April 24th, 2014

Estimating the Costs of Workplace Bullying

This tutorial is for bullied targets who decide to fight back. Do not confront your bully. If you could have done that successfully, you would have. Waiting for months makes whatever you do ineffective. It’s not your style. That’s OK. Nor should you bother to explain to anyone who will listen (and the number of those people dwindles by the day) the emotional harm you suffer. That tale will scare people away and make you appear weak and psychologically frail. What can you do?

The best option is to spend time, while off on job-stress disability leave at home, researching the historical effect the bully has had on the organization. Below, we explain how to estimate the total costs associated with that one person or group of bullies. Make the impersonal, consultant-like, economic, bottom-line case rather than an emotional appeal.

Our approach is not idealistic, or utopic, as one commenter suggested. It is grounded in reality. Read our rationale for this approach, fully taking into account the fact that most employers would rather defend and retain the bully than the bullied target. It is an irrational decision to be sure by employers, but bullying itself is an irrational, indefensible act.

Here’s the way calculate losses attributable to the bully.

Before You Start

Time period: Costs should be calculated for the weeks or months (or years?) that the bully or bullies operated without being challenged to stop. It will shock executives to learn how long the losses accumulated without being noticed or addressed.

Affected workers: Individually-based cost estimates calculated below should pertain to all the people directly targeted for bullying AND those who were aware of it and indicated a desire to quit, transfer or took time off to repair their health. Research clearly indicates that witnesses are affected almost as strongly as the bullied.

Turnover

Even in tough economic times, when job candidates outnumber positions open for hiring, employers still do not want turnover, especially the need to replace the best and brightest (the bullied ones).

Turnover costs include employer contributions to COBRA insurance for the departed worker, expenses to announce the job opening, headhunter/recruiting firm fees to recruit worthy candidates, time spent by managers and staff to meet all candidates at meetings while getting no work done, hiring bonuses/incentives, moving expenses (?), and the harder-to-calculate lost production during the entire process that must be made up by coworkers.

Here’s the good news. The cost of all of the above turnover-related activities can be estimated simply by multiplying the combined salaries of departed workers by 1.5. The 1.5 multiplier is very conservative (a low-ball estimate).

Thus, for each person driven out who earned a $50,000 salary, the recruit and replace expenses are $75,000.

The challenge is to count the number of people affected who left or were driven out because of the actions of the bully or gang of bullies.

Lost Opportunity Cost

We know that adults targeted for bullying at work pose a threat to their bullies. Envy and jealousy are two powerful motives for bullying. That means that when the more talented target is driven from work, either through termination or constructive discharge or quitting, the company loses the value that worker created.

In many industries, you can affix dollars and cents to the loss her or his departure represents. For instance, if that person was responsible for 5 clients that produced $1.4 million in revenue, that account and that money is lost to the employer. The bully (bullies) cost the company that much money by tormenting that target. Include the lost revenues attributable to the talented target to the total.

Absenteeism & Presenteeism

Targets tend to make one of two choices: use all paid time off (sick leave, vacations, holidays) or never take time off (for fear of losing their jobs while away).

Most employers do not have paid time off policies. Regardless, for the sake of their mental health, targets stay away from work to preserve their sanity.

Estimate the number of days (and hours per each day) targets and others missed work to avoid being confronted by the bully.

To calculate the Absenteeism cost, multiply the hours away from the employer by the hourly rate. [For salaried exempt workers, divide the annual salary by 2020 to find the hourly rate of pay.]

To calculate the Absenteeism cost, multiply the hours off the job by the appropriate hourly rate. [For salaried exempt workers, divide the annual salary by 2020 to find the hourly pay rate.]

Presenteeism costs are harder to estimate, if even possible. It originally described employees coming to work sick. Their presence threatened everyone else with contagion from viruses and other bugs. Presenteeism is the best rationale for employers paying sick people to stay home and get healthy.

Presenteeism can also be considered the trend of bullied workers not being able to find another job elsewhere with equivalent pay. So, they stay, show up on a daily basis, but they are present only in body, not spirit. They are the antithesis of an “engaged” worker. They are disgruntled, disgusted and desperate (the “3-D”‘s) to be somewhere else.

One suggested Presenteeism cost estimate method would be to count the number of “3-D” employees, ascertain their hourly wage and number of hours worked during the entire bullying episode. Then halve that value. That would represent the paid wages lost to the employer by paying workers rendered unproductive by the bullying.

Litigation & Settlements

Though we write extensively about rarely applicable current laws to bullying situations, that doesn’t mean people with the means will not threaten a lawsuit against the employer based on its vicarious liability for the misdeeds of the bully (who is an agent of that employer). If the threat from a plaintiff’s attorney alleges potential discrimination, as does happen in 20% of bullying cases, the employer will take the threat more seriously than if the complaint is unrelated to discrimination.

An employer responding to a credible threat of litigation will convene some legal eagles to mount a defense. That defense may be done by an internal legal team on the payroll, if the employer is large. In those cases, try to ascertain the hourly wage of the attorney-employees. Then, calculate how many of them are involved. Finally, estimate how much time they all spent dealing with the case — responding by letters, meetings, and mediation sessions. These would be labor costs of mounting a defense.

Many employers compel bullied targets to participate in mediation or arbitration. Associated costs include the fee paid to the dispute resolution professional and hourly costs for all involved managers.

Smaller employers do not have legal staff. They retain an external legal firm when they are threatened with a lawsuit. Having dealt with this phenomenon as an expert witness many times, it is safe to estimate this cost at $30,000 per threat or lawsuit.

If a complaint is actually filed in court and a lawsuit ensues, cost escalate rapidly to defend the employer. Filing costs, depositions, transcripts, investigation costs all combine to raise a modest defense to $60,000 years before a trial can be scheduled. Trial costs raise the totals even higher.

Because costs of litigation and pre-trial defense are so great, most employers are advised to settle. They pay complaining employees to shut up. They purchase silence with a “gag clause” in the settlement contract. Your goal is to find out who has been paid a settlement and for how much. Many will have left their jobs. They probably cannot tell you exactly what they were paid, but you can play the “hot/cold” game with them as you guess the approximate size of the settlement. Then, add all the settlement costs you discover.

Settlement payments are in addition to litigation defense costs estimated above.

Workers Comp & Disability Insurance Claims

Workers compensation costs are covered by employee payroll deductions and employer insurance paid to state compensation systems. The same is true for disability insurance. However, employers willingly incur additional costs by challenging the WC and disability claims made by injured workers. The challenge is nearly automatic when the claim involves stress from the job, anything even remotely psychological. The WC or Disability claim is based on an inability to work.

The doubting employer hires a firm to investigate. The firms stalk the claimant and follow them every time she or he leaves home. Any outside activity is videotaped and provided to the employer who is looking for a way to discredit the claimant, to say the claim is fraudulent. That all costs money. Try to estimate such costs when you confirm that employees were filmed while they had pending WC or Disability claims. Call the firms and solicit their rates.

The Total Tab

Turnover + Opportunity Lost + Absenteeism + Presenteeism + Legal Defense Cost + Dispute Res. + Trial Costs + Settlements + WC/Disab Fraud Investig = The Routine Cost of Allowing Bullies to Harm Others with Impunity.

It all adds up.

What to do with your findings. Take the total estimate with cost breakdown in the various categories to the highest-ranking manager or executive you can find who is not loyal to, related to or known to be supportive of the bully (bullies). Do your homework. Try to find someone who still cares about the bottom line and running an honest enterprise. Ask for a 15 min. meeting with that person to “share ways to significantly cut costs for the company.” State your years of experience working there and familiarity with services and products. Present the figures. State that the losses are attributable to the named individual or group. Ask that they be sanctioned, punished. Ask that you be put out of harm’s way in a safe position with no loss of pay or status. If that is not offered to you, leave the company then and there because no one will stop the bully for you. You were too good of an employee to have given your talent for so long only to be dealt with as you have been. Leave with your head held high. Your departure is their loss.

<-- Read the complete WBI Blog

Tags: absenteeism, costs, fiscal impact, litigation, turnover, workplace bullying

This entry was posted on Thursday, April 24th, 2014 at 10:13 am and is filed under Tutorials About Bullying, WBI Education. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.