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Costs to Organizations

How to calculate costs

Mistreatment at work — ranging from incivility to bullying (including illegal discrimination and harassment) — results in psychologically unsafe work environments that operate on a climate of fear.
 

Fear, stress symptoms, gossip, absenteeism, presenteeism (at work but checked out), and turnover go up. Productivity, morale, innovation, and customer happiness go down.


In the long-term, costs add up for organizations.



Research shows that bullying at work can cost an organization up to $100,000 per employee (Violence and Victims, 1990) and the US organizations anywhere from $64 billion to $300 billion annually in total (Clay, 2010).
 

These costs result from a climate of fear and intimidation. Interpersonal breakdowns result in less motivation, efficiency, quality, learning, engagement, and loyalty and more anxiety, depression, and absence — which all get in the way of meeting goals and take a hit on an organization's bottom line.


Financial success depends on collaboration, which leads to innovation, sound decision-making, learning, loyalty, engagement, and maximum productivity, performance, and competitive advantage.

 

Types of costs

According to Civility Partners in their white paper  The Cost of Bad Behavior in the Workplace, costs of mistreatment at work include distraction from tasks, time lost, and tangible costs, including legal costs:

  • Decreased work product and productivity (quality and quantity) from:

    • Decreased loyalty and commitment to the organization

    • Impaired mental ability from loss of motivation and energy

    • Stress-induced mental and physical harm and burnout (including anxiety and depression) resulting in absenteeism and sick leave

  • Time costs:

    • Looking for different work and gossiping (as much as 52% of the day according to the Canadian Safety Council)

    • Counseling those who were targeted, counseling or disciplining perpetrators, and addressing other key stakeholders (customer and suppliers)

    • Moving employees and reorganizing teams

    • Interviewing, recruiting, and training replacements for departed employees

    • Investigating

  • Opportunity costs:

    • Employees leaving and working for competitors

    • Lost customers, including damage to reputation

  • Tangible costs:

    • Training (anger management, communication, leadership, etc.)

    • Increased unemployment insurance, workers' compensation, and health insurance costs

    • Employers' legal costs. Median rates for California discrimination cases according to the UCLA-RAND Center for Law and Public Policy:

      • Settlement: $7,500

      • Through summary judgment (a judge dismisses the charges before going to trial): $75,000

      • Through trial: $150,000 (Blasi & Doherty).
         


How to quantify your organization's losses from abuse at work

Answer these questions:

  • What have you witnessed? Yelling? Gossiping? Low morale?

  • What can you quantify: absences, quitting, increased medical costs?
     

Quantify these questions:

  • Time spent by HR hiring replacements for people who quit: $20,000

  • Time spent by five employees talking about bullying behaviors after a staff meeting is over (5 employees at $25/hour pay, spending 4 hours/week over last 6 months): $12,000

  • Cost of lost client because employee called in sick due to fear of bully: $10,000

  • Cost of lost client who left because he was bullied: $50,000

  • Time spent by HR dealing with appeals to unemployment insurance because of people who were fired at the hands of the bully: $5,000

  • Estimated total cost of the bully: $97,000


What real, tangible costs of negative behavior can you identify?


 

References


Blasi, G., & Doherty, J.W. (n.d.). California employment discrimination law and its enforcement: The Fair Employment and Housing Act at 50. UCLA-RAND Center for Law and Public Policy. Retrieved October 21, 2010, from http://dfeh.ca.gov/res/docs/Renaissance/FEHA%20at%2050%20-%20UCLA%20-%20RAND%20Report_FINAL.pdf
 

Canada Safety Council. (2000). Bullying in the workplace. Retrieved October 21, 2010, from http://canadasafetycouncil.org/workplacesafety/bullying-workplace


Clay, R.A. (2010). Healthier workplaces and better bottom lines. American Psychological Association. Retrieved April 30, 2011, from http://www.apa.org/monitor/2010/05/slc-workplaces.aspx


Level Playing Field Institute. (2007). Corporate Leavers Survey. Retrieved October 10, 2010 from http://www.lpfi.org/workplace/corporateleavers.html


Leymann, H. (1990). Mobbing and psychological terror at workplaces. Violence and Victims, 5(2), 119-126.