The following case study was prepared by Sharon Cruz, Dan Gronniger, Nanette Houck, Nicole Lentz, and Jane Morton as an in-class exercise for a course in Managing Organizational Conflict at the University of Hartford. Identities of case characters and of the organization have been disguised.

ABC is a global telecommunications company headquartered in Chicago, IL. The Employee Relations (ER)/Labor Relations (LR) organization consists of two ER/LR Specialists, one secretary, and one ER/LR Manager. This group is situated in Chicago, within the headquarters complex. The salary structure of the ER/LR Specialist position is $45,000 annually, while the manager position is currently $65,000 annually.

The ER/LR organization is responsible for the administration of two labor agreements as well as all employee relation issues that arise within these two bargaining units. Each ER/LR Specialist is assigned the responsibility of a labor agreement and is also responsible for dealing with union representatives on a daily basis via telephone and in writing.

Recently a new ER/LR Specialist position became vacant, requiring the need to backfill. The position was posted and due to the tight labor market, few candidates were identified. One of the candidates indicating an interest in the position was the current secretary of the ER/LR organization, Mary Clark.

Mary has held the position of secretary for the last eight years. During this time members of the organization have come and gone due to staff reorganizations. Mary holds her CPS certification and is considered extremely proficient in her current job. Based on Mary's tenure and due to turnover, she has had the opportunity to perform many of the ER/LR Specialist functions in a limited role over the last eight years.

Due to the limited number of candidates, the manager of the ER/LR organization, Bob Tippin, decides to interview Mary for the position. As a result of Mary's overall knowledge of the ER/LR organization, including knowledge of both labor agreements, Bob Tippin decides to promote Mary to the position of ER/LR Specialist.

Shortly after Mary Clark is promoted, Bob Tippin is informed that due to reorganization and budget concerns, the vacant position of secretary (Mary's former position) will be eliminated. The additional headcount would be transferred to another manager outside of Chicago. As a result of this reorganization, Bob Tippin informs his staff (Mary Clark and Susan Moore the other ER/LR Specialists) that the former job functions of secretary will transition to each member of the organization. Going forward, each individual member of the organization will be required to manage their own general clerical functions to include, filing, copying, mailing, etc.

Shortly after this announcement, Susan Moore approaches the manager, Bob Tippin and complains that Mary is failing to complete her clerical functions, imposing on Susan on a daily basis to assist with these functions and ultimately causing Susan to get behind in her work. Susan tells her manager, Bob during a one-hour meeting that this has been occurring for the past two months and while she is a team player and wants to support the organization, she doesn't feel it is right of Mary to impose her clerical work on her. Susan asks Bob Tippin to intervene and correct the problem.

Bob is in the middle of contract negotiation preparations. He makes the decision to delay addressing this issue, hoping that it will resolve itself. Shortly thereafter, Bob asks Susan and Mary to select an EAP vendor for the two labor organizations they support. Based on the unresolved conflict and decision by Bob to delay addressing the issue, Mary and Susan are unable to reach agreement on the EAP vendor of choice, delaying the decision. The original cost for the product has been determined to be $20,000. As a result of the delay in making the decision, the final cost to the company was determined to be $45,000.

Susan Moore perceives that these increased costs are a direct reflection on her work ethic and is now exhibiting stress related health issues (headaches). These headaches result in Susan being gone on three different occasions for the entire day within the last month for doctor appointments to determine the cause. These doctor appointments are coming at a time when Bob Tippin is preparing for contract negotiations and he needs his entire staff available to conduct costing models.

Costing models is a learned job function and each member of the organization needs to learn this job function to be given the opportunity to negotiate a labor agreement at some point in the future. As a result of Susan's absence, Mary Clark has been asked to work overtime to complete the costing models that Susan normally would have been assigned.

The overtime requirement placed on Mary is causing Mary to believe she is being asked to do more than her normal job duties. Moreover, Mary is now losing motivation and her work product is suffering. In addition, Susan has become angered that the costing model function assigned to her has been given to Mary resulting in her delay in development and the possibility that Mary will be given the opportunity to negotiate a labor agreement before her.

Susan has approached Bob Tippin again about Mary's habit of passing her clerical functions off on her. In addition, on this occasion Susan has also raised the issue of not getting to participate in the costing model function. She has informed Bob Tippin that she believes this will irreparably harm her development in her chosen career field and if these two issues are not resolved, she will be forced to seek another opportunity outside the ER/LR organization.

Wasted Time

Conflict distracts employees from otherwise productive use of their time Estimate the amount of time wasted by each person who is/was affected by the team conflict.

We calculated Mary and Susan to waste 5 hours per week per person dealing with the conflict. Bob wastes only 1 hour over the eight-week period in his failure to address the conflict. Total wasted time costs $2,642.88.

Reduced Decision Quality

Decisions made under conditions of conflict are always inferior to decisions made when cooperation prevails. In addition, when conflict is present between people who share decision-making authority, the resulting decisions are likely to be contaminated by power struggles between those people

As a result of the conflict, Mary and Susan were unable to select an EAP Vendor. An original cost projection of $20,000 was inflated to $45,000 due to their inability to make a decision. (By the guideline provided, 50% of the final project cost equals the reduced decision quality cost: $22,500.00)

Loss of Skilled Employees

Exit interviews reveal that at least 50% of terminations are caused by conflict. Corporations estimate that replacing trained worker costs 150% of the employee's annual salary. This determination is based upon lost productivity, recruiting fees, interviewing time, staffing department salaries and retraining costs.

At this point, loss of a skilled employee has not occurred. Due to the intensity of the situation, we determined this cost for demonstrative purposes. Susan is salaried as $45,000 and her departure would be 100% due to this conflict. By the guideline of 150%, her replacement would cost $67,500.00.

Restructuring

Often, the workflow is altered in an attempt to reduce conflict. Restructured workflow unfortunately is less efficient that original design. Determine the cost of restructuring the workflow to accommodate conflict.

The workflow was restructured to meet timelines. With Susan absent, Mary was forced to take up the slack. By the guideline 10% of the combined salaries account for $9,000.00 in cost.

Sabotage/Theft/Damage

Accidental or inadvertent errors may be masked by sabotage or damage to the work process by angry employees. Often times cost associated by these factors are hidden from management's view.

Our analysis proved that Susan purposely delayed the approval of the EAP contract resulting in additional costs of $25,000.00.

Lowered Job Motivation

Employees suffer lowered levels of motivation due to the stress of trying to get along with a difficult person.

We estimate the productivity rate of Mary to have dropped 25%, accounting for the increased stress from taking up the slack of Susan. Susan's productivity is measured to have decreased by 50%. By the guideline, lowered job motivation cost the organization $33,750.

Lost work time

Absenteeism has been shown to correlate with job stress, especially the stress associated with anger toward co-workers. This stress leads to employee's choosing to take time off "sick days". Medical science has determined that nearly every physical illness and injury is partially "psychogenic". That is, they are caused in part by emotional conditions.

The conflict has created 3 lost days from work. By the guideline 10% of Susan's annual salary is $4,500.00 in lost work time.

Health Costs

Rate of insurance claims affects the premium paid by the employer for employee insurance, therefore is an indirect costs of workplace conflict.

The intensifying conflict created psychogenic illnesses that required treatment to be sought. This indirect expense to health care premiums is measured by the guideline of 10% of factor 6, which equals $3,375.00.

1. Wasted time   Salary/benefits per hour/day (150%) = $2,642.88
2. Reduced decision quality   Any decision made by you and/or others, independently or jointly, affected by the conflict = $22,500.00
3. Loss of skilled employees   Cost of loss of human resource (150% of total annual compensation) = $67,500.00
4. Restructuring   Inefficiency of work redesigned to accommodate conflict = $9,000.00
5. Sabotage/theft/damage   Equipment, work processes, reputations = $25,000.00
6. Lowered job motivation   Reduced performance/productivity, % reduction times salary = $33,750.00
7. Lost work time   # of days lost at prorated daily salary = $4,500.00
8. Health cost   Stress related; Insurance premiums linked to rate of claims = $3,375.00

TOTAL COST = $168,267.88