In the early 1990's Professor Charles Handy challenged a group of business leaders to help him discover the critical factors that would identify "Tomorrow's Company". An inquiry called Tomorrow's Company followed and one of the key findings was that the adversarial approach to relationships is one of the key behaviours preventing companies from performing at their optimum level.
When conflicts and disputes arise, the majority of companies are ill equipped to deal with them in a timely and efficient way so that escalation and rising costs are the norm.
Take the following story as an example.
An IT company struggles to find the right fit for a new HR Director. In the interim Deirdre the HR Manager fills in carrying out many of the tasks and attending many of the meetings that the HR Director would have done.
Deirdre has been with the company for many years and has worked her way up to her current position. After 6 months of filling in for the HR Director she decides to apply for the post herself but is unsuccessful.
The successful applicant Jamie arrives to start work as the new HR Director but Deirdre is still fuming at what she feels has been her shabby treatment by the other directors and finds it impossible to create a good working relationship with Jamie.
As time goes by, Deirdre finds much to complain about Jamie's work and management style and begins to gossip about him to his team undermining and sabotaging his efforts (she still has power and influence over the team). The unrest spreads to the other Directors who begin to question Jamie's ability.
With a new baby at home and a wife with post-natal depression, Jamie is unable to cope with the strain and is signed off with work-related stress and depression.
Here is the beginning off a very typical workplace dispute that could well end up with a claim against the company by one of the aggrieved parties.
Legal fees are only the tip of the iceberg in terms of the cost to business of such disputes. In the scenario above Deirdre, Jamie and their colleagues are already spending time and energy dealing with the conflict as it unfolds.
When staff are tied up in managing conflicts or handling disputes, spending time in meetings with lawyers, gathering evidence and clarifying facts, their personal value-add to the company will be substantially reduced.
Hidden costs of disputes include:
- Lost productivity: the value of lost management time and lost business opportunities
- Relationships: the value of lost or damaged relationships
- Health: the costs related to stress and the impact on long-term health
A Commercial Disputes Survey carried out by BDO Stoy Hayward in 2003 found that the most damaging effect of dispute on business was its effect on management time.
The survey found thatalmost nine out of 10 businesses in dispute experienced an effect on management time and seven out of 10 suffered financial loss. Moreover, nine out of 10 disputes actually lasted over three years, often resulting in high levels of stress and decreased motivation.
So it is abundantly clear that apart from legal fees, the TRUE cost of disputes – management time, lost productivity, health costs, damaged relationships and reputation – represents a resource drain of huge proportions and a source of great unhappiness and discomfort which organisations can ill afford, especially when times are tough.
Our instinctive reaction to conflict is to see it as a threat. Any conflict, that is anything that threatens our needs and interests – our values, attitudes and beliefs, is reacted to as if it were an immediate threat to our survival. A social threat is treated in same way as a physical threat. So Deirdre and Jamie are both reacting to the perceived threat to their own survival at work.
The adversarial approach to relationships identified by the Tomorrow's Company Inquiry as one of the key behaviours preventing companies from performing at their optimum level may manifest itself as:
- Silence: not speaking to one another
- Talking behind someone's back: gossip and innuendo
- Withholding information
- Fighting: verbal or even physical
Unless the organisation and the individuals concerned have knowledge of and access to a better way of dealing with conflicts and disputes they will end up in a spiral of destructive behaviours based on the mistaken concept of right versus wrong.
Conflict is Normal
Conflict is quite simply a process. It is the process of expressing dissatisfaction, disagreement or unmet expectations – someone or some group is unhappy with someone else or something else.
Dissatisfaction can arise from multiple factors – differing expectations, competing goals, conflicting interests, confusing communications or unsatisfactory relationships.
In sabotaging Jamie's authority with his team and co-directors, Deirdre is simply expressing her dissatisfaction with the way she has been treated and the failure of management to address her concerns. An everyday occurrence YES – but one that has a huge price tag if it is not handled well.
Disputes are the end point of a chain of events – the product or outcome of an unresolved conflict and are more likely to occur when people ignore he warning signs that things are going wrong.
Conflicts and disputes are unavoidable in business and in many cases provide a useful catalyst to change. Awareness that relationships are strained or working practices are unpopular, can provide critical information to enable a company to re-evaluate its position and re-align its thinking and actions.
The key to avoiding the costs of disputes and to turning conflicts into opportunities, to add value instead of creating waste, is to identify the dispute or potential for dispute at the earliest possible opportunity and use the simplest and most cost-effective means of resolution.
Window of Opportunity
If organisations can pay attention to the warning signs and catch conflict at an early stage before relationships have broken down and while dialogue is still a possibility, they can save enormous costs and build considerable value.
A window of opportunity exists from the moment that people involved begin to feel unhappy about the way another or others are behaving or the way in which a situation is unfolding.
Early Resolution Systems
Many companies have yet to discover the cost saving benefits of conflict management and mediation. The Principles of both are the same – involving a neutral third party to help design and implement a collaborative approach to managing conflicts and disputes.
Conflict Management or Early Dispute Resolution (EDR) is used to help organisations to identify conflict or the potential for conflict and plan routes to resolution. Mediation or Alternative Dispute Resolution (ADR) is used to resolve disputes.
By achieving earlier resolution of conflicts and disputes that would otherwise have incurred the costs of formal grievance procedures or litigation, businesses can save huge sums in wasted management time, damaged relationships, lost productivity and legal fees. It is estimated that using ADR and EDR initiatives will save British business in excess of £1 billion this year.
In the US companies such as General Electric, Halliburton and Shell Oil have saved millions of dollars in liability costs by designing and implementing an early resolution system helping them to identify potential conflicts and flash points and to resolve them at the earliest opportunity and at the lowest level of cost to the organization.
The aim of Early Dispute Resolution is to create high performance collaboration between an organisation and its stakeholders (including directors and employees) to accelerate the time-to-resolution of any conflict or dispute and to seek to add value by identifying opportunities to improve relationships, enhance reputation and productivity.
The idea behind a system for managing issues or conflicts is that the individuals involved should be able to choose from a range of options in terms of methods for trying to reach a resolution and that they should always start with the simplest and most cost effective.
Staying Ahead of the Game
The current economic crisis has served to highlight the potential level of savings for organisations that want to continue boosting efficiency and cutting costs.
Companies that understand the value-added potential of Fighting Fires without Burning Bridges by using Alternative and Early Dispute Resolution will not only save money and enhance relationships but will be among the winners of the 21st century who are truly on their way to becoming Tomorrow's Company.