Is the High Cost of Conflict Affecting your Company’s Bottom Line?

BY: Pamela Large-Moran

Unresolved conflict can be very costly to a business or organization. Conflict is inevitable. It is a fact of life. The key, however, is in how you deal with or manage conflict. Conflict when managed properly can be an impetus for positive change and the basis for satisfactory continuing future relationships.

Internal/Workplace Conflict

There are generally two broad areas of conflict that a business or organization may encounter. The first type is Internal Conflict. This involves disputes between and among employees, between employees and management and between management/partners/shareholders.

Here the relationship between disputants is a crucial element of the dispute. The cost of this type of conflict can be quite significant. Unresolved conflict of this nature results in poor morale, low productivity, sickness and absenteeism, disgruntled employees, lawsuits and ultimately results in the business or organization not achieving its goals.
According to the “Dana Measure of the Financial Cost of Conflict” unmanaged employee conflict is the largest reducible cost in organizations today. Over 65% of performance problems result from strained relationships not from deficits in individuals’ skills or motivations.

Internal Conflict Resolution Processes/Systems

Establishing an effective internal conflict resolution process or system in your business or organization can prevent recurring conflict, conflict escalation and puts in place effective procedures for resolving conflict that does arise. The main goals of a conflict resolution system are to reduce time and costs involved in resolving conflict, improve or maintain relationships, deal with emotions, create satisfactory outcomes and avoidance of future disputes.

Communication issues are often at the heart of disputes and often times constructive communication processes can be the key in dealing with disputes. There are many communication skills and strategies that can assist in disputes. As well, there are techniques for working with and responding to difficult behaviours.

External Conflict

The other area of conflict a business or organization may encounter is External Conflict. This is where disputes arise between a business and outside third parties such as suppliers, creditors, clients or customers. Individuals or companies you do business with in one way or another.

There are a number of alternative dispute or conflict resolution processes for dealing with External Conflict . These processes are less expensive and speedier than the litigation/court process. Further, these processes can repair and preserve valued business relationships which is an important consideration with External Conflict. Litigation with its adversarial approach destroys relationships and can result in unsatisfactory outcomes.

Alternative Dispute or Conflict Resolution Processes

ADR or Conflict Resolution Processes include: Interest-Based or Principled Negotiation, Mediation, Facilitation, Mediation/Arbitration (Med/Arb) and Arbitration. ADR processes can be built into agreements up front or agreed to between the parties at any time.

The two most widely used ADR processes are Mediation and Arbitration. In Mediation, disputing parties engage a qualified, neutral and impartial 3rd party (the Mediator) to assist them in reaching their own mutually satisfactory resolution. The Mediator has no decision-making power but provides structure for negotiation, impartially listens to both sides, works with the parties to clarify issues, identify interests, facilitate understanding and dialogue, generate and decide on options for resolution.

The many benefits of Mediation are that it is cost effective, expeditious, voluntary and informal, private and confidential. Mediation also is less stressful and takes less of a personal toll on the parties, and results in more creative and tailored solutions resulting in increased party satisfaction. Mediation works! Studies in Canada and the US have shown that approximately 80% of cases mediated settle on the first day with an additional 10% settling within a month of the Mediation.

Arbitration is a rights based process where a neutral and qualified 3rd party hears evidence, makes determinations of fact and/or law and comes to a decision on the issues. The Arbitrator’s decision can be binding or non- binding, depending what the parties choose.

You can protect your business from the high cost of conflict by having processes in place to constructively deal with Internal Conflict and also minimizing costs of External Conflict by being aware of and using ADR or conflict resolution