Putting a Number on the Conflict Tax
Every organisation pays a Conflict Tax. It is the cost of leaving conflict unworked, and it compounds while nobody is looking. It never appears as a budget line, and nobody signs it off. Most leaders sense it. Very few can put a figure on it.
We want the people we work with to see that cost in their own numbers. So here are the rates we use, where each one comes from, and the adjustments we made along the way. Anyone in your finance team should be able to follow every step.
Three conflict zones between the 3Cs
The 3Cs Model holds three responsibilities in tension: Commercial, Customer and Culture. Where two of them pull against each other and the tension is left unworked, a conflict zone forms. Each zone generates a different cost, so each needs a different measure.
- Zone 1 — Conflict, between Commercial and Culture. It is paid in people leaving, formal grievances and disciplinaries, absence and tribunals.
- Zone 2 — Silos, between Culture and Customer. It is paid in time: the hours managers spend on friction that never reaches a formal process.
- Zone 3 — Waste, between Commercial and Customer. It is paid in value already approved and never realised: initiatives that were signed off, funded and then stalled.
Because the three zones measure different costs from different sources, they add up rather than overlapping.
Zone 1: the cost already paid
The most rigorous UK estimate of what conflict costs comes from Acas. In 2021 Professors Richard Saundry and Peter Urwin put the annual cost to UK employers at £28.5 billion, or £1,028 per employee.
Most of that figure is the cost of people leaving. Resignations account for about 42% and dismissal and replacement for a further 37%, so roughly four-fifths of the total is exit cost. Formal procedures, sickness absence, presenteeism and litigation make up most of the rest. Informal resolution is about 1%.
The HPtE Zone 1 rate is £1,028 per employee per year.
Industrial action: a risk, not a rate
The Conflict Tax is a running cost, paid every year whether anyone notices or not. Industrial action is different. It may never happen, and when it does, no two disputes cost the same. A finance team wouldn’t budget for a strike as a recurring cost, so we don’t include one in the Conflict Tax either.
That doesn’t make the risk small. When the British Airways pilots’ strike of 2019 happened, IAG, BA’s parent company, reported a net financial impact of €137 million, about £121 million at the time, from two days of action and the cancellations around a third. That is well over a hundred thousand employees’ worth of Zone 1 cost at the Acas rate.
When a conflict between Commercial and Culture goes unworked for long enough, it can become collective action. The Conflict Tax measures what an organisation pays while that conflict persists. The risk of industrial action is what it could pay if the conflict escalates.
HPtE significantly reduces that risk. Company and union leaders work the conflict together, as partners with legitimate interests on both sides, so it dissolves before it escalates. For a board, that reduction sits alongside the Conflict Tax recovered. It isn’t added into the same total.
The record from two long-running partnerships shows both the effect and what it depends on.
Air New Zealand began High Performance Engagement with its unions in 2014, covering pilots, cabin crew, engineers and ground staff, around 70% of its workforce. Across the partnership’s first five years, the one serious strike threat, by engineers in December 2018, was withdrawn after mediation. The union credited the partnership’s commitment to keep working on solutions.
Kaiser Permanente went 26 years without a national strike under its labour–management partnership, launched in 1997 when the organisation was on the verge of a major strike. When leadership changed and investment in partnership training fell away, strikes returned, beginning with a three-day walkout by 75,000 workers in 2023.
The lesson from both is the same. Partnership reduces the risk of industrial action for as long as it is maintained. That is why HPtE builds the capability inside the organisation, rather than leaving it with the people who introduced it.
Zone 2: the time nobody counts
Acas counts the management time spent on formal cases: grievances, disciplinaries and tribunals. It does not count the everyday hours managers spend on conflict that never becomes a case. That everyday time is Zone 2.
Two studies set the range.
- Thomas and Schmidt (1976). Their survey for the American Management Association, published in the Academy of Management Journal, found managers spent between 18% and 26% of their time on conflict, depending on their level. It is the origin of the widely quoted figure that managers spend a fifth of their time dealing with conflict.
- The Myers-Briggs Company (2022). Its Conflict at Work study found managers spend more than four hours a week on conflict, about a tenth of the working week, and that conflict at work has become more common since 2008.
That gives a range of roughly 10% to 20% of management time. We publish the lower figure and treat 20% as the upper figure the research supports.
One overlap needs removing. The management time Acas does count, on formal cases and informal discussions, comes to about £100 per employee. It is already in Zone 1, so we take it off Zone 2.
The HPtE Zone 2 rate is 10% of loaded management cost, less £100 per employee. Loaded cost means salary plus employer on-costs such as National Insurance and pension.
Zone 3: unrealised approved value
No study of the cost of conflict includes Zone 3, because it is not a cost being incurred. It is value an organisation has already authorised and not yet collected: the business case that was approved, funded, and then stalled because the conflict around it was never worked.
It sits in the portfolio rather than the profit and loss account, so the only honest source is the organisation’s own portfolio data. For most organisations it is the largest of the three zones.
Putting the rates together
| Zone | HPtE rate | Applied to |
|---|---|---|
| 1 — Conflict | £1,028 per employee per year | Headcount |
| 2 — Silos | 10% of loaded management cost, less £100 per employee | Managers × loaded cost; headcount for the overlap |
| 3 — Waste | Unrealised approved value | The organisation’s own portfolio |
Take an illustrative organisation of 2,000 people, 150 of them managers, with an average loaded management cost of £75,000.
- Zone 1: 2,000 × £1,028 = about £2.06 million a year
- Zone 2: (150 × £75,000 × 10%) − (2,000 × £100) = about £0.93 million a year, or £2.05 million at 20%
That is around £3 million a year before Zone 3, and before any risk of industrial action is considered.
Where the estimate has limits
No study separates the zones. The management-time research measures time spent on conflict of every kind. We don’t claim anyone has measured Silos directly. We keep the zones separate by giving each a different kind of cost, and by removing the one overlap we can identify.
The research is not all recent or British. Thomas and Schmidt’s study is fifty years old and American. The Myers-Briggs study is recent but international. The Acas analysis uses data from 2018 and 2019. Taken together, they agree that conflict takes a substantial share of management time, and nothing suggests the share has fallen.
The rates will be revised. Acas has said it will update its cost-of-conflict analysis in 2026. When it does, we will recalculate and update this page.
What the number is for
Knowing the Conflict Tax does not reduce it. What the number does is change the conversation. Conflict stops being background noise and becomes a cost someone owns, one that can be measured, tracked and dissolved.
That is where HPtE starts. In the first half-day with a leadership team, we work through the Conflict Tax using the organisation’s own headcount, management structure and stalled initiatives. It is often the first time the three zones have been seen side by side, each with a figure attached.
If you’d like to see what your own organisation’s Conflict Tax looks like, get in touch.
Sources
- Coalition of Kaiser Permanente Unions. Our Mission & History.
- Cornell ILR School, Scheinman Institute (2023). The Strike at Kaiser Permanente: Causes, Lessons, and Opportunities.
- Healthcare Dive (2025). 31,000 Kaiser Permanente workers begin strike in Northern California, Hawaii, 14 October 2025.
- International Airlines Group (2019). Trading update, 26 September 2019.
- 1News (2018). Air New Zealand engineers call off Christmas strike, 12 December 2018.
- NBR / BusinessDesk (2015). Air NZ and unions collaborate on high performance engagement, 23 July 2015.
- Saundry, R. and Urwin, P. (2021). Estimating the costs of workplace conflict. Acas.
- The Myers-Briggs Company (2022). Conflict at Work.
- Thomas, K. W. and Schmidt, W. H. (1976). A survey of managerial interests with respect to conflict. Academy of Management Journal, 19(2), 315–318.
HPtE Conflict Tax rates, 2026 basis.
