The Many Costs of Conflict

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?

                        author

Stewart Levine

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. MORE >

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