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Opinion: There’s a hypothetical in KPMG’s new report on bullying and harassment in the workplace that will be instantly recognisable to anyone who’s been targeted by a workmate.
It tells the story of “Sally”, who is being sexually harassed by her manager. She’s told him “no” multiple times but he ignores her, and on he goes on with his sexualised comments and invitations to go out drinking together. Sally becomes anxious and uncomfortable, her work suffers and eventually she can’t face being in the same space as him and calls in sick. After that she takes the issue to HR, but mediation efforts fail. She resigns. Her employer spends tens of thousands recruiting a replacement and, likely, six months getting them up to the standard of work Sally was doing before the harassment started.
Victims of harassment and bullying at work usually have a good grasp on what it’s cost them - their job, their hopes of career progression, connections with workmates, their mental health and so, bleakly, on.
Now, we know what this (rampant and often ignored) behaviour is costing their employers. In a first for this country, KPMG, working pro-bono for the Human Rights Commission, has measured the economic cost of sexual and racial harassment and bullying at work. This is a bit of research we’ve been missing for far too long and, predictably, it’s enough to make your hair stand on end.
The overall cost to employers in a single year (June 2021-June 2022) was $1.34 billion.
Thanks to inflation and increases in wages and numbers of workers, that’s likely to have risen to $1.5b in 2023.
KPMG is quick to state in its report that these are conservative figures, based only on the impacts on employers, which can be stacked up with reliable data. The actual economic cost, the authors note, is likely to be much higher. And most of the burden falls on women; 58% of the total cost to businesses is from the effects of harassment and bullying of female workers.
The report breaks down the costs into categories, which will elicit an immediate “oh yep” from any manager who’s had to deal with a bullying or harassment issue in their department. They are:
- Absenteeism. The cost of bullied/harassed workers taking sick leave = $178 million
- Presenteeism. The cost of reduced work performance through physical and mental stress = $369m
- Replacement. The cost of losing a trained worker and hiring and training a new one = $568m
- Internal costs. The opportunity cost of time taken by HR, management and affected workers to deal with the harm caused by bullying and harassment = $226m.
Again, those are conservative figures. Staff turnover and replacement alone could be costing Kiwi business up to $1.3b. In one year.
What does all this look like in practice?
Back to Sally as an example. When she leaves, the company must replace her, and the average cost to do that through a recruitment firm is 15-20% of the candidate’s wage. That’s $14,000 for someone on $70,000 a year. On top of that, Sally’s company will pay for the hours its HR and management staff spend writing job descriptions, reviewing the finalists’ pool of applications, interviewing and onboarding. The new hire must then be given orientation and skills training. If they make a “bad hire”, productivity and staff morale will take a hit.
The KPMG report rolls all this together to estimate the cost of replacing a harassed worker at $29,000 per person.
One very tiresome thing about researching and writing about equity in the workplace is the need to always find the business case. Never mind that addressing wage inequality, bullying and harassment and other safety issues is simply the right thing to do. Or that it’s an obvious match for the modern corporate world’s ESG (Environmental, Social and Governance) aspirations.
But, needs must. The fact that these numbers now exist is a big step forward. The more gnarly question is, what will businesses do about it?
The KPMG report has some useful ideas, including training, procedures to spot the problem as it arises, and flexible responses that don’t take a sledgehammer to every situation. Harassed workers have told researchers they would like to see someone independent looking into their workplace culture, more training, free resolution services, and mental health support.
One high priority the report names is strong leadership - setting the tone from the top. Research from across the ditch shows fewer than 20% of large Australian companies make their directors responsible for preventing and responding to workplace sexual harassment, for example. And despite the number of harassment cases, fewer than half of company boards regularly discuss the issue. Here in Aotearoa, the Institute of Directors in 2018 reported [AM1] only 40% of boards received detailed updates on ethical matters and the steps taken to address them.
So, the question for the management and governors of Kiwi businesses is this; are you directly addressing the behaviour that is leading to this fiscal hole? And if you’re not - are you properly serving your staff and your shareholders?
Alison Mau is a journalist and co-founder of access to justice NGO, Tika. In 2021 she was awarded Reporter of The Year at the Voyager Journalism Awards for her reportage on sexual harassment in New Zealand workplaces.
