months = 420 h per year In 2.5 year there are 1,050 working hours spent in litigation. 3 TOTAL COST OF LITIGATION: We multiplied the average of an attorney fee ($ 350 per hour) by the time spent in litigation yearly. The cost of litigation is = $ 350 x 1,050 h = $ 367,500. 4 MONETARY COST OF ALTERNATIVE DISPUTE RESOLUTIONS: We calculated and took in consideration the two major Alternative Dispute resolution Method such as Arbitration and Mediation as alternative to the traditional legal system. AARBITRATION: We researched real data from an arbitration organization in the USA and we estimated that the time spent in arbitration is 60 hours and the hourly fee for an arbitrator is $ 350 per hour. In order to calculate the fee of arbitration we needed to multiply the time spent by the hourly fee for an arbitrator. Cost of arbitrator is = $ 350 x 60 h = $ 21000, that means $ 10,500 per party. An attorney costs an average of $ 350 per hour and for 60 hours the cost will be $ 21,000. In order to calculate the total cost of arbitration we need to consider - the initial fee and case handling fee $ 6,100 - the cost of the arbitrator is $ 21,000 divided per party $ 10,500 - the expert fees $ 5,000 - the deposition cost for 2 depositions $ 2,000 - the cost of attorney $ 15,000 Total cost of arbitration = $ 6,100 + $21,000+ $ 5,000 + $ 2,000 + $ 21,000 = $ 49,000 B MEDIATION: A generally mediation last for an average of 8 hours for the process and an administrative time of 2 hours for a total of 10 hours. The average of the mediator cost is $ 350 per hour and for 10 hours the cost will be $ 3,500. In order to calculate the cost of the mediation we have to consider - Mediator cost $ 3,500 - Attorney fees $ 350 that will spent on the case at least 10 hour - Administrative fee average $ 100 Total cost of mediation = $ 3,500 $ + $ 3,500 $ + $ 100 = $ 7,100 5 TIME SAVING: In order to calculate the time saving you need to do the subtraction between the time taken and time taken by the different processes. Time saving between arbitration and litigation is: 1,050 h - 100 h = 950 h

Time saving between arbitration and mediation is: 100 h – 20 h = 80h

Time saving between Litigation and mediation is: 1,050 h- 20 h= 1,030 h 5 MONEY SAVING: In order to calculate the money saving you need to do the subtraction between the costs of the different processes. Cost saving between arbitration and litigation is: $ 367,500 - $ 49,000 = $ 318,500

Cost saving between Mediation and Arbitration is: $ 49,000 - $ 7,100= $ 41,900

Cost saving between Litigation and Mediation is: $ 367,500 - $ 7,100= $ 360,400

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Appendix #2: Cost of Internal Subtle Conflicts.

SIZE OF BUSINESS

SALARY1

Based on Hypo $ 15.00 x hour

ACTUAL DAMAGES OF CONFLICTS FOR BUSINESS2

40% TO 200% of base salary

TIME LOSS3

Productivity LOSS from time loss 4

TOTAL COST OF CONFLICT (Damages + Profit Loss) 5

Hypo 1 employee

Daily $120 Weekly $600 Monthly $2,400 Yearly $25,200

Daily: $48-$240 Weekly: $240 - $1,200 Monthly: $960- $4,800 Yearly: $10,080 - $ 50,400

Weekly: 2.8h Monthly: 11.2h Yearly: 117.6h

Monthly: $168 Yearly: $ 1,764

Monthly: $1,128-$4,968 Yearly: $11,844- $52,164

MICRO 1-10 HYPO Monthly salary for 5 employees

Monthly: $12,000 Yearly: $126,000

Monthly: $4,800- $24,000 Yearly: $50,400 - $252,000

Weekly: 14h Monthly: 56h Yearly: 588h

Monthly: $840 Yearly: $ 8,820

Monthly: $ 5,640- $24,840 Yearly: $ 59,220- $ 260,820

SMALL 10-50 HYPO Monthly salary for 30 employees

Monthly: $ 72,000 Yearly: $ 756,000

Monthly: $28,800-$144,000 Yearly: $32,400- $1,512,000

Weekly: 84h Monthly: 336h Yearly: 3528h

Monthly: $5,040 Yearly: $ 52,920

Monthly: $33,840- $149,040 Yearly: $ 355,320 - $1,564,920

MEDIUM 50-250 HYPO Monthly salary for 150 employees

Monthly: $ 360,000 Yearly: $ 3,780,000

Monthly: $144,000 - $720,000 Yearly: $1,512,000- $7,560,000

Weekly: 420h Monthly: 1680h Yearly: 17640h

Monthly: $ 25,200 Yearly: $264,600

Monthly: $169,200- $745,200 Yearly: $1,776,600- $7,824,600

BIG 250-1000 HYPO Monthly salary for 625 employees

Monthly: $ 1,500,000 Yearly: $ 15,750,000

Monthly: $600,000- $ 3,000,000 Yearly: $6,300,000 - $31,500,000

Weekly: 1750h Monthly: 7000h Yearly: 73 500h

Monthly: $105,000 Yearly: $1,102,500

Monthly: $705,000- $3,105,000 Yearly: $7,402,500- $32,602,500

 1   THE   HYPO   SALARY   is   based   on   $15   hourly   payment.   Which   means   that   it   would   be   $15  multiplied  by  8  working  hours  per  day.  This  gives  us  the  result  of  $120  per  day.   In  a  month  we  have  20  working  days,   so   the  monthly   salary  will  be  $120  multiplied  by  20  days,  which  means  that  the  Hypo  Salary  is  $2,400  per  month.  And  per  year  it  will  be  10.5  working  months  multiplied  by  $2,400  per  month,  this  gives  us  the  amount  of  $25,200  hypo  salary.    

• $15  hourly  x  8  hours  daily=  $120  daily  • $120$  daily  x  5  days  weekly  =  $600  weekly  • $600  weekly  x  4  weeks  monthly  =  $2,400  monthly  • $2,400  monthly  x  10,5  months  yearly=  $25,200  yearly*  

*All  of  these  results  refer  just  to  one  employee.  So  for  our  hypothetical  example  we  will  have  to  multiply  by  the  numbers  of  employees  we  take  in  consideration  for  each  type  of  business:  

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 MICRO:  5  employees    SMALL:  30  employees  MEDIUM:  150  employees  BIG:  625  employees    2  ACTUAL  DAMAGES  OF  CONFLICT  FOR  NUSINESSES:  In  order  to  calculate  the  cost  of  subtle  conflict  we  take  the  data  from  the  research  of  2008  “Workplace  conflict  and  how  businesses  can  harness   it   to   thrive”   by   Jeff   Hayes   where   it   is   considered   that   the   cost   of   conflict   for   each  employee  varies  between  140%  to  300%  of  his  base  salary.  Which  means  that  according  to  this  research  the  business  beside  the  actual  salary  pays  an  extra  of  40%  for  the  subtle  conflicts  up  to  the  200%.  For  example:  In  one  year  one  employee  earns  $25,200  which   is  the  100%  of  the  cost   for  the  company  and   if  the    same  employee  is   in  any  kind  of  conflict  the  business  will  have  to  pay  an  extra  40%  of  the  salary  that  is  equal  =  $10,080  for  minor  subtle  internal  conflicts  per  year.  This  number  can  go  up  to  200%  of  the  salary  if  the  subtle  conflicts  are  more  serious  which  means  and  extra  of  $50,400  that  the  business  needs  to  pay  for  one  employee.      In   the   best   scenario   of   a   small   subtle   conflict   one   employee   cost   to   the   business   a   total   of   $  35,280  per  year.  While   in   the  worst  scenario   for  a  serious  subtle  conflict  will  cost  $75,  600  per  year.    These   numbers   are   only   referring   to   one   employee.     If   in   our   hypo   we   consider   to   take   in  consideration  5  employees  to  be  in  conflicts  the  total  cost  annually  (salary  +  conflict)  will  range  between  $  176,400  to  $378,000.  So  it  means  only  conflicts  will  cost  from  $  $50,400  up  to  $252,000  per  year  for  5  employees      3   THE   TIME   LOSS:   In   order   to   calculate   the   time   loss   in   conflicts  we   take   in   consideration   a  research  done  in  2008  called    “Workplace  conflict  and  how  businesses  can  harness   it  to  thrive”  by  Jeff  Hayes,  CEO,  CPP,  Inc.  in  this  research  we  see  that  in  2008,  2.8  hours  per  week  are  spent  dealing   with   conflicts   in   USA.   So   each   employees   will   spend   2.8   hours   per   week   dealing   with  conflicts,  this  means  that  in  one  month  the  time  loss  will  be  2.8  h/week  by  4  weeks=  11.2  hours  per   month   and   11.2   h/monthly   by   10.5   months=117.6h   per   year.   In   the   chart   we   take   a  hypothetical  number  of  employees  in  each  type  of  businesses  as  it  follows:  

-­‐ MICRO  BUSINESS:   in  a  company  of  10  employees  we  consider  that  5  of  them  deal  with  conflicts,  this  means  that  per  week  2.8  h/week  per  employee  by  5  employees=  14  hours  weekly  spent  by  5  employees  dealing  with  conflicts.  And  monthly  this  is  14  x  4  weeks=  56  monthly  hours  spent  in  dealing  with  conflicts  by  5  employees.  Per  year  this  will  be  56  by  10.5  working  months  per  year=  588  hours  per  year  spent   in  dealing  with  conflicts  by  5  employees  in  micro  business.  

-­‐ SMALL  BUSINESS:  in  a  company  of  50  employees  we  consider  that  30  of  them  deal  with  conflicts:   2.8   h/week   by   30   employees=   84   hours   weekly   dealing   with   conflicts   by   30  employees.  84  h/week  by  4  weeks  =  336  hours  monthly.  336h/monthly  by  10.5  working  months=  3528  hours  per   year   spent   in  dealing  with   conflicts  by  30  employees   in   small  business.    

-­‐ MEDIUM  BUSINESS:  in  a  company  of  250  employees  we  consider  that  the  average  of  150  deal  with   conflicts:   2.8   h/week   per   employee   by   150   employees=   420   h/week   for   150  

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employees.   Per  month   420  by   4=   1,680  hours  monthly.   Per   year:   1,680  by   10  working  months=   17,640   hours   per   year   dealing   with   conflicts   by   150   employees   in   medium  business.    

-­‐ BIG   BUSINESS:   in   a   company   of   1000   employees  we   consider   that   the   average   of   625  employees   deal   with   conflict.   Which   means   that   2.8   h/week/employees   by   625  employees=   1,750   hours   per   week   spent   by   625   employees   in   dealing   with   conflicts.  1,750h/week   by   4   weeks=   7,000   hours   per   month.   7000h/month   by   10.5   working  months=  73,500  hours  per  year  spent  in  dealing  with  conflicts  by  625  employees.      

4  PROFIT  LOSS  FROM  THE  TIME  LOSS:    To  calculate  the  Monetary  cost  per  year  the  formula  that  we  follow  is    Profit   loss   from   the   time   loss=  hours   spent  dealing  with   conflicts  per   year  multiplied  by  hourly  earning  Which  means  we   need   to  multiply   the   hours   spent   yearly   dealing  with   conflicts   by   the   hourly  earning   (which  hypothetically   is  15  dollars  per  hour).  For  example,  as  we  have   in   the  chart,  an  employee   spends   117.6   h   per   year   dealing   with   conflicts   which   means   that   the   total   lost  translated  in  money  will  be  117.6  h  by  $15  the  hour  =  $1,764.    *For  the  monthly  profit  loss  refer  to  the  chart.    5TOTAL  LOSS  FOR  CONFLICT    To  calculate  the  total  loss  for  conflict  per  year  the  formula  that  we  follow  is:    Total  loss=monetary  cost  per  year  (profit  loss  per  year)  +  yearly  cost  for  subtle  conflicts  (actual  damages  per  year)  for  the  hypothetical  number  of  employees  in  each  type  of  business.      For  example,  for  one  employee  first  we  have  to  calculate  the  actual  damages:  which  are  between  40%  and  200%.  As  we  have  on   the  chart   the  annual   salary  based  on   the  hypothetical  earning  of  $15  per  hour,   is  $25,200.  So  the  actual  damages  for  one  employee  will  be  between  40%  of  $25,200  and  can  get  up  to  200%  of  $25,200,  which  is  $  10,080-­‐  $  50,400.    Once  we  have  the  actual  damages  per  year,   in  order  to  calculate  the  total   loss  per  year  we  have  to  sum  the  profit  loss  from  time  loss,  which  we  already  explained  how  to  get.  So  yearly  per  employee  a  profit  loss  will  be  the  117.6  hours  spent  in  conflicts  by  $15  hourly  earning=  $1,764.    So   the   total   loss  yearly   for  one  employee   is  between  $1,764  +  $10,080=  $11844  and  $1,764  +  $50,400=  $52,164.                        Appendix  #3:  Health  Consequences  

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LIST CAUSES CONSEQUNCES COST

GROUP A

Intrapersonal Conflict1

Conflicts related to criticism Conflicts related to self-esteem Conflict related of cause related under the influence of medication, alcohol or drugs

Competition for resources (money – time – materials) Opposite personal interests When responsibilities become unclear (Lack of clarity about accountability) Interpersonal relationships Differing Values (Lack of honesty and openness) Personality Conflicts Poor communication Personal problems (Poor selection/ pairing of teams) Subpar performance Harassment Limited resources Ego Stress Heavy workloads Poor leadership Taboo topics (office affairs) Perceived discrimination

Waste of time and resources Sub-Optimization Stress, frustration and anxiety Anger and frustration Loss of Sleeping Loss of appetite or overeating Headaches The feeling of being unapproachable Violence among members (Personal insults or attacks) Absenteeism Increased client complaints Disability claim Sick leave Loss of productivities Loss of good employees Cross-departmental conflict Bullying Employees were moved to different departments or fired Project failure Demotivation

1st Real Case study: Therapist: $ $2,00USD/hour and I see her twice a week

Psychiatric: $ 500USD the first visit and 175USD the following one, once a month Doctors: $ approx. 1,500 USD Prescriptions: $ 100USD/month I should be on these prescriptions for about 1 year at least Attorneys: $ about 3,000 USD

GROUP B

Interpersonal Conflict2

Conflicts related to delegation Conflicts related to quality of the final outcome Conflict related of cause related under the influence of medication, alcohol or drugs

GROUP C Intragroup

conflict3

Conflicts related to Personality differences Cultural Differences Conflict between line managers and their reports

GROUP D Intergroup

conflict4

Conflict between employees in entry-level/ front-line roles Between different levels of management Between middle managers Between first-line management/supervisors

GROUP E External conflict5

Breach of contract Non disclosure agreement Trade secret Patent and trademark Debt collection Intellectual property Dispute about merchandise quality Relations with bank and government

Unfulfilled expectations Misunderstandings Bad negotiation Cultural differences Competition

Reputation Loss on productivity Loss of good employees Bad investments Loss of customers Loss of money

Attorneys: Average Attorney fee goes from $ 130-800

General therapy: Average Doctor fee goes from $ 300- 500

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1Group  A:   Intrapersonal   Conflict:   can  be  defined  as  a  conflict  occurring   in   the  mind  of  the  single  individual.  Based  on  researchers  intrapersonal  conflict  means  a  battle  existing  or   occurring   within   the   individual   himself.   This   conflict   can   develop   out   because   the  individual  has  trouble  of  choosing  between  two  possible  alternative  options,  or  has  mix  positive   and  negative   feelings   toward   some  decision,   or  when   the   individual   sees   only  negative  consequences  to  his  alternatives.    Intrapersonal  conflict  occurs  when  a  person  has  trouble  internally  choosing  between  two  or  more  goals.      2  Group   B:   Interpersonal   Conflict:    can  be  defined  as   a   conflict   associate  between   two  people.  Based  on  researchers   interpersonal  conflict  occurs  with  an   individual  and  other  people.  This  conflict  can  develop  between  co-­‐workers,  siblings,  spouses,  roommates  and  neighbors.    3   Group   C:   Intragroup   Conflict:   can   be   defined   as   a   conflict   occurring   within   the  individuals   in  a  community  or  an  institution.  Those  conflicts  happen  when  two  or  more  people  that  work  for  the  same  organization  do  not  get  along  and  the  personal  battle  of  those  individuals  can  effect  the  entire  organization.  Examples  of  intragroup  conflict  can  be   a   disagreement   and   misconceptions   of   team   members:   strategy,   ethnic,   religion,  gender   prejudice,   perceived   or   real   injustices   and   various   personality   differences.   Any  businesses   to   be   productive   need   to   be   balanced   and   keep   the   harmony   between   the  people  in  the  organization  otherwise  the  major  damages  will  be  in  the  productivity  of  the  organization  and  it  will  effect  all.      4  Group   D:   Intergroup   Conflict:  can   be   defined   as   a   conflict  occurring   between   two  or  more  social  groups.    Example  of  those  conflicts  can  be  related  to  the  quality  of  the  final  outcome   of   a   project   that   involve   two   departments   of   the   same   organization.   The  disagreement  on  how  to  implement  a  new  product  in  the  same  organization  can  involve  different  departments  and  the  managers  of  each  group  may  think  different  strategies  in  order   to  do   that.  Another   example  of   intergroup   conflict   is   related   to  battles  between  different   departments:   accounting-­‐operation   team,   front   line   workers   and   online  customer  care.  The  battles  can  translate  in  miscommunication  or  no  communication  at  all  effecting  the  entire  organization  to  function.      

5  Group   E:   External   conflict:   those   conflicts   arise   among   different   types   of   parties:   1.  Business   Entities   vs.   another   business   entities.   2.   Business   Entities   vs.   Individuals.   3.  Between  Different  Individuals