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The Many Costs of Conflict

by Stewart Levine
Stewart Levine

In 1994, 18 million cases were filed in U.S. courts at a cost of $300 billion. 20% of Fortune 500 senior executives’ time is spentin litigation-related activities. Imagine the tally that adds up to. It’scommonplace for legal fees to exceed the value of the amount at stake. Years ago, if a situation had more than $100,000 at stake, litigation was a viable alternative. Today the benchmark is $1 million and growing quickly. Following the old paradigm is very costly!

The cost of conflict represents a resource drain of huge proportion and a source of great unhappiness and discomfort.

WHY SO EXPENSIVE?
Traditional court systems, what you may think of as the usual way of resolving conflicts, do not foster resolution. Their operative premise is that someone will win. Our dispute resolution machinery often fuels the fire of conflict and impedes resolution. Worse, while engaged in the conflict resolution process, your productive activity, what your life is really about, is diluted.

The system does not foster resolutions that address the underlying sources of conflict—breakdowns in relationship. The process is not designed to get people back to an optimal state of productivity.

The current system embodies struggle, control, and a survival of the fittest mentality. It is based on dialectic, right/wrong, either/or patterns that originated in Aristotelian logic. Even though we live in a densely populated, rapidly changing technological world that cries out for systems that foster collaboration, individuals and institutions tenaciously cling to old habits.

Elected representatives, mostly lawyers, to whom we have abdicated control, sometimes believe that we can legislate ways of treating each other. Often they have a knee-jerk response to enact a new rule or regulation in response to a problem. This does not work. The standards essential for a functional social fabric cannot be legislated. What’s missing are the bedrock ethics and values that were taught by the educational community and religious
institutions and were fostered in extended families. These values have become clouded in our modern, mobile, sound-bite techno-society.

Because family structures and religious institutions have become so fragmented, we no longer rely on them to provide the education of core values. Many people seek external standards that will tell them what to do. People often have little grounding in collaborative skills because real partnership flows from within the "conventional" relationships that community, family, and religious institutions have traditionally demanded and fostered. Many people have no role models and sadly, in many instances, don’t know how to treat each other from within a common covenant.

In a recent interview, noted futurist Alvin Toffler, author of Future Shock, The Third Wave, and Powershift, stated: "The place we need really imaginative new ideas is in conflict theory. That’s true with respect to war and peace, but also it’s true domestically. The real weakness throughout the country is the lack of conflict resolution methods other than litigation and guns."

Toffler is on the right track. Our current crisis is caused by both the aspects of today’s conflict resolution system and the way that it is administered, such as:

  • Increase in the body of statuary and case law reflecting the growing numbers of lawyers, and complex transactions requiring regulation.
  • Commercialization of the legal tradition fostered by competition and advertising.
  • Growing reliance on counselors and therapists who care for our internal conflict and feed our conflict-avoidance mentality.
  • Breakdown of trust and the inability to assess the value of, or need for, specific actions that therapists or lawyers take (evidenced by growing malpractice claims).
  • Attorneys’ conflict of interest because their practice of hourly billing results in a devotion to process, not results.
  • The growth of the contingent fee and a class of cases in which there is nothing to lose by taking a chance.
  • The legal, economic, and emotional minefields of the litigation process.
  • The myth of finding truth and justice in a courtroom, a myth that has been perpetuated by the role models celebrated on TV.

These reasons are symptoms. They evidence a breakdown in the covenants of trust between people who are members of the same "community." They point to a lack of communication. People are focusing on themselves. They are concerned about their "rights" and "entitlements" without thinking about their responsibilities toward others. This all flows from the win/lose systems and
practices that are in place.

Many people are looking for guideposts and rules that will tell them how to treat each other. This requires new practices and new ways of thinking, which are the subject of this book. Before discussing them, let’s examine the cost of doing things the present way. As we review the many different costs, imagine how much more you might accomplish if you could harness the resources
expended, the money and energy used in the battle of traditional conflict resolution. Imagine using those resources to produce the outcomes you want.

THE COST OF CONFLICT

The cost of conflict is composed of the following:

  1. Direct Cost Fees of lawyers and other professionals
  2. Productivity Cost Value of lost time
    The opportunity cost of what those involved would otherwise be producing
  3. Continuity Cost Loss of ongoing relationships including the "community"they embody
  4. Emotional Cost The pain of focusing on and being held hostage by our emotions

It’s important to identify the costs of our current paradigm and examine some tangible examples. Recognizing the cost, I hope, will motivate change.

1. Direct Costs
Because of an inability to face conflicts, many of you spend money you can’t afford on professional gladiators hired to do your bidding. A divorce between two people whose only asset is their home can transform that residence into legal fees. The process brings out the worst in people who thought enough of each other to marry, but now can’t even sit down and talk.

A few years ago I was called into a situation of two brothers who were business partners in a third generation family business. They had reached impasse over the strategic direction their business would take. They believed they had to engage in a battle about placing a valuation on their business. Each hired a lawyer and each lawyer retained a forensic accountant to place a value on the business. By the time I was called they had stopped speaking to each other based on their respective lawyer’s advice. In just the preliminary stages of the "battle" they had spent over $60,000 on professional fees and they were barely at the beginning.

The rule of thumb used to be that if you had over $100,000 in dispute, litigation might be cost effective. Today that number is at least $1,000,000.

2. Productivity Cost
Time is a valuable, limited commodity. When people are focused on rehashing the past, they cannot create and produce value in the present. There are two aspects of this cost—direct loss and opportunity cost. The direct loss is the value of a person’s time—what the person should be earning but is not being
paid because he or she engaged in the conflict. The opportunity cost is the value the person might have produced if his or her energy was focused on creation and innovation.

Intellectual Property.
Two colleagues designed two innovative forms of management "technology." These processes were significant additions to the knowledge base about personal productivity and leadership. They battled for over a year about who owned the intellectual property they had developed. The productivity loss from their feud boggles the mind. Instead of many students and clients getting the value of what they discovered, their time was devoted to fighting. That direct loss was their loss in revenue. The opportunity cost consisted of the value of new innovations that might have been developed during the conflict.

3. Continuity Cost
Continuity costs result from being stuck in the past—costs such as the loss of relationship and community. Gary was on a fast track management development Program. He was transferred to manage the branch office of a financial services Company. Unfortunately he could not get along with Brandy, the office manager.

Gary objected to the way Brandy completed reports, and the way she socialized with co-workers and clients. Even though she had been doing things her way for years, and even though Gary was made aware of the power she had in the local community, he was insistent on her following standard policy. He would not back off and they ended up in a nasty confrontation. Gary’s youth forced him to test his power as "the boss."

Two years later both Gary and Brandy are gone. Brandy quit and went to work for the competition. It takes two people to do what Brandy accomplished, and they can’t do it as well. Revenues for the office are down 10%. The cost: $230,000 per year.

4. Emotional Cost
Sometimes there are situations you can’t let go of: a fight with a spouse, boss, co-worker, neighbor, friend, partner, or the person who ran into your car. The emotions of anger, fear, and blame grip you and force a reaction that saps your current productive capacity. Instead of going about your business, you are riveted on the injustice done to you and the untoward behavior of the perpetrator.

You are consumed with vengeance and a desire to punish the wrongdoer. You expend energy on your anger in addition to the loss you have already suffered. All of this energy will never be recovered.

The Revenge of the Past.
Randy finally received the promotion he was longing for. That was the good news. The bad news was his inability to focus on his job. He was going through a messy child custody battle with his ex-wife. That stirred up all of the anger he was holding about the past relationship. She wanted to mediate the dispute, but Randy was set on winning. Unfortunately he lost—his job. It was a position that required all of his attention. He missed two important deadlines because his mind was focused on the past.


Current attitudes and systems of conflict resolution foster conflict. Conflict is very expensive. It consists of the following, never to be recovered, costs:
(1) direct cost—professional fees;
(2) opportunity cost—what would otherwise be produced;
(3) continuity cost—the loss of relationships and "community";
(4) emotional cost—the pain of being held prisoner by emotions.

Reflections
Think about the "expensive" conflicts in your own life. What was the direct cost? The cost of professionals? The opportunity cost? The emotional cost? The relationship cost? As you reflect on your situation, think about the different actions and results you might have had if you had taken a different tack. How might you do it differently next time? How would things be different?

Biography


Stewart Levine is the founder of ResolutionWorks that provides training, facilitation and conflict resolution services. This article is adapted from his book, Getting To Resolution (Berrett-Koehler, San Francisco, 1998)  The book is a selection of the Executive Book Club and was nominated as a top ten business book for 1998.

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Website: www.resolutionworks.org

Additional articles by Stewart Levine

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