Although conflict is a normal part of life, learning how to resolve conflict effectively can be a daunting task, particularly in the workplace. Addressing conflict should be viewed as an important element in achieving organizational effectiveness and enhancing productivity. Many organizations, however, suffer chronic patterns of unresolved conflict that are costly and often symptomatic of serious organizational dysfunction. In fact, some experts believe that unresolved conflict represents the largest reducible cost in many businesses, yet it remains largely unrecognized (Dana 1999, Slaikev and Hasson 1998). Without a clear picture of the real costs associated with conflict, the priority for developing healthy resolution strategies is likely to remain low.

In this article we discuss the difficulty in recognizing the far-reaching aspects of organizational conflict and define a hierarchy of costs associated with it. We also look at some of the issues that prevent conflict resolution in the workplace and provide some suggestions on how to more effectively deal with this important problem.

Some Definitions

Conflicts are often thought of as disagreements or problems at an interpersonal level. But these aren’t necessarily conflicts. A disagreement may be defined as a difference of opinion that does not directly affect behavior, decisions or the ability to accomplish a task, and consequently may not seriously impact organizational effectiveness. Disagreements among co-workers are common, healthy and frequently of no consequence, and do not require intervention.

On the other hand, a problem exists when there is a divergence of opinion that does affect behavior, decisions or the ability to accomplish a task. If there is also a belief that the interests or goals of the parties involved cannot be achieved simultaneously, then the problem has become a conflict. The ability to differentiate these various possibilities is an important first step in developing a conflict resolution strategy.

The Consequences of Unresolved Conflict

Unresolved conflict can create serious and quite varied consequences. For example, employee conflicts often create project delays that can result in missed market opportunities. Customer relations can be damaged when conflict results in confused communication or inconsistent information. The development of effective work groups and teams can fail as a consequence of disputes between members. Companies with chronic conflict often find it difficult to attract and keep good people.

• Excessive employee turnover
• Low morale
• Reduced productivity
• Quality problems
• Delayed and missed deadlines
• Increased supervision overhead
• Increased stress
• Reduced collaboration
• Fractionated activities
• Passive/aggressive behavior
• Abusive behavior
• Damaged management credibility
• Decreased customer satisfaction
• Negative upward attention
• Split alliances (factions & cliques)
• Distrust

Given the wide variety of possible consequences, it’s appropriate to further define the effects of unresolved conflict and quantify them where possible. In this article, we divide the consequences into three categories, consisting of first, second and third-order effects.

First-Order Effects. At the most basic level, there are consequences that are readily determined to be the result of a particular conflict situation, and are fairly easy to quantify. We call these first order effects. For example, as a result of poorly managed conflict, one of the disputants may leave the organization. If a disputant doesn’t leave, then there is a possibility that peers will escape the tension and stress by leaving. The first-order effect in this case would be the direct replacement costs for the employee who has left (usually termination costs, recruitment expense and training for the new hire).

Second-Order Effects. However, when a new employee joins a project team, how long will it be before that person is a productive member? Assessing the effect of a new hire on team effectiveness may be difficult. Likewise, trying to quantify a change in team productivity can be very difficult. This is an example of a second-order effect, in that the consequence might not be viewed as a result of the original conflict, and because it is not specific to a known problem (any new hire might have problems becoming integrated), it is harder to quantify.

Third-Order Effects. When conflict occurs frequently in an organization the effects often become "enculturated". This leads to a generally unpleasant work environment, in which issues are not discussed (much less resolved) and where fear, distrust and passive-aggressive behavior become the norm. Such situations may affect the organization’s reputation, resulting in lost business and making it difficult to hire or retain good people. These consequences, which we classify as third-order effects, are difficult or impossible to quantify, and can be true "business killers"

W. Edward Deming said that it is impossible to predict the long-term consequences of poor quality. The same can be said of unresolved conflict. For example, when a major project has been seriously undermined and delayed as a result of festering disputes among project members, it may be easy to measure the cost of increased expenditures of resources and the cost of the extended time to completion. In the product (or service) development world, it is also possible to measure the loss of revenue and profit resulting from a delayed completion. But it is much more difficult to measure the cost of missed windows of opportunity, lost market dominance, damaged customer relations or the continued poor productivity of a "team" that doesn’t function well.

A reduction in productivity of disputants and their peers is one of the more serious consequences of unresolved conflict. Tension and stress reduce motivation and disturb concentration. A loss of simple productivity of 25% (doing things other than work related activities, such as discussing the dispute, playing computer games, finding reasons to get out of the area) reduces an average work week to fewer than 20 hours, based on an annualized, valid time off adjusted basis.

Besides suffering increased supervisory overhead, the conflict saddled manager is in danger of losing credibility in the eyes of peers, subordinates and superiors. Subordinates feel a sense of disappointment when conflicts are allowed to continue. Peer managers may begin to look at the disputing group as badly managed and uncooperative, both higher order effects.

An exercise in determining the cost of conflict by calculating first order and estimating higher order effects can be sobering. Even a crude estimate can be an eye-opener for management.

• Lost revenue as a result of missed deadlines, late deliveries, etc.
• Employee replacement costs, including termination costs, recruitment, etc.
• Increased expenditure resulting from quality problems (restocking, replacement orders, parts re-work, etc.)

• Loss of market share as a result of "missed windows of opportunity"
• "Ramp-up" time required for replacement employees to become effective contributors
• Increased supervision or management activities

• Passive-aggressive behaviors exhibited by disgruntled employees
• Loss of effective management resulting from loss of credibility
• Miscommunication with other groups resulting from confusion
• Poor image within the industry or the marketplace

Why Conflict Is Not Addressed

Why isn’t conflict effectively addressed in many organizations? For one thing, managers and executives often fail to recognize what constitutes real conflict in their organizations. Most managers have not had the benefit of training in conflict resolution and simply are not aware of the symptoms of conflict and the resolution strategies that are available to them. Because of a general discomfort in dealing with issues involving strong emotions, some managers won’t intervene unless situations go to extremes, or will ignore conflict (consciously or unconsciously) fearing that if they intervene, they assume responsibility for the resolution.

Without management intervention, disputants are unlikely to successfully resolve conflict on their own. Many disputants believe that addressing conflict requires some form of unpleasant confrontation that results in a win/lose outcome. Some employees fear that if they bring attention to conflict issues they will be labeled as hard to get along with or simply not "team players". Most disputants who have not developed career related negotiation skills (such as sales or purchasing) have little ability to negotiate effectively.

Reducing the Cost of Conflict

What can managers do to deal more effectively with conflict and reduce its cost?

Increase knowledge. Increased awareness and training are the first step. There are many books and workshops that describe conflict and the resolution strategies available. The Principled Negotiation process developed by Fisher and Ury is very effective and can be learned quickly. References are provided at the end of this article.

Develop sensitivity to chronic employee conflict. Look for major changes in employee behaviors. Be alert to passive-aggressive behaviors such as withholding important information, chronic oppositional attitudes, chronic tardiness and resistance to firm commitments. Note body language when employees interact, especially in tense situations.

Establish standard procedures for resolving conflicts when negotiation attempts have failed. With training, managers can learn how to act as arbitrators or mediators. Some organizations use peer mediation or conflict management committees. The manager’s role in conflict resolution requires a delicate balance. Attempting to manage the behavior of employees may be interpreted as controlling or manipulative. At the same time, consciously creating an environment that allows open and constructive exploration of conflict issues will empower and encourage employees to resolve disputes themselves, or with minimal management intervention. When disputants are directly involved in this process, they are much more invested in making the solution work.

Acknowledge conflict honestly. Conflict exists in many human interactions. Discuss the subject at staff meetings. Empower subordinates to use creative ways to address conflict and encourage them to learn resolution strategies.

Lewis A. Coser, in his book Functions of Social Conflict, said "far from being necessarily dysfunctional, a certain degree of conflict is an essential element in group formation and the persistence of group life". In fact, conflict can be a powerful force in the creation of ideas, novel solutions and group energy. It isn’t conflict itself that creates problems and increased cost, but rather an inability or unwillingness to address it in timely and intelligent ways. The impact of unresolved conflict extends far beyond our ability to quantify it.

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