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Why should corporations care more about conflict management?

Corporations should pay more attention to conflict management. Addressed properly, conflict management helps a corporation find and detect better solutions to conflicts. In addition, resources are saved for preferred purposes when decisions on conflicts are based on facts instead of beliefs and/or individual agendas.

The September-October 2017 issue of Harvard Business Review offers an article by Raffaella Sadun, Nicholas Bloom, and John van Refnen with the title Why do we undervalue competent management?

In brief, the article draws from a more than decade-long study of the use and adoption of management practices across more than 12.000 firms and 34 countries with two main findings: 1) Achieving operational excellence is still a massive challenge for many organizations, and 2) Large, persistent gaps in basic managerial practices are associated with large, persistent differences in firm performance.

The writers contend (with ‘big data’ based argumentation) that management should be treated as a crucial complement to strategy. Organizations need competent management just as much as they need analytical brilliance.

While discussing Project Iquja with the founder of a well-established Finnish family business – he asked whether I had read the article. I confirmed and he continued: “If companies struggle even with basic managerial practices, why do you suggest that companies pay more attention to conflict management?”

A fair question. When dealing with the management of conflicts one is, undoubtedly, addressing a narrow sector of management. On average, corporations encounter conflicts rather seldom. So, why should corporations spend time and effort on improving conduct and practices on a marginal phenomenon when there are other (possibly more) important areas to concentrate on?

Before offering an answer, it is necessary to define my use of the term ‘conflict’.

By conflict, I refer to any controversy or dispute a corporation has with someone else (customer, supplier, joint venture partner, competitor, governmental authority, municipal authority, multi-national authority, employee, etc.). If not settled, the conflict will then be resolved through some kind of a formal proceeding.

By conflict, I thus do not refer e.g. to ordinary interactions by and between individuals where disagreements quite frequently occur (these ‘conflicts’ some suggest should be nurtured in the corporate world for better overall performance).

Conflicts, by chosen definition, are disruptive and unproductive. Corporations know this and pay attention to conflicts (as they most often don’t have a choice). But why should corporations pay more attention to conflict management?

Because, quite simply, it pays off.

Conflicts are noisy – often surrounded by allegations and opinions that, by law, do not have relevance. By paying attention to conflict management, corporations can reduce the noise and concentrate on the essential. Awareness of relevant facts and a better grasp of a corporation’s factual position (case merits) enables informed decisions and appropriate responses.

Further, in conflicts, being early is far better than being late. By paying attention to conflict management, corporations have a better chance of being early when necessary.

By being early, corporations do not miss out on the easiest ways out of conflicts. In many conflict types, the least damaging paths out of a conflict are often visible at the early stages of the conflict when costs are low and the parties’ general mutual irritation level is moderate, or at least not at its peak.

Bad news is always bad news. In conflict situations, bad news early, however, is always better than bad news late. If you know that you have a bad case, you can take that into account in your decision making and, as a consequence, you may e.g. decide to push for an early settlement. But what are your options if you have decided to proceed, invested resources to the conflict resolution process and accumulated significant costs on both parties – only to later learn that you have a bad case?

Further, in conflicts, the best outcomes are only available to proactive corporations. By paying attention to conflict management, corporations can be proactive.

There are always plenty of choices to be made – argument lines to follow and argument lines to avoid, actions to take and actions to refrain from. Many far-reaching decisions will be made way before any actual dispute resolution proceeding gets started. Proactive corporations have the power to influence where a conflict is or is not heading.

If your counterparty makes the key decisions on your behalf, you can be rest assured that many of them are not the same decisions you would make. Reactive corporations often end up with arbitrary negative outcomes.

It is difficult, if not impossible, to be proactive in a conflict situation unless the organization is prepared to respond to a conflict. It is also literally impossible to be right on time with an action or early with one’s actions if a corporation addresses all aspects of conflict management on a case by case (ad hoc) basis – like it was the very first time the corporation encounters a conflict. By paying attention to conflict management, corporations can prepare themselves for future conflicts.

From the conflict management perspective, it does not really matter whether a corporation is otherwise well managed or poorly managed. A well-managed corporation can manage a conflict poorly and a poorly-managed corporation can manage a conflict just fine.

A conflict, nevertheless, always requires management. When an early opportunity is missed, or unconsidered negative signals are sent to the opponent, a corporation is left with no option but to manage the conflict further (possibly in a far messier form) – an outcome that a prepared and proactive corporation might have avoided altogether. If one, in any case, has to do something, why not do it well?

When facing conflicts, corporations, without exception, conduct measures that fall under the concept of ‘conflict management’. It seems, however, that corporations, in general, are quite far from realizing the full potential of conflict management. Opportunities for better outcomes are lost, resources are wasted and unnecessary conflicts prosper – hence my suggestion that corporations pay more attention to conflict management.

Conflicts often emerge unexpectedly. The process that corporations follow thereafter should not develop unexpectedly. A prepared organization knows things in advance. It has established a set of conflict management practices to the effect that management results, in connection with a conflict, are predictable and not (solely) dependent on the skills of an individual manager.

Project Iquja seeks to address the question of how to improve corporate conflict management practices in a structured manner in different business environments.

Some may think back and remember that a past conflict got handled just fine without any specific preparation or added conflict management efforts. To set things straight, I’m always happy when someone gets a lucky break. Maybe I would, though, out of curiosity, inquire whether the opponent’s management at the time seemed stellar or whether it was more a case of both parties kind of flowing through the exercise.

Luck tends to run out eventually. It is also beneficial to remember that even if you won a case before a court, you did not necessarily reach the best outcome to the original conflict.

Contact

Harri Jussila

Founder, Attorney at law, EMBA

+358 50 577 4088

harri.jussila@iquja.com

Address

Huopalahdentie 24
00350 Helsinki
Tel. +358 50 577 4088

Business ID, VAT code

2801483-4 / FI28014834

E-Invoicing address

EDI-Code: 003728014834

Operator ID: 003721291126

Iquja’s office is located at Menuetto Business Center in Munkkivuori, Helsinki (20 minutes from the Helsinki Airport [HEL/EFHK]).

Business ID, VAT code

2801483-4 / FI28014834

E-Invoicing address

EDI-Code: 003728014834

Operator ID: 003721291126