Many small and medium-sized enterprises (SMEs) pride themselves on having close-knit teams, collaborative cultures, and flat structures. But when conflict arises, it often feels easier to sweep it under the rug in hope that it passes, rather than dealing with it. Leaders tell themselves: “It’ll blow over,” or “We don’t want to rock the boat.”
The truth? Avoiding conflict in the workplace comes at a high cost – financially, culturally, and emotionally.
The myth of ‘Keeping the peace’
In smaller businesses, relationships are often more personal, and leaders may hesitate to intervene in disputes. The instinct is to preserve harmony at all costs. Yet avoidance rarely solves the problem. Instead, it allows frustrations to fester, and what started as a small disagreement can grow into toxic patterns of behavior.
Over time, the “peace” you’re protecting becomes a fragile façade, hiding disengagement and resentment beneath the surface.
Productivity takes a hit
Unresolved conflict saps energy. Employees distracted by tension spend more time worrying about dynamics than focusing on their work. Research shows workplace conflict can cost businesses hours of lost productivity per employee each week (around 25% accroding to a study by the University of California). For an SME with a lean team, those hours represent missed deadlines, slowed growth, and customer dissatisfaction.
Impact on employee wellbeing
Conflict avoidance also takes a toll on wellbeing. Team members who feel unheard or undervalued may withdraw, disengage, or even take stress leave. In small teams, where every role matters, the absence of just one person has an outsized impact.
This stress doesn’t just affect individuals – it can spread across the team, creating a culture of tension and mistrust.
Talent retention and reputation
One of the biggest risks of ignoring conflict in the workplace is turnover. High-performing employees don’t stick around in toxic environments. For SMEs, the cost of replacing even one team member including recruitment, training, and lost knowledge can be devastating.
Worse still, a reputation for unresolved conflict can leak out into your employer brand, making it harder to attract the right people in the first place.
The cost of inaction vs. the aalue of resolution
Avoiding conflict might feel like a short-term win, but it’s a long-term drain. On the flip side, addressing conflict early creates opportunities for growth. You can read our early warning signs on a previous post here. When handled well, conflict resolution builds stronger communication, fosters innovation, and strengthens trust within the team – particularly for SMEs, where culture is one of the biggest competitive advantages. Creating space for healthy conflict is an investment that pays off.
If your business requires support in conflict resolution, contact our team on 02 8977 4000 to discuss how we can be of assistance.