Sexual harassment can cost companies big — and not just from lawsuits
More companies need to say #MeToo when it comes to preventing sexual harassment.
There are, of course, many reasons for this — allowing all employees to feel safe and comfortable at work chief among them. But there’s another, lesser talked about, reason companies should work harder to prevent sexual harassment: it can save them millions.
Of course, lawsuits are often one of the largest costs. Consider the record 2012 settlement that awarded a former cardiac surgery physician assistant nearly $168 million (this amount was later reduced somewhat in a private settlement between the lawyers) in a sexual harassment suit against the California hospital where she once worked; she alleged that she was harassed by surgeons and staff for years.
Other companies have paid out $10 million or more for sexual harassment suits, including the Ford Motor Company ($10 million), UBS Financial Services ($11 million), Madison Square Garden and Daimler Chrysler.
Of course, most lawsuits don’t settle for nearly this amount — six figures or less is far more common, expert say — but that’s still money that eats into a company’s bottom line. And that’s not the only way that sexual harassment is costly. Here are five more subtle ways sexual harassment can impact your company’s bottom line.
Employee turnover: Employees leave companies where the workplace culture is uncomfortable, and they feel management isn’t taking steps to address it, notes Matthew Steinberg, an employment attorney at Akerman LLP who deals with sexual harassment cases. “Turnover can be high and you may lose high-performing employees — employees who could have generated revenue or innovated for your company for many years to come,” he says. “Turnover is also contagious.”
The cost of employee turnover is significant. A study by the Center for American Progress, for example, found that the median cost of turnover was 21% of an employee’s annual salary. So, for an employee earning say $75,000 a year, the cost of that person leaving would be more than $15,000 for the company.
Lower productivity: Even if an employee doesn’t or can’t immediately leave, a culture that includes sexual harassment may lower morale and productivity and increase absenteeism, research shows. That’s costly: A CareerBuilder study found that 41% of employers estimate that disengaged employees cost them more than $25,000 a year, another 24% think that cost is more than $50,000.
VC funding issues: For companies that are looking for funding, a history of sexual harassment may impact whether or not they get money. “Given some of the publicity around high profile cases and potential for significant lawsuits and liability, harassment will start coming up in the diligence process, it might impact the valuation of the company,” says Steinberg. That may be because these VC firms do not want to have to deal with the cost of litigating a case should it go forward.
Consumers flee: If you sexual harassment problems get bad, expect customers to take note. Earlier this year, amid allegations of sexual harassment and other workplace issues at Uber, many customers began using its competitor, Lyft. One study that looked a credit card spending done by USA Today found that between the time of Susan Fowler’s blog post alleging sexual harassment at the firm and the first week in June, Uber’s share of rides dropped to 75.3% from 78.8%. During that time, Lyft saw its market share rise.
Recruiting troubles: “If sexual harassment is happening in your workplace — even if it never rises to the level of litigation — it may discourage employees from coming to your company,” says Steinberg. That’s because “people now are more willing to talk about their day-to-day workplace,” he says — and social media and other anonymous employer review platforms makes that chatter more easily spreadable.
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