The Cost Of Project Conflict
The Cost Of Project Conflict
During my past 24 years of telecommunications experiences I have often wondered what the real agenda was of some corporate executives. A recent conversation with a former colleague revealed a belief that is widely accepted in his work environment but never openly talked about. This belief is that for some corporate executives profits are not as important as maintaining the status quo. According to him these leaders believe that the appearance of ‘being strong’ and ‘in control’ is more important than being responsible to the bottom line. If this is true then it is one explanation for why one would observe daytoday decisionmaking that results in poor company performance.
This was in part the response my former colleague shared with me after I presented the opportunity that my project mediation service provides for removing costly conflict from the work environment. He believes the corporate leaders in question thrive on conflict and use it to improve their position of power within the company structure. The perception is that conflict leads to blame which triggers organizational restructuring ultimately resulting in promotion opportunities. After receiving this insight I decided to evaluate the cost of ‘appearing strong and in control’.
This simulation uses the Dana Measure of Financial Cost of Conflict tool designed by Dr. Daniel Dana author of Managing Differences and founder of Mediation Training Institute International.
The simulation is a realistic situation for one 1 project overseen by a corporate executive Project Executive. The leaders involved in this project are a Project Manager a Sr. Software Developer an Operations Manager and an IT Manager. In addition there are two 2 Software Engineers working at the direction of the Sr. Software Developer. A Customer Service Representative Installer Specialist and Electronics Technician are all working at the direction of the Operations Manager. A Computer Technician is working at the direction of the IT Manager and an Administrative Assistant is working on behalf of the entire project team. There are a total of 13 people including the Project Executive. The average compensation used in this simulation is from PayScale Inc. under United States Telecommunications updated July 18 2008.
Assume that an unresolved conflict develops between the Sr. Software Developer and the Operations Manager one month after the project start. This conflict is allowed to persist for 2 months 10 weeks. The conflict is resolved when the Sr. Software Developer leaves the project. Upon leaving the individual is frustrated and communicates that his skills have been requested on another project. The cost of this conflict as is as follows:
1: Wasted time: 3772
2: Opportunity cost of wasted time: 5658
3: Lowered job motivation and productivity: 189
4: Lost performance due to conflictrelated absenteeism: 0
5: Loss of investment in skilled employees: 193866
6: Conflictincited theft sabotage vandalism and damage: 5389
7: Restructuring around the problem: 10778
8: Health costs: 450
9: Degraded decision quality: 112090
TOTAL COST of this conflict: 332192
This simulation assumes:
There are only 10 people are directly impacted in this project conflict
No cost for impact to the Project Executive IT Manager or Computer Technician due to the conflict
No additional cost to managers or executives outside of the project
There is no absenteeism due to the conflict
The conflict only last 10 weeks my former colleague sited a conflict that’s been ongoing for 78 weeks
Each of the project members impacted by the conflict only loses 1 hour/week due to the conflict
Only a 5 reduction in project members’ job motivation and loyalty resulting from the conflict
This is the simplest simulation of project conflict. In reality corporate executives are responsible for larger projects and more than just one. Typically more than 10 people are affected for more than one hour every week of a conflict. Project conflicts can easily be responsible for financial losses in the millions of dollars.
Looking ahead the opportunities in project mediation are tremendous. Global competition has and will continue to create cost reduction pressure for American companies. When companies are ready there is a solution available to assist them with picking a low hanging fruit that I refer to as project conflict. A project mediation or “decisionmaking” service can be engaged to guide conflicting parties to an agreed resolution within 24 hours avoiding further project delays and reducing overall costs. This service can be delivered anywhere in the United States for a relatively small cost 5000. Now assume that a mediation meeting was scheduled during the 9th week of the simulated conflict. A resolution was reached that required an additional two weeks to implement ending the impact of the conflict after 11 weeks. The model now calculates to cost of conflict to be:
1: Wasted time: 4149
2: Opportunity cost of wasted time: 6224
3: Lowered job motivation and productivity: 207
4: Lost performance due to conflictrelated absenteeism: 0
5: Loss of investment in skilled employees: 0
6: Conflictincited theft sabotage vandalism and damage: 5928
7: Restructuring around the problem: 0
8: Health costs: 495
9: Degraded decision quality: 112090
TOTAL COST of this conflict: 129094
The simulated conflict resolved through project mediation 134094 yields a savings of at least 198098 compared to the cost of doing nothing 3321920. A proactive Project Executive who schedules an earlier intervention would save an additional 11700 for every week the conflict interval is reduced. One day soon we will not question the agenda of any particular corporate leader. Business profitability will be the agenda.
About the writer: Steven Alston stevenalston.com works as a mediator and organizational guide. His company Split Screen Consulting was created to support global projects by delivering unique team building problem solving and decision making processes. Steven’s has contributed to work assignments in Canada England Germany India and throughout the United States. Steven is a graduate of the Physical and Mathematical Sciences School at NCSU and is certified by the Mediation Training Institute International.
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