March 21st, 2013

Investopedia: Financial impact of workplace bullying


By Janet Fowler, Investopedia, July 16, 2012

Society is becoming more aware of bullying in all aspects of our world – everywhere from school to online. We are recognizing that bullying can be found in many different situations. Workplace bullying has also become a more common topic of discussion, with estimates suggesting that somewhere between 25 and 50% of the workforce has been subject to some form of bullying in the workplace. Nearly half of the working population has witnessed it at some point. Workplace bullying can take many forms and is generally intentional.

Workplace bullying can include verbal abuse, intimidation, humiliation and sabotage. These mistreatments are typically not one-time occurrences; they happen over a significant length of time and cause the victim to suffer a loss of self-esteem and possibly even long-term physical or mental health issues. Aside from the damages to the victims of bullying, organizations are finding that workplace bullying costs money as well.

Reduced Productivity

Considering that people don’t typically perform well when working in high-anxiety situations, employers face a loss of productivity due to workplace bullying. Stanford University’s Bill Sutton has suggested that productivity could decline up to a 40% when workers are distracted by bullying. Aside from the distraction, bullied employees also feel a loss of motivation, causing them to avoid putting in extra effort or working extra hours.

Lost Time

When people are involved in high-stress situations, it’s common that they’ll go to great lengths to avoid the unpleasant situation. Perhaps they will call in sick when they’re not, or maybe even go on extended stress leaves. Research out of the United Kingdom suggests that workplace bullying has been a factor in the loss of 18.9 million working days each year. That kind of absenteeism translates into a big loss of time in the workplace. Royal & Sun Alliance, the largest commercial insurance company in the United Kingdom, has suggested that this has cost businesses approximately 18 billion British pounds annually, which equates to approximately eight to 10% of a company’s profits.

Employee Turnover

Workplace bullying has been associated with high turnover rates. A report released by noworkplacebullies.com suggests that up to 30% of bullied employees will resign from their jobs, and 20% of those who witness bullying will also leave the organization. Figures released by overcomebullying.com suggest that the number of employees who leave due to bullying could be much higher – perhaps as much as 70% of bullied employees leave their employers. This in turn comes with an economic impact to the employer. Each time an employee leaves the workplace, there are replacement costs associated with recruiting, hiring and training new staff. Indirectly, workplace bullying also often brings a decline in morale, thus making the workplace even more susceptible to high turnover rates as employees throughout the organization suffer the effects of a less-happy work environment.

Impact to the Company’s Reputation

When someone is unhappy, he or she will typically tell someone about it. Even if an employee isn’t telling his or her company about what’s going on at work, there’s a good chance he or she is telling his or her family and friends outside the organization. Though it may be difficult to directly connect workplace bullying to decreasing sales for a company, it’s certainly possible that as a company develops a bad reputation for allowing workplace bullies it will impact the sales of the company. This is especially true if it’s an organization that relies upon public consumption in order to survive.

Medical Concerns

Society has also become more aware of the negative physical impacts of depression and anxiety. High stress levels can have a real impact on the health of employees, perhaps in the form of medical issues related to high blood pressure, depression, migraine headaches or anxiety. This can cost an employer in the form of sick leaves, health insurance costs and worker’s compensation claims.

Legal Costs

In some circumstances, employers have been found liable for the bullying that takes place within their organizations. Many employers have paid damages to an employee for physical or mental health issues, stress, lost wages and other issues associated with workplace bullying. Employers can add the legal costs associated with engaging in legal proceedings. Several extreme cases of bullying have forced employers to pay out millions of dollars in settlements to staff. Employers must also consider wrongful and constructive dismissal claims in this category, specifically where the bullied employee has been terminated wrongfully by a bully supervisor.

Rehabilitation Costs

If a bullied employee chooses not to leave the company, the employer may be forced to pay rehabilitation costs, such as counseling fees to help the employee remedy any emotional damages he or she may have incurred. Additionally, once a workplace bully is identified, there are typically costs associated with rehabilitating the bully in order to allow them to function more appropriately within the workplace. These costs could include such things as anger-management or leadership training, team-building activities, sensitivity training and counseling.

The Bottom Line

Even though it may be difficult to tabulate the exact costs that an employer faces when a bully is operating within the organization, there is little doubt that there are financial impacts. Despite this dismal fact, some researchers suggest that workplace bullying may actually be on the rise. There’s little doubt that happy employees invest more in the success of the organizations that employ them, so wise employers will take heed and do what they can to increase productivity, employee retention and morale through taking a hard stance on the issue of workplace bullying.

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This entry was posted on Thursday, March 21st, 2013 at 8:00 am and is filed under Media About Bullying. 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.



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