Harassment costs can be huge. Imagine what your company could do with an extra $100,000. How would you spend it? You could purchase a sophisticated vehicle or piece of equipment. You could speed up product research and development. You could re-furnish your offices, or hire two new full-time employees, or fund a marketing campaign, or buy dozens of new computers… The possibilities are endless.
Or, you could spend that $100k settling a workplace harassment claim out of court. That’s right—according to Workforce Magazine, employers can expect to lose between $75,000 and $125,000 defending a case through discovery and a ruling on a motion for summary judgment. (By the way, that’s assuming the employer wins; otherwise, the total typically ranges from $175,000 to $250,000—but may even surpass $150 million.)
It’s time to face the facts: Harassment is unethical. Harassment is illegal. And for the organizations that allow it to occur, harassment is really, really expensive.
Fox News, for instance, paid $45 million over the course of a year to address the fallout from an investigation into former anchor Bill O’Reilly’s history of sexual harassment. Uber, meanwhile, fired 20 people after reviewing current and former employees’ claims of harassment, bullying, and other violations.
And these are only the harassment costs we can calculate. There’s more—much more—to the story than settlements, fines, legal fees, and turnover. Consider the employees who dread coming to work, the consumers who boycott after reading negative press coverage, and the untold numbers of smart, talented people who leave an industry—or decide not to enter it in the first place—as a consequence of their and others’ experiences of harassment.
All told, the combined, immediate and interrelated impact of harassment is difficult to imagine. But that hasn’t stopped the Equal Employment Opportunity Commission from addressing it. In the EEOC’s Select Task Force on the Study of Harassment in the Workplace June 2016 Report, co-chairs Chai R. Feldblum and Victoria A. Lipnic write that the business case for stopping harassment “extends far deeper” than the sea of legal expenses (emphasis added):
It encompasses employees who endure but never report harassment, as well as coworkers and anyone else with an interest in the business who witness or perceive harassment in the workplace. When accounting for all those affected by it, harassment becomes more insidious and damaging. In addition to the costs of harassment complaints, the true cost of harassment includes detrimental organizational effects such as decreased workplace performance and productivity, increased employee turnover, and reputational harm.
let’s explore the direct and indirect costs of harassment, as identified by the EEOC:
76 harassment charges a day are filed with the EEOC.
For small and mid-sized companies, an estimated 19% of employment disputes result in defense and settlement costs, averaging $125,000 per claim.
Internal resolution of claims that do not result in legal fees takes an average of 275 days
In 2012, the total cost of harassment settlements and awards surpassed $356 million. Of the 28,642 allegations of harassment the EEOC resolved in 2015, 5,518 were resolved in favor of the charging party, for a total of $125.5 million in benefits for employees. The same year, the EEOC won $39 million for employees on whose behalf the Commission had filed charges.
In addition to these statistics, the EEOC points out the “precious time, energy, and resources” organizations expend on handling harassment claims—whether or not they result in legal defense or a settlement.
Indirect Harassment Costs
Reports of harassment negatively affect consumers’ perception of brand.
Employee turnover may represent “the largest single component of the overall cost of sexual harassment.”
Harassment frequently leads to job dissatisfaction and low productivity – not just for people who experience it, but those who observe it as well.
Studies have linked sexual harassment to numerous physical health issues such as headaches, exhaustion, sleep problems, nausea, and gastric problems.
The fines associated with harassment should be sufficient motivation for any organization to take the problem seriously. The indirect costs of harassment, however, dwarf anything we can clearly calculate.
People who experience harassment suffer a variety of psychological and physical repercussions. Studies have tied harassment to increased risk of depression, anxiety, PTSD, substance abuse, unintentional weight gain or loss, insomnia, drug and alcohol abuse, and cardiovascular and musculoskeletal issues. These issues worsen with prolonged harassment.
Harassment hurts victims’ colleagues and co-workers as well. The EEOC points to mounting evidence that “employees who observe or perceive mistreatment in their workplace can also suffer mental and physical harm”:
One study found that employees, female and male alike, who observed hostility directed toward female coworkers (both incivility and sexually harassing behavior) were more likely to experience lower psychological well-being. These declines in mental health were, in turn, linked to lower physical well-being. According to the study, the drivers of these effects can stem from empathy and worry for the victim, concern about the lack of fairness in their workplace, or fear of becoming the next target.
Harassment drags down an organization’s bottom line. The claims management and investigation process siphons departments’ time and resources. Victims and bystanders often report difficulty concentrating on and engaging with work. Employee engagement and teamwork plummets while rates of tardiness and absenteeism increase.
According to the EEOC, “the mere awareness of sexual harassment among a work group can create a tense environment, negatively influencing the group’s day-to-day functioning.” Employees are more likely to neglect work and avoid each other. Furthermore, the Commission reports, the aftereffects of harassment can become a “contagion” that spreads throughout the workplace stresses and breaks down long-term team health.
Harassment leads to turnover. Faced with instances of harassment and a culture that permits misconduct and incivility, employees tend to “exit the scene.” In fact, some researchers contend that turnover constitutes “the largest single component of the overall cost of sexual harassment,” amounting to hundreds of millions of dollars per year. The reverse is also true: employers who take broad, holistic steps to reduce harassment tend to retain employees for longer than their competitors.
Additionally, harassment hurts an organization’s reputation and ability to attract new business. Perceived misconduct and incivility towards workers turns away not only current and potential employees, but current and future clients and customers. The EEOC reports:
Studies demonstrate that perceived sexual harassment in the workplace has a negative effect on attitudes toward the brand and brand image. Conversely, when internal stakeholders understand, embrace, and execute organizational brand values, the company has an opportunity to gain a competitive advantage in the marketplace and the brand has an opportunity to flourish. In this sense, internal brand strategies are critical for overall business success.
These associations with a brand may last for years. Consumers who witness or perceive harassment at an organization are “less likely to repurchase from the firm and express less interest in learning about the firm’s new services.”
Finally, organizations should keep in mind that no employee who engages in harassment, regardless of that individual’s profile at the company or contributions to the business, is worth protecting from allegations of harassment. As the EEOC report argues, “[e]mployers should avoid the trap of binary thinking that weighs the productivity of a harasser solely against the costs of his or her being reported.”
In making this point, the Commission references a recent Harvard Business School study, which found that “toxic” workers—even “top performers” who exhibit toxic behavior—have an overall negative impact on their organizations. No one gets a pass:
No matter who the harasser is, the negative effects of harassment can cause serious damage to a business. Indeed, the reputational costs alone can have serious consequences, particularly where it is revealed that managers for years ‘looked the other way’ at a so-called ‘superstar’ harasser.
Calculate Your Risk Now, or Pay the Price Later
Workplace harassment takes a toll on every single person who experiences, witnesses, or perceives it, as well as those employees’ co-workers, friends, and family members. On top of that, harassment hurts a brand’s reputation with clients and prospects.
Don’t wait until a claim surfaces to address this dizzying array of direct and indirect harassment costs.