The Incalculable Cost of Workplace Sexual Harassment

From broken cultures and decreased productivity to severe reputation damage, the far-reaching consequences of workplace sexual harassment can punch a big hole in your company’s bottom line.

The wave of public accusations of sexual harassment and abuse fostered by the #MeToo movement seared the issue into the public consciousness in 2017 when the New York Times broke its story on producer Harvey Weinstein’s history of sexual harassment and coercion. Before that, stories of widespread sexual harassment flew largely under the radar and lurked in in the shadows of the corporate world. For the most part, organizations kept a lid on sexual harassment allegations through a combination of nondisclosure agreements and behind-the-scenes settlements. And despite the financial and reputational costs to organizations of high-profile payouts—such as the $45 million that 21st Century Fox paid to settle allegations of sexual harassment—executives seemed unaware of the scale of the problem or chose to ignore it.

The Weinstein scandal thrust sexual harassment into the limelight and kicked off the reckoning around sexual misconduct that continues to make headlines. Cases include the resignation of New York State Governor Andrew Cuomo over allegations of sexual harassment, celebrity chef Mario Batali’s settlement in two sexual misconduct cases for undisclosed amounts, and billionaire Elon Musk’s payment of $250,000 to a flight attendant from his SpaceX company to settle a sexual misconduct claim against him.

Cause & effect of workplace sexual harassment

Organizations are now 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 this form of abuse and triggered a broader conversation about sexual harassment in the workplace.

It’s more than just legally and morally necessary for organizations to aggressively fight workplace sexual harassment—it’s good for business too, and not just monetarily. Sexual harassment can come at a steep price, but a price measured not only in dollars.

Workplace sexual harassment cases can cost organizations millions of dollars in victim settlements and in reputational damage. Although brand damage is hard to quantify, it can have long-term financial consequences, including drops in advertising revenue, product boycotts, the loss of investors, decreased worker productivity, and a decline in consumer confidence.

Considering the devastating consequences of sexual harassment on the individuals involved, it may seem somewhat cold to examine its economic aspects, but it’s a vital aspect to consider in terms of precipitating organizational change. Looking at financial markers provides a strong basis for corporate policy changes, since 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, like 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 also decrease productivity, increase worker turnover, and lower employee morale—which can all deter progress toward an organization’s growth targets.

Providing support and a modern approach to learning, culture, and employee communication is essential, as the effects of sexual harassment and assault can be detrimental to workers’ 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. More than a decade ago, an analysis of 41 studies of workplace sexual harassment estimated that, on average, organizations lose about $22,500 in productivity per harassed individual. That amount would undoubtably be larger today and, realistically, the damage for victims may never be able to be fully calculated.

In addition, when investigations reveal that warning signs were ignored, the collateral damage for the C-suite and board members may result in major business disruptions. Given this, it’s easy to understand why corporate culture and ethics are no longer viewed as a side project, but as a corporate imperative to future-proof an organization against reputation damage.

Workplace Sexual Harassment Prevention Training

Between FY 2018 and FY 2021, the U.S. Equal Employment Opportunity Commission (EEOC) received a total of 98,411 charges alleging harassment under any basis and 27,291 charges alleging sexual harassment. We know that sexual harassment cases are still being under-reported, so it’s virtually impossible to draw up a balance sheet when so many cases are settled privately. On the positive side, the issue of sex-based harassment has intensified the efforts of 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 sexual harassment, they’re increasingly acting to address it in the workplace—from firing and ridding themselves of harassers and predators to integrating workplace sexual harassment prevention training across the workforce.

Although the tide is turning, cultural change needs to happen at every level of the professional ecosystem, to build the workplace structure needed to address sexual harassment. Culture is more than a word, more than a poster or a saying—it’s the DNA of your business, and it needs to be carefully managed across the entire organization. Providing resources and training tools to prevent and address workplace sexual harassment and assault is critical to making workplaces safer for all.

Learn more about Ethics and Compliance Learning from SAI360.