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Reducing The Costs Of Conflict Through Dispute Resolution Systems Design

“This article originally appeared in Track Two (Vol. 7
No. 2 August 1998) , a quarterly publication of the
Centre for Conflict Resolution and the Media Peace
Centre (South Africa).”

Poorly handled conflict generates significant costs in corporate settings, in terms of frustration, disappointment, poor performance, lost hours of management and employee time, hampering of creativity and productivity, souring of relationships, and high employee turnover – not to mention the costs of attorneys hired to press or defend against legal suits. Costly conflicts are not confined to issues within the organisation; relationships with outside entities are also involved.

In the competitive global economy, companies have become increasingly and painfully aware of the effects of unresolved conflicts on the corporate bottom line. Shrewd managers are attempting to address this knotty problem in corporate culture. Dispute resolution systems design (DRSD) is gaining an increasing following as an approach to conflicts in modern corporations. DSRD is a focused process for developing new or enhanced systems for dealing with a wide range of conflicts.

The dilemmas of corporate dispute resolution

Some disputes in the workplace are actually resolved well using traditional methods, such as managerial review of grievances, appeal panels and arbitration. Some companies maintain dispute resolution systems that operate smoothly for some types of cases. However, common problems with traditional systems include the following:

  • Conflict resolution procedures, such as multi-step grievance processes, take too much time;
  • Even the parties that ‘win’ their disputes are often dissatisfied with the outcome;
  • Many procedures do not provide any means for bringing the parties most concerned together to address the real issues;
  • In some cases, the relationships among the parties are actually worsened through the dispute resolution process;
  • There are no regular procedures for addressing certain kinds of conflict;
  • People don’t use existing processes, considering them unfair, cumbersome or likely to bring reprisals;
  • At times, people overuse processes, overloading the system with grievances and causing a backlog of unresolved cases;
  • Companies lack ways to intervene early and informally, in order to prevent problems from becoming difficult and protracted;
  • Too many disputes escalate to expensive adjudicatory processes, such as the use of arbitrators or law courts for resolution.

In addition to interpersonal disputes, many companies experience a range of other types of disputes, such as those occuring between:

  • organisational units (teams, departments, divisions, etc.);
  • headquarters and field units;
  • the company and its customers, vendors or contractors;
  • the company and its partners in joint ventures or investment initiatives;
  • the company and the surrounding community (often over environmental or facility-siting issues);
  • the company and government regulatory/enforcement agencies.

Few companies have explicit procedures for handling these types of disputes. This article will concentrate on the interpersonal disputes; a different article might address systems for addressing inter-unit or external disputes. The process of dispute resolution systems design is essentially the same, however.

To illustrate the problem, let’s consider two typical stories (in which the names have been disguised to protect confidentiality).

Bobbie’s Beef

Bobbie was a supervisor at Threads, Inc. a clothing company. She had seven years’ service, having started with data-entry work and steadily promoted to a position where she supervised two women and three men in a happy team of technicians which consistently met or exceeded production quotas. Her promotions ceased two years ago coincident with the arrival of Ed as Division Director. Ed appeared to dislike or disapprove of her. Bobbie had asked her immediate supervisor and Ed himself to disclose the problem, but to no avail.

She applied for three divisional management openings for which she felt well-qualified, but Ed appointed less senior and less-qualified people in each case. Bobbie filed a grievance through the correct channels and was given a hearing by personnel, but three months later she was formally notified that her complaint had no substance. An attorney wrote to the company on her behalf but was rebutted. After further frustrations a neutral arbitrator was appointed.

At the arbitration hearing Bobbie was unable to follow much of the technical legal argument, including the finding in her favour. The company was ordered to consider Bobbie for any future promotions and warned against reprisals. Shortly afterwards, she was transferred to another section where she had to learn new technical skills.

Despite Bobbie’s ‘victory’ she still had neither the promotion she desired nor any better understanding of her problem with Ed.

Paul’s Protest

Paul is an engineer with a company we’ll call ‘PetroPipe’, which operates an oil pipeline through ecologically sensitive wilderness areas and is subject to close government oversight and regulation. A programme, GRACE (Getting Response to Anyone’s Concerns Early), is in place to encourage employees to notify management and/or the government oversight office about problems of safety, compliance, and harrassment or initimidation. GRACE aims at eliminating the need for ‘whistle-blowers’ to go outside of the company to the media or legislative bodies.

One day Paul noticed that an aviation fuel tank was not earthed and not properly mounted, posing dangers of leakage and explosion. Paul reported this to his supervisor, Jerry, but after four weeks nothing had been done about it, resulting in an argument between the two men.

Paul contacted George, the GRACE representative, to submit his concern. He requested confidentiality, but accepted that it was unlikely. George initiated an investigation, but by the time he arrived at the pumping station, the problems with the tank had been mysteriously sorted out. When George spoke to Jerry, Jerry insisted that it was all a friendly misunderstanding and there really was no problem. George left, filing a report showing that the issue was resolved.

Within a week, George got an agitated call from Paul. Paul said that a few days after George’s investigation visit, Jerry had taken him behind the pumping station and told him that if he ever “ratted” on him to the company again he would see to it that Paul lost his job and perhaps other things vital to him. As he spoke, Jerry had waved a large wrench in front of him.

According to GRACE rules, George was required to investigate such an intimidation charge. Jerry denied threatening Paul; without witnesses to the conversation, no one could confirm that Paul had been threatened. The official GRACE report closed out the complaint without action. However, Paul was moved to another pumping station when regular job rotation came up.

The process of dispute resolution systems design

While these stories are different, they illustrate some of the problems enumerated above. Although Bobbie won her case, she never had an opportunity to deal directly with Ed about the issues. Dealing with the dispute took several months and, in the end, required both Bobbie and the company to pay legal fees. Certainly, the relationship between Bobbie and the company has not improved in the process, and prospects for a good relationship with Ed look dim.

Paul’s main goal was getting his supervisor to attend to a safety problem. However, by the time he had lodged a complaint with the GRACE system, his relationship with Jerry was severely damaged, resulting in threats and an inconclusive investigation. Although the company did intervene to separate the parties, this action was outside the GRACE process and did not involve the principal parties. George’s responsibility was to investigate the complaint, not to bring the parties together to seek a mutually acceptable resolution.

While every situation is unique, the typical steps involved in dispute resolution systems are the following:

  • Establish a process for making decisions about new or enhanced dispute resolution processes.
  • Identify and diagnose the causes of recurring organisational conflicts and the effectiveness of existing dispute handling procedures.
  • Examine the range of options for additional procedures or revisions of existing procedures.
  • Select or revise conflict resolution procedures, considering the corporate culture and the kinds of disputes that arise. Organise the selected procedures in a comprehensive conflict management system.
  • Seek support from key organisational constituencies and secure approval for the proposed new system.
  • Develop a plan for implementing the new system and promoting its use. Train personnel to administer the system and to provide specific services, such as mediation.
  • Create a process for quality control, feedback and refinement of the system.

Both Threads, Inc. and PetroPipe engaged in a DRSD process in order to address the problems with their systems. We will discuss the steps above comparing and contrasting the experience of the companies.

Establishing a process

In some corporate cultures, top-down decision making will work for enhancing dispute resolution systems. However, in this era, few corporate managers can get away with unilateral decisions. For a new dispute system to succeed, it must enjoy the support of all potential users, who must consider the system fair, timely, and efficient. One way to garner support is to provide for broad participation in the systems design process itself.

The systems design process at Threads was initiated and coordinated by the corporate legal office, but also included consultations with employees from all levels. Consultants were used to support the diagnosis and design process, to train internal company mediators, and to train in-house trainers in basic conflict resolution skills.

In contrast, PetroPipe felt that the buy-in of employees was less crucial in their decision-making process than obtaining support from top management and from the government oversight agencies. Most of the design process took place through a dialogue between a DRSD consultant and the staff of the GRACE programme. As the GRACE staff came to agreements about proposed changes in the system, these were shared with the CEO (to whom the Director of GRACE reported), other high level managers, and key officers at the oversight office. The consultant asked frequently whether it might not be prudent to involve lower-ranking managers and other employees, but, given the corporate culture of PetroPipe, the GRACE staff felt this was unnecessary. They viewed it as a management responsibility to provide a credible system for employees to bring forward concerns and get them resolved swiftly and fairly.

DRSD consultants generally recommend that companies undertaking a DRSD process form a ‘design team’ comprised of representatives from the key constituencies to use the new system. The consultants then work with that team, leading them through the steps of diagnosis, option generation, design, decision making, and implementation. One of the first tasks is to push for clarity about decision making, so that everyone knows from the beginning who will be involved in what ways at what stages and where final authority lies.


Once a design team is formed, the next task is to assess the effectiveness of current methods for handling conflicts. What happens if an employee has a grievance? What are the steps to the process? How long does it take at each step? Over the past period (one, two, three years) how many grievances were filed and what were they about? Were employees and managers satisfied with the outcomes? What other disputes erupted that did not go through the grievance process – either because they did not fit the definitions in the policy or because the disputants chose to use other means to get their issues addressed? How frequent and costly were they? What intangible costs are there to the present systems?

In addition to considering the dispute resolution systems, some design teams examine the deeper causes of conflict in the company. Why are disputes arising? Are there preventive measures that could be undertaken to reduce the occurrence of certain kinds of disputes? Can we reduce the number and severity of conflicts by increasing the skills of managers and/or employees to resolve their own problems? Are there structural problems (rules, roles, division of labour, decision-making processes, organisation of work, geographic dispersal of organisational units, communications systems, etc.) that could be changed in order to reduce conflict?

In the case of Threads, the company-wide design team engaged in a study for several months of conflicts in the company, looking both at corporate offices and manufacturing plants and the attitudes of both managers and employees. Outside consultants gathered some of the data through surveys, using questionnaires and focus groups. All the information gathered was fed back to the design team as they continued to develop a sophisticated understanding of the sources of conflicts and the effectiveness of the existing systems for dealing with them. The company strategy was to develop new conflict management systems for the non-unionised settings first, partly through pilot programmess. If effective there, they would later engage the unions in discussions about whether and how to introduce the new systems under the terms of existing contracts.

The design team at Threads discovered a serious lack of basic conflict resolution skills among both management and employees. In addition, the workforce in the clothing manufacturing plants was extremely diverse, in some cases comprising four major language groups of recent immigrants. As in Bobbie’s case, conflicts tended to escalate quickly, since there were no mechanisms for early intervention or resolution. As they moved on to design new dispute resolution systems, the team decided to include a strong element of conflict resolution skills training at all levels.

The diagnostic process at PetroPipe was much less elaborate. The DRSD consultant visited corporate headquarters and interviewed all present GRACE programme staff, several staff from the government oversight office, a former director of GRACE, several other managers (in Human Resources and the Business Practices Office). He also reviewed a comprehensive outside evaluation of the GRACE programme that had been completed quite recently and that recommended changes in the system. The consultant conducted several meetings with GRACE staff in which he presented concepts of dispute resolution systems and engaged the group in analysis of the strengths and weaknesses of the present systems. At that stage the group also sketched out various options for additions and changes.

The most significant insight gained was that the GRACE programme really is not a system for resolving disputes. Rather, the GRACE representatives are analogous to police investigators. When they receive an employee complaint, they investigate and either establish the validity of the complaint or determine that it is groundless. If a complaint is confirmed, it is referred to management for action. If not, they inform the employee who brought the complaint and provide a mechanism for appeal. The system works fairly well at determining validity, but it does not provide any process for engaging the parties most directly involved in trying to resolve the issues. Paul’s story illustrates this well, since GRACE helped neither to solve the tank safety problem nor to preserve his working relationship with his supervisor. When it came to the intimidation issue, GRACE could investigate, but having only Paul’s allegation deprived them of further recourse. The system did not provide a way to bring Paul and Jerry together to deal with each other – regardless of the ‘guilt’ or ‘innocence’ of either party.

Option generation

PetroPipe was initially interested in introducing a mediation option in their process, based partly on the recommendations from the outside evaluation. However, once they understood that they really had no dispute resolution process, but only an investigation process, they realised that they needed a more comprehensive set of options for resolving disputes. The staff group and consultant also realised that some portion of the concerns raised by employees were not about specific individuals, but involved whole teams or other types of corporate units. For instance, in Paul’s case, the fuel tank safety issue could have been treated as a problem for the whole pumping station team. They needed some process for engaging in group problem solving, not just mediation of one-to-one interpersonal disputes.

In order to educate themselves about options, the company-wide design team at Threads asked the consultant to make a presentation to the group about typical ADR (alternative dispute resolution) procedures in the workplace. Based on that presentation, they began to consider what mechanisms would be most beneficial.

Systems design

For a period of months, the consultant and a key GRACE staff person exchanged documents containing proposals for changes in GRACE procedures, including introduction of a mediation component for interpersonal disputes and a facilitated group problem-solving process for issues of concern to whole units. The exchanges also addressed the issue of how to continue to integrate the existing GRACE investigation process, since this would have to continue as well. Flow charts were generated and descriptions of the proposed processes were written.

At Threads, the design team agreed on a four-step process for resolving disputes. At Step One, employees and managers at all levels would be encouraged to resolve disputes on their own – and a programme of skills training would be inaugurated to support this step. At Step Two, employees could ask for coaching assistance from respected and trustworthy individuals on how to resolve issues. At Step Three, the employee could ask for mediation, in most cases handled by a trained mediator from within the company and acceptable to both parties. The fourth step involved use of an arbitrator from outside the company. The design team established a goal of 90 percent of disputes to be handled at Step One, 7 percent at Step Two, 2.5 percent at Step Three, and 0.5 percent at Step Four.

Gaining support and a decision

Since Threads had chosen a highly participatory process for both designing the system and for gaining support, it took some months for all the necessary groups to sign off on the proposed new dispute resolution system. Once the necessary approvals had been gained, the design team and corporate management felt that they could proceed with the assurance of wide acceptance and use of the four-step process.

As already mentioned, the process at PetroPipe involved only management decisions and approval from the government oversight office. While this certainly took less time, there was potential for employees to misunderstand the intent of the new procedures, protest the changes, or simply refuse to use them. Several months later, the process of implementing the new systems is going slowly at PetroPipe. It is too soon to tell why.

Implementing the system

Once a proposed system has gained all the necessary approvals, the group responsible must develop a plan for implementation. In some cases this involves creating a new unit (such as a company ombuds) or preparing staff to play specific roles (advising people as to their choices, coaching parties to resolve their own disputes, doing intake on formal complaints or grievances, mediating disputes, etc.). At this stage, training becomes quite important.

Threads established a whole new team to oversee implementation of the new system and to monitor its progress. In addition to this company-wide implementation team, they set up an oversight group in each of the locations where pilot programmes were to be undertaken. They also hired a training firm to train mediators at the pilot locations. In order to implement the conflict resolution skill development program, the training firm developed a short intensive basic course, and then ran pilot programmes to refine it. Once the programme was in good shape, the training firm delivered training-for-trainers courses in each of the pilot sites, so that the company could continue to train its personnel in basic skills. In one plant where the floor workers were almost entirely Spanish-speaking, the company provided interpreters for the training programme and translated all the manuals and descriptive materials to make them accessible to all employees in that plant. Similar efforts were made to bring Asian employees into the programme.

PetroPipe wished to train all the GRACE representatives in mediation skills, and also recruited other employees from both management and non-management to serve in a mediator pool. Since almost 50 percent of the workforce at PetroPipe works for subcontractors, they also recruited subcontractor staff to be trained as mediators. The subsequent 40-hour mediation training programme not only introduced the participants to mediation skills, but also addressed the process of implementing the mediation component of the new plan.

Quality control, feedback and refinement

At PetroPipe, if Paul brought his complaint about the fuel tank to GRACE today, GRACE might initiate several different actions. First, if Paul agreed, they could call Jerry and give him a chance to resolve the issue on his own – with a guarantee of no retribution against Paul. Paul might also have the option of requesting an in-house mediator to work with him and Jerry. If mediation failed, Paul could file a formal case and trigger an investigation. If GRACE decided that the problem was not interpersonal, they could initiate a problem-solving session for the pump station team. It is still too early to tell what will happen to the programme. The evaluation of GRACE did call for periodic repeat evaluation processes to monitor the programme’s success.

Threads, despite recent decisions to institute draconian lay-offs throughout their network of manufacturing plants, remains committed to the conflict resolution system – partly based on extremely positive feedback from the pilot sites. The conflict resolution skills and mediators even proved helpful in dealing with serious tensions at some of the plants that were slated for closing – not to suppress conflicts, but to keep the discussions productive. Threads remains committed to providing a supportive workplace and considers the conflict resolution programme an essential element of that commitment. If Bobbie had her problem with Ed today, she would have organisational support for dealing with it directly with Ed – and Ed would be encouraged to participate. If they tried, without success, to resolve it on their own, they might each seek the guidance of a coach and then a mediator. If needed, an arbitrator could be brought in to make a decision, but only in rare cases.

Dispute resolution systems design is not a cure-all for every conflict inside or outside the modern corporation. In fact, the process recognises that conflict is a fact of life – the challenge is to deal with it more constructively. The cases described above illustrate how two companies in quite different industries tried to meet that challenge in addressing different kinds of disputes.


Peter Woodrow

Peter Woodrow is Program Director at CDR Associates in Boulder, Colorado, USA. Peter is a respected trainer, mediator, and consultant experienced with non-profit, educational and other institutions in the U.S. and abroad. He has over sixteen years of experience with direct conflict intervention and training in group processes, problem solving,… MORE >

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