“This article was originally published in ‘The Executive Business Journal’, Issue No. 46, November 2012, http://www.the-executive.biz/issues/46/, Ta’Xbiex (Malta): Effective Marketing Ltd.”
Taking a holistic view on the internal organisation and its dynamic external
environment, a business conflict can be defined as:
‘Any solvable interpersonal, interest- based and/or cultural conflict between the dispute stakeholders which causes disturbances in the organisation’s value-adding activities and results in a significant reduction of the business performance and delay in the achievement of the organisational mission whilst at the same time being a recognised or hidden opportunity for organisational and personal improvement.’
Rather than an emerged static situation, any commercial dispute – and any other type of conflict for
that matter – generally progresses along a multi-staged ‘conflict life cycle’ (e.g. Glasl, 2002(i) and Brahm, 2003(ii)). The parties to the dispute jointly move along the line of time and experience the various phases of conflict intensity: following conflict emergence and escalation, Disputing individuals may
emotional strain intensifies and the persons entangled in a conflict go back and forth through the various energy- draining stages of denial, anger, bargaining, depression and eventual acceptance of the situation(iii).
Disagreements naturally escalate and easily spread out to a variety of dispute stakeholders
the conflict reaches its peak (‘hurting stalemate’) after which it de-escalates by negotiation, settlement and ‘post conflict peace building’.
However, in reality business conflicts rarely evolve in exactly this straightforward manner, not in the least due to the increasing loss of empathy and emotional impact that advancing disputes have on the quarrelling individuals. On a psychological level, the related emotional strain intensifies and the personsentangledinaconflictgoback and forth through the various energy- draining stages of denial, anger, bargaining, depression and eventual acceptance of the situation(iii).
Disputing individuals may independently refer to their trusted third parties, such as the legal profession (to seek advice on rights and duties, calculating chances of winning/ losing and finding out who’s right and who’s wrong), their accountants/ auditors (expressing the conflict in numbers and carrying out any cost/benefit analyses), psychological experts (to obtain further insight on personalities, incompatible behaviours and potential avenues to restore the distorted relationships) and the social network (coworkers, family members and others willing to act as sounding board and providers of general advice).
With all such sources having their specific viewing angles, the business- minded decision-maker facing conflicts is likely to perceive the emerged situation as an interruption of the organisation’s value chain, an (all or not unnecessary) cost in terms of finance,time and resources, and an undesired obstruction of the organisational performance. Satisfaction is generally sought on the procedural level (considering available methods to ‘move beyond settlement’ with or without own control of the outcome), the substantive level (the terms and benefits of the eventual settlement) and the emotional and psychological level (finding relief and justification in the outcome).
Traditionally, settlement attempts are initiated through direct negotiations based on competitive arguing defending (extreme) positions taken and/or collaborative reasoning built on shared interests, mutual needs, separating people from problem and establishing objective criteria (iv). Both strategies share that parties strive for reaching a mutually acceptable and enforceable agreement under their own steam and in a voluntary and informal manner. A satisfactory result may however not necessarily be achieved
due to the various potential barriers existing, such as mutual mistrust, incompatible negotiation strategies adopted, too high emotional levels and continued disagreement on the neutral measures to be used for assessing the case value.
When direct negotiations and other communications between parties stall whilst at least one of the parties considersthebusinessconflictathand of sufficient relevance, recourse to legal action is traditionally believed to be the best next step. This can easily turn into lengthy, bureaucratic procedures no longer driven by the parties themselves and resulting in the parties losing control over the timing and outcome of the conflict whereby the total cost of conflict (both financial andnon-financial)tendstospiral.
Regardless this uneconomical outlook, litigation may still be a conscious choice for specific reasons, such as the need for establishing a legal precedent, the conflict being of wider importance to a particular trade or market, the seeking of vindication or protective relief and forcing the other party (or parties) to take settlement proceedings seriously in view of facing legal judgment.
The fundamental purpose of any business operating in the profit- sector is to carry out activities that generate maximum value-added
and customer satisfaction through the allocation of a minimum number of resources (finance, human resources, equipment, tools, time etc.). Optimal profit levels are reached by maximising revenue whilst minimising cost and time. In this context of striving for maximum efficiency, how would a responsible decision-maker handle business conflicts previously defined as ‘disturbances in the organisation’s value-adding activities’ that cause a ‘significant reduction of the business performance and delay in the achievement of the organisational mission’? Which options do decision-makers actually have at their disposal for selecting a most preferred settlement process? And how could a preferred dispute resolution method be justified?
Within the traditional legal system, a limited number of settlement avenues exist based on ultimately facing a binding third-party ruling whereby the parties have a low influence over an imposed ‘win/lose’ settlement order. More flexibility and control over the process and outcome can be found in various other dispute resolution methods, such as (assisted) negotiation, mediation and conciliation based on non-binding third party involvement for the purpose of facilitating and maximally empowering the disputing individuals to reach a self-negotiated agreement.
Business conflicts occur in wide- ranging contexts, subjects, industries, cultures and geographical locations. However, no matter how different their appearances, all disputes dynamically revolve around a key set of interlinked characteristics which remain of relevance during the entire conflict life cycle, throughout the settlement process and even beyond agreement reached. These dispute parameters are directly related to the decision-maker’s aim to achieve maximised organisational efficiency:
Time (short – long) – quick settlements and significant time savings safeguard the organisational momentum and keep the organisation focused on its true mission (‘time
Rather than binding third- party ruling, more flexibility and control over the dispute settlement process and ouhttp://mediate.com/pdf/zandtexecutive.jpgtcome can be found in various dispute resolution methods
is money!’)
Cost (low – high) – by keeping a constant awareness of the actual cost of conflict (as ‘value destroying activity’ with damages and losses beyond finance) and any opportunity costs (e.g. by adopting an activity-based costing approach or undertaking cost/benefit analyses), various settlement options can be evaluated, chosen and justified; ideally, the cost of conflict is turned into an investment for both the organisation and the individuals involved as can be measured by the long-term outcome achieved
Effectiveness of outcome (none – long-term) – rather than steering towards a gambling-like ‘win/lose’ result determined by a third party, the self-designing of a mutually acceptable settlement agreement by the empowered parties maximises the chances of
a long- lasting
positive outcome (e.g. maintaining on-going relationships between disputants and avoiding any otherwise unavoidable ‘switching costs’)
Trust (low – high) – doing business is largely based on mutual confidence and full transparency which however quickly evaporate in situations of increasing disharmony, not in the least due to deteriorating communications between the disputing individuals; maintaining trust in all persons involved in the settlement process will add to keeping control over a positive outcome
Reputation (increasing – decreasing) – perceived company status being a critical success factor for competitive and strategic advantage, business conflicts emerged require an appropriate handling as to achieve a desired outcome that safeguards the existing internal and public image of the organisation and ideally increases the good standing based on settlement achieved
Confidentiality (high – low) – careless and public sharing of the nature and explicit details of a business conflict may well have negative consequences for the manifestation, perceptions and performance of the individuals and organisations involved, hence a most discrete approach to any aspect of the dispute at hand would be beneficial
Underlying intentions (consensual – conflictual) – any tacit motives of any nature (e.g. delaying tactics, achieving maximum financial gain and holding personal grudges) are to be revealed and converted into constructive interests that strengthen the mutually acceptable and long-lasting outcome strived for
Risk (low – high) – the consequences of a business conflict can severely impact an organisation on various fronts (finance, operations, human resources etc.); associated risks are inversely proportional to the disputant’s control over the outcome (i.e. the lower the control over the settlement agreement, the higher the risk of facing negative consequences of the dispute at hand, and vice versa), therefore maintaining ultimate control over the resulting settlement terms by the disputing individuals is to be assured.
Pragmatic business decision-makers may – in view of the organisational mission and organisational efficiency – wish to keep full control over the settlement outcome at any time whilst aiming for a most efficient process with minimal time and cost for both the organisation represented, for themselves and all others involved.
To achieve this, a conscious effort can be made to immediately handle the emerged dispute – regardless if any litigation or arbitration has already commenced – by taking the Business Mediation route. This pragmatic dispute resolution method, widely encouraged on various levels in view of easier access to justice and available both within and outside Court systems (v), is defined as a ‘flexible process conducted confidentially in which a neutral person actively assists parties in working towards a negotiated agreement of a dispute or difference, with the parties in ultimate control of the decision to settle and the terms of resolution’ (vi).
The above eight dispute parameters, as presented in Figure 1, allow for a practical self-assessment of any actual business conflict at hand to determine the suitability of settlement through Business Mediation, i.e. reaching agreement on one’s own initiative and facilitated by a qualified and neutral third party (the ‘Business Mediator’). These factors furthermore support and justify the decision-making to all or not have any recourse to Business Mediation.
A dispute at hand is considered most suitable for Business Mediation when all dispute parameters are maximally satisfied (i.e. reach the outer ring in Figure 1).
In other words, chances of settling a business conflict through Business Mediation are maximised when all persons involved continuously endeavour to achieve a shortest time of settlement and lowest cost of conflict compared to other methods (for example litigation or arbitration), a long-term effectiveness of the outcome is desired, high trust levels in the other party, the Mediation process and the Business Mediator are maintained, the individual and organisational reputations are safeguarded, strictest confidentiality regarding all issues related to the Mediation is respected at all times, ultimate control over the dispute outcome is kept (i.e. lowest risk for the parties) and mutual consensual intentions focused on active problem-solving and moving on beyond settlement remain.
The flexibility of the Business Mediation process can be found in the tailor-made approach adopted based on a proven multi-staged framework customised by the parties in presence of the Business Mediator. Aspects covered may include (and are not limited to) selecting neutral grounds as meeting venue, the date(s) to hold private and joint meetings, the timing and maximum duration of the Mediation process (e.g. two consecutive days), the involvement of anyothers(e.g.advisors,referrersand/ or external experts) and any desired use of secondary communication tools in addition to the preferred face-to- face meetings (e.g. videoconferencing and online meeting tools). This to minimise time and cost and respect the parties’ schedules and commitments in an already busy life further strained by disharmony.
The Business Mediation route is to be considered rationally and with utmost caution always. To maximise the chances of success, parties are to assure that:
Engaging a neutral third party who does not meet the above criteria will dramatically increase the risk of precious resources, time and money being wasted, the duration of the conflict being unnecessarily prolonged andirreversibledamagebeingcaused on the detriment of the disputing individuals and their organisations,all or not leading to a further escalation of the business conflict.
Conclusion
When initial negotiations to settle business conflicts have failed, decision-makers may want to think twice before taking immediate legal action and becoming subject to binding third-party rulings, imposed decisions and insecure outcomes.
With litigation being justifiable in many circumstances, an assessment of additional dispute resolution settlement methods available to efficiently resolve an emerged business conflict may reveal new dimensions and avenues, even if litigation or arbitration has already commenced.
With their on-going desire to maximise organisational efficiency and achieve highest profits, decision- makers may instead focus on how to maintain ultimate control over the dispute outcome and become active shapers of a mutual acceptable agreement allowing all to move on in a self-chosen direction under own terms and conditions. Taking the Business Mediation route, a duly qualified and neutral third (the ‘Business Mediator’) is involved for facilitating the settlement process and guiding the parties towards their self-negotiated agreement.
Key aims include the shortest time to agreement for lowest cost (in both financial and non-financial terms), achieving long-term effectiveness of the settlement reached,maintaining high levels of mutual trust in the process and individuals involved, safeguarding the organisational reputation, respecting strictest confidentiality, acting in a constructive manner based on shared interests and mitigating any direct risks caused by the dispute at hand. With appropriate and neutral guidance, escalating or dragging business conflicts can be transformed from lengthy and costly proceedings into efficient opportunities for short-term settlement, thereby maintaining the focus on achieving the organisational mission whilst potentially achieving further personal development and growth of all involved.
Footnotes:
(i) Glasl, Friedrich. 2002. Konfliktmanagement. Ein Handbuch für Führungskräfte, Beraterinnen und Berater. Bern (CH)/Stuttgart (D): Haupt-Verlag.
(ii) Brahm, Eric. 2003 Conflict Stages. Intractable Conflict Knowledge Base Project, Conflict Research Consortium. Boulder, CO (USA): University of Colorado.
(iii) Kübler-Ross, Elisabeth. 1970. On Death and Dying, Tavistock Publication Limited/Routledge (UK).
(iv) Fisher & William Ury, Roger. 1991-2012. Getting to Yes: Negotiating an Agreement Without Giving In. Random House Business (UK).
(v) See e.g. the EU Directive (2008) on Mediation in civil and commercial matters: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32008L0052:EN:HTML
(vi) Definition by Centre for Effective Dispute Resolution (CEDR), London, www.cedr.co.uk.
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