The Incalculable Cost of Sexual Harassment in the Workplace

March 6, 2020 Steffi Prange-Jones

From broken cultures and decreased productivity to reputation damage, the far-reaching consequences of ineffective sexual harassment action can pack a hefty punch to your company’s bottom line.

The wave of public accusations of sexual harassment and abuse fostered by the #MeToo movement has seared the issue into the public consciousness, shattering the prevailing silence on sex-based harassment and illuminating the vast economic dimensions of a mammoth problem that up until October of 2017 – when the New York Times broke its story on producer Harvey Weinstein’s history of sexual harassment and coercion – had so far lumbered largely under the radar.

Prior to 2017, sexual harassment seemingly lurked in the shadows. Despite rumors being plentiful and innuendo rampant, for the most part, organizations kept a lid on sexual harassment allegations through a combination of non-disclosure agreements and behind-the-scenes settlements. And despite the financial and reputational costs to organizations of high-profile payouts – such as the US$45 million that 21st Century Fox paid early in 2017 to settle allegations of sexual harassment – executives seemed unaware of the scale of the problem, or choose to ignore it.

Now, though, it’s a different story, as the Weinstein scandal created a cultural shift that thrust the issue into the limelight and kicked off the reckoning around sexual misconduct that continues to this day. Organizations are now being scrutinized from the outside in, and the inside out, on how they handle worker sexual harassment and assault allegations. This has thrown them into a turbulent process of confronting and rapidly reassessing such an insidious form of abuse and triggered a broader conversation about sexual harassment in the workplace.

Cause & effect

It would seem that organizations are now realizing that it’s not just legally and morally necessary for organizations to aggressively fight sexual harassment, it’s actually good for business too. After all, sexual harassment can come at a steep price. And not just one that can be measured in dollars.

For companies, it has often cost millions, from settling with victims to damage to their brand. And although the impact of sexual harassment on brand reputation is difficult to quantify; evidence shows that sex-based harassment is linked to external reputation damage. It can lead to long-term financial consequences – a fall-off in advertising dollars, loss of investors, decreased worker productivity and consumer confidence, to start. Bill O’Reilly’s show is a case in point. When the news broke that Fox News paid US$13 million to five women who worked at or appeared on O’Reilly’s show, dozens of advertisers boycotted his program.

By examining the economic aspect, the devastating consequences of harassment truly come into view and although adopting this viewpoint may seem somewhat cold when discussing such an emotionally charged and traumatic incident, it is nonetheless a vital aspect to consider in terms of precipitating change. After all, looking at financial markers can provide a basis for corporate policy change, as they offer concrete and tangible evidence of the impact that sexual harassment and assault have on the business.

While most employers tend to focus on direct costs to a business, such as legal fees or settlement amounts, the true price of sexual harassment includes indirect costs such as driving away customers, investors, and potential talent. It can additionally decrease productivity, increase worker turnover and lower employee morale – which can curtail progress toward growth goals.

The issues we continue to see around sex-based harassment events are often systemic, tend to lead to some type of domino effect, and end up costing too much in terms of lost reputation, brand identity, and trust. According to findings from our recent Reputation Trust Index, more than half of respondents (57 percent) state that they were least likely to trust an organization that had allegations of sexual misconduct in the workplace. Further, 62 percent stated they wouldn’t trust an organization that behaves unethically towards employees and suppliers.

This is why providing support and providing a modern approach to learning, culture and employee communication is essential, as the effects of sexual harassment and assault can be detrimental to your worker’s wellbeing. Numerous researchers have found that dealing with sexual harassment negatively impacts workers’ psychological wellbeing and their job satisfaction – effects that could lead to absenteeism and lower productivity. A meta-analysis of some 41 studies of workplace sex-based harassment estimated that, on average, organizations lose about US$22,500 in productivity per harassed individual. Of course, the damage for victims may never be able to be fully calculated.

In addition, if external investigations reveal that warning signs were ignored, the collateral damage for other corporate leaders and board members can disrupt business. Given this, it is easy to understand why corporate culture and ethics are no longer being viewed as a side project but as a corporate imperative to future-proof an organization against reputation damage.

Affirmative action

It's impossible to draw up a balance sheet for all the accusations of sexual violence that have come out in recent times because so many of the cases are settled privately and sexual harassment is still under-reported. What we do know is that sexual harassment and assault exacts a heavy toll not only on the individuals who have gone through it, and on our society as a whole, but also on a company’s bottom line.

With these most recent organizational culture failure events, the issue of sex-based harassment has intensified concerns among business leaders and boards to retool their perspectives on what they know about their own organizational culture.

With more organizations now recognizing the personal and business consequences of this repugnant abuse, they are increasingly acting to address sexual harassment in the workplace – from firing and ridding themselves of sexual pests and predators to integrating sexual harassment prevention training with workers and management. And for those firms that tolerate sexual harassment, they will lose talent to rivals that do not, and the market will punish them. The costs of decency are trivial; the rewards to the bottom line are large.

But even though the tide is turning, cultural change needs to happen at every level of the professional ecosystem, to build the workplace power needed to address sexual harassment. Culture is more than a word, more than a poster or a saying, it is the DNA of your business, and it absolutely needs to be managed and be front of mind for the whole business.

Therefore, providing resources and training tools to prevent and address workplace sexual harassment and assault is critical to making workplaces safer for all; such actions can also help organizations capture resulting productivity gains.

 


Read more about our fight against sexual harassment in the workplace: The conversation is not done.

Learn more about Ethics and Compliance Learning from SAI Global. 

Or, request a demo to see how SAI Global has helped organizations like yours.

About the Author

Steffi Prange-Jones

Steffi Prange-Jones is a Business Development Manager at SAI Global. As part of the ethics and learning portfolio at SAI Global, Steffi is responsible for new business in Germany, Austria and Switzerland. She has an extensive background in compliance, ethics & compliance learning and is passionate about helping customers to manage and mitigate risks and protect their brand, reputation and stakeholder trust by implementing an ethical culture. Steffi has an MA Cultural Studies/Critical Theory & Analysis from Universität Hildesheim.

Steffi Prange-Jones ist Expertin in den Bereichen Compliance, Ethik und Compliance-Schulungen. Als Business Development Manager bei SAI Global hilft sie Unternehmen, ihre Marke, ihren Ruf und das Vertrauen ihrer Stakeholder durch die Einführung einer ethischen Kultur zu schützen. Steffi hat einen Master in Kulturwissenschaften der Universität Hildesheim.

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