Workplace disputes cost UK £33bn a year

Oct 02 2007 by Nic Paton Print This Article

Disputes with employees, colleagues, customers and suppliers cost the UK economy £33 billion a year, yet fully two thirds of employers fail to educate staff on how to avoid and manage them, with more than half even leaving senior managers to sink or swim.

The survey of 100 in-house lawyers and managers by law firm Nabarro has also found nearly a third of companies do not learn from previous disputes or fail to update their policies in the light of dispute outcomes.

Just as worrying, just six out of 10 senior managers were concerned about the impact a dispute could potentially have on employee morale, despite a fifth of disputes being directly with employees.

The Nabarro research adds weight to growing evidence that the UK's dispute resolution system is simply not working.

A study by the Chartered Institute of Personnel and Development at the start of this year warned that the introduction of statutory dispute resolution procedures three years ago had failed to reduce the burden on the employment tribunal system and in fact had made it less likely that disputes were resolved informally.

Its survey found that conflict at work cost the average employer around 350 days of management time every year, even before the direct cost of employment tribunals was taken into account.

The Nabarro research concluded that, while the majority of firms (78 per cent) did have a risk management policy in place, just a third of these policies covered dispute resolution.

Only 51 per cent of companies had training programmes focused on dispute avoidance and management for senior managers and just 38 per cent offered the same training to other staff, it found.

Many of the factors said to cause disputes to escalate, such as poor communication, not being fully aware of the facts and poor case management could be improved with better procedures and training, Nabarro advised.

As such, front-line staff played a critical role when it came to nipping disputes in the bud at an early stage.

It was, said the law firm, therefore "alarming" that on average staff understood fewer than half of their firm's risk management policies.

Susan Gordon, employment dispute resolution partner at Nabarro, said: "Disputes, in one form or another, are inevitable. It is therefore important to have an effective risk management policy in place to protect your organisation and employees.

"This should include clear, practical dispute management procedures, and comprehensive training for employees. Not only should this help to minimise the risk of disputes arising, but it should also provide a framework for dealing with them when they do occur," she added.

"By feeding the lessons learnt back into your risk management policy, the time and costs involved in settling a dispute can be minimised. It is worrying that so many organisations seem to simply rely on having a policy in place with the implementation and training Ė so vital to success Ė potentially overlooked," she continued.

"Education and internal communications are crucial for improving the understanding of risk management procedures. The research reveals that front-line staff are critical in halting potential disputes before they erupt, but respondents admit that they often lack the knowledge or skills to resolve them effectively," she concluded.

Despite clear inadequacies in many risk management policies, disputes were a major cause for concern for senior management, the survey also found.

Top of their list of concerns, ahead even of the cost of potential damages, was damage to an organisation's reputation (89 per cent).

Eight out of ten worried about the time taken up by disputes and more than half were concerned about the impact that a dispute could have on employee morale.

The most common types of dispute are with customers (more than a third), followed by employees (more than a fifth) and suppliers (15 per cent).

Worryingly, almost half of all respondents actually blamed ineffective risk management procedures for causing disputes.

"Disputes with employees, whether claims by the employee (such as unfair dismissal or discrimination) or litigation against a former employee such as for breach of restrictive covenants, not only divert attention from the core business, but can also have a very destabilising effect on other employees," added Gordon.