Employee investigations – the economic cost of ‘excessive’ HR processes and procedures
The King’s Fund has estimated that the wage bill for the NHS was £56.1 billion in 2019/20, which amounted to 46.6 per cent of the NHS budget.
In May 2021, ACAS published analysis which estimated that workplace conflict costs UK employers £28.5 billion every year, which constitutes 51 per cent of the total cost of NHS employment. The estimate is based on the total cost to organisations in handling workplace conflict and includes informal, formal and legal processes, as well as the cost of sickness absence and resignations.
Managing workforce disputes
It provides a clear perspective on the magnitude of expenditure incurred to manage disputes in the workplace. The major drivers of such expenditure relate to formal procedures involved in employee dismissals and the productivity losses arising from employee resignations, which between them account for 79 per cent of the £28.5 billion. Further, the cost per employee involved in formal proceedings amounts to £6,405 per annum, compared to the £1,941 per annum cost per employee who engages in informal processes but takes no further action.
Employee investigations are one of those areas that can run up considerable costs. Whilst they are a necessary and important part of organisational governance – they can, in some situations, have a serious impact on the individuals involved, an organisation’s culture, reputation and finances if they are ill-advised and poorly run.
NHS Wales organisations like Aneurin Bevan University Health Board are emphasising the importance of thorough initial assessments with their teams to inform decision-making and identifying other options to address issues to ensure their investigations are seen as a last resort, rather than a first. They have seen a 66 per cent reduction in the number of formal investigations, following the introduction of their ‘Employee investigations: Looking after the process and the people’ programme which encourages staff to understand the impact of the process and consider other alternatives to addressing issues.
Workplace conflict
NHS organisations are increasingly confronted by a cocktail of staff shortages and unprecedented stress and sickness levels among staff, exacerbated by the Covid-19 pandemic. In order to address the supply deficit, the growth in agency and locum staff has seen agency bills comprise over 4 per cent of the total pay expenditure in NHS Wales. Poorly managed workforce conflict therefore intensifies workforce pressures and their consequential costs and increasing exponentially when opportunity cost is factored into the assessment.
Opportunity cost refers to the benefits that are foregone when a decision is made to utilise resources in one area, rather than another. Committing staff, time and funds to the formal management of disputes, which might otherwise have been resolved through informal processes, means that those staff, time and funds are not available for other purposes and the outputs and outcomes that would have resulted are lost.
In addition, the ‘negatives’ arising from ‘excessive process and procedures’ to manage disputes must be included in any cost of managing disputes’ calculation. The loss of productivity from both the individual under investigation and close working colleagues, possibly aggrieved at the organisational response; the deleterious impact on the health and wellbeing of the individual being investigated and those close colleagues affected by the uncomfortable and possibly toxic culture might also result in a red flag being flown for potential new employees.
Whilst it’s not possible to place a monetary value on these opportunity costs, it is likely to represent a significant amount and feature large in any estimation of the economic (as opposed to financial) cost of managing disputes.
Compassionate leadership
A different and less formal approach to managing disputes might be found within the notion of compassionate leadership, as advocated by Professor Michael West and colleagues. Professor West himself described ‘chronic conflict as disastrous’ advocating a shift from a culture of ‘fear and blame’ to one of ‘civility and respect.’
While such a context may be somewhat optimistic, it is the case that the values of many health organisations express such sentiments. The implementation of such values might therefore reduce the prevalence of what might be perceived as heavy-handed, bureaucratic and unnecessary methods and approaches to the management of disputes within organisations.
The economic cost is highly significant, a reduction will generate financial savings and enable colleagues involved to pursue their functions in a fully productive manner.
Professor Ceri J Phillips is Vice Chair of Cardiff & Vale University Health Board and Emeritus Professor of Health Economics at Swansea University.
Published on 14th February 2023.
