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The Partnership charter

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Conflict Management: The CFO’s Secret Weapon

The Financial Manager

by Edward J. Kopf, Ph.D. and Erwin G. Krasnow, Esq.
The Financial Manager
September/October 2006

“All they talk about are Saturday’s game and Alpha Delta Tau. I don’t think you have a future here if you’re not a good ol’ boy from State U. If I don’t get the promotion, I’ll really give them something to talk about.”

“Everything they do makes me look bad – and it’s no coincidence. They hate people like me.  Well, they’re going to get their wish. I’m out of here! They can try to finish my projects themselves.”

“It makes me furious that he can treat me like a servant – and get away with it! I hate coming to work. I don’t care who knows it.”

Conflict among the employees of a broadcast station or cable system can eat away at the firm’s bottom line. The costs associated with conflict include:

  • Reduced productivity. This affects both those directly in conflict and all the other members of the work unit that experiences the problem. Estimates of managerial productivity lost to dealing with conflict range as high as 30 percent to 40 percent.
  • Employee turnover. Surveys have identified workplace conflict as the leading cause of turnover other than downsizing, mergers, and restructuring. Replacing a departing employee tired of a contentious workplace can cost as much as 150 percent of a year’s salary.
  • Bad decision-making. Personal fears, antagonisms, and biases related to conflict can prevent or undermine sound business decision-making. While intangible, this product of conflict has the potential to be by far the most damaging. What is the quality of decision-making when, for example, the sales and program managers engage in turf battles?
REDUCED PRODUCTIVITY  No. of employees affected by conflict x hours lost daily x average hourly wage x 250
TURNOVER = No. of employees lost x annual salary x 1.5

The heads of media companies normally don’t think of workplace conflict as a “cost center.” But when a company’s CFO or a station’s business manager recognizes the costs of conflict, he or she has a powerful tool for improving financial performance – and for enhancing the lives of their fellow employees. (The Dana Measure of Financial Cost of organizational Conflict, available online from Mediation Training Institute International, provides a good introduction to the costs of conflict.)

Making it matter

At most stations, the business manager is best able to raise workplace conflict issues. The grapevine winds its way through the business office, and the business manager is often the first person to know when conflict is brewing among the staff. At larger offices, human resource managers are often tuned in to employee concerns. They can be financial managers’ best allies in curbing conflict-related costs. Many financial managers are already working together with their human resource colleagues to minimize the costs of accidents, sexual harassment, absenteeism, and employee theft. It’s only natural to extend this collaboration to employee conflict.

The first step in reducing the cost of conflict is changing managers’ mindsets. Too often, conflicts are viewed as little more than nuisances and, in any case, insolvable. Financial and human resource executives can sensitize managers at all levels to two realities:

  • Conflict is costly.
  • Conflict is preventable and curable.

If these truths are recognized, your company is well on the way to creating a conflict control culture.

Calculating the costs: Once you point them out, the financial implications of employee conflict should be evident to managers. The message is even clearer if you encourage employees to estimate conflict costs. Suppose the persistent debate, dispute, and discussions that company workplace conflict absorb an hour a day for three employees for six months. The cost can run into the thousands of dollars. One employee departing because of a contentious atmosphere can cost tens of thousands of dollars to replace. And it’s a fortunate company that doesn’t experience these levels of conflict in some of its work units.

Conflict is controllable: It can be harder to convince managers they can do something effective about conflict – other than resorting to costly terminations. You may be able to get help from your corporate human resource team to get this message across. But the message isn’t complex. You can convey the “ABC’s of Conflict Management” yourself.

Learning the ABCs

As with bodily diseases, organizational disorders are most easily managed if we understand their origins. The sources and stimulants of workplace conflict are well known. They include poor job or organizational design, differences in personality, values, goals, and expectations and the momentum that conflicts gain once begun. With an understanding of the sources and sustainers of conflict, the following effective strategies for dealing with it have been developed:

  • Fostering direct and effective communication
  • Achieving a degree of mutual understanding and empathy
  • Reaching specific agreements about mutual expectations and relationships

Practical steps

Preventing conflict is less expensive than resolving it. Every organization can afford to do it. In fact, they can’t afford not to do it. Here are some simple preventive measures that go a long way:

  • Build a conflict-literate workforce. Start with a staff-wide meeting on conflict prevention. At the most basic level, you’ll need to convey and discuss two key points: First, “talk it out” – open and honest communication is essential to dealing with potential conflicts with your colleagues. Second, adopt a “my door is open” policy signifying that when it’s difficult to have a productive discussion, managers are always available to help you through it. Your corporate human resource department should be able to help you with planning this meeting or arranging a fuller training for your staff on conflict-related issues.
  • Get off on the right foot. When new employees join your organization, or existing employees change roles, their managers should sit down with the work group and help their employees share with one another:
  1. What’s expected of the new, or newly positioned, employee.
  2. What he or she should be able to expect from the others.
  3. How things get done within the group.
  4. Potential problems to monitor.
Clear job descriptions and work processes are invaluable in these discussions. The key is to create effective working relationships from the start. Excepting slavery and the conscripted military, virtually all workplace relationships are ultimately voluntary. Whether colleague/colleague or superior/subordinate, every relationship works best when the participants themselves agree on its structure, commit to making it work, and perceive it as fair. The participants voluntarily become “workplace partners” in the kind of relationship they have agreed upon. Where a position interacts with other departments, it pays off to sit down with the new employee and appropriate staff in those departments for a similar conversation.
  • Stay alert for the danger signals of conflict. The potential for conflict in the workgroup increases as time passes and circumstances change. Old patterns of behavior that once worked well may need some adjustment. As a manager, to identify where potential conflict is emerging, you can include questions about relationships with fellow workers in your informal and formal performance reviews; keep an eye out for decreased communication and socializing, or cold body language among your staff members; and consider whether “systems” problems that arise are really systems-based or, at root, interpersonal problems. When you spot one of these danger signals, don’t hesitate to get involved.

The more thorough and explicit the discussions and agreements among employees working closely together are, the lower the risk of conflict. If you have the resources and the commitment, the ideal goal of such a conflict prevention process should be short, simple, upfront, written agreements between the workplace partners on how to accommodate their respective personalities and values, what their roles and responsibilities will be, what they expect of one another, how they will deal with incipient conflict if it develops, and more. It’s just the kind of careful discussion and planning that you’d require relative to any critical asset – physical, financial, or human.

Our colleague, David Gage, is the author of The Partnership Charter: How to Start Out Right With Your New Business Partnership, or Fix the One You’re In (Basic Books, 260 pages) which describes the subjects that need to be discussed between any partners (see list below). Gage also lays out a process for productive and efficient discussion and negotiation that can be adapted to the workplace setting.

Personality types
Personal Values
Contributions and rewards
Mutual Expectations
Scenario planning
Conflict resolution
Strategic vision

Coping with conflict

Managers are often able to head off conflict by encouraging good communications, understanding and clear expectations with and among their subordinates. But by the time conflict becomes visible as a workplace problem, often it has become too complex for such an intervention by a manager. The parties in conflict begin to perceive their problem as inherent in the flawed character of their adversary. This perspective is reinforced as they seek out colleagues who will take their side and share their demonized view of the other. In time, the split can become so deep that each “combatant” comes to see the mere presence of the other in the workplace as a mortal danger.

Even an extremely sophisticated manager is well advised to resist the temptation to mediate workplace disputes. It is, for all practical purposes, impossible for a manager to avoid being viewed as biased by one or all of those involved in the conflict. This can take a bad workplace situation and make it worse. It is also difficult for most managers to resist imposing a settlement that leaves the harsh feelings and perceptions of the parties intact or exacerbated – waiting for an opportunity to resurface in the future.

For this reason, among others, trained mediators can be a key neutral resource in addressing deep-seated conflict among employees. They are trained and experienced in assisting clients who need to retreat from extreme positions that they have adopted in the heat of conflict. They also offer sophisticated help in restoring communications, in encouraging parties to “walk in each other’s shoes,” and in fostering negotiated solutions to problems. And they serve as lightning rods that divert from managers and peers the charged emotions that emerge as conflict is explored and resolved.

If you are fortunate, your corporate human resources department will include staff that is skilled in workplace mediation. Outside workplace mediators are costly and very few companies have funds budgeted for such an unexpected need. But if you’re dealing with key employees and the mediators are successful in restoring expected levels of productivity to a sick work unit, that expense can be an excellent investment. It may be penny-wise and pound-foolish to let conflict linger and/or drive away vital human resources.

Conflict among managers

When addressing workplace conflict, it’s essential to recognize that this problem can exist at all levels in the organization – and that its effects are more costly the higher you go. It’s easier to intervene in a clerical unit to address conflict than in the executive committee. Yet poor communication and impaired decision-making at this higher level of management can cost the company far more that just near-term productivity reductions. It can lead to missed opportunities and unaddressed threats that can change the fundamental health of the organization.

Typically, a financial manager has limited options in directly dealing with conflict among her peers or superiors. But introducing conflict management into your firm’s culture is a first step toward helping managers at all levels to examine their subordinates’ and their own behavior in this regard. The results can only be for the better.

Edward J. Kopf, principal and founding member of BMC Associates, is a leader in the field of business mediation. He has more than 20 years of senior management experience in rapidly growing public and closely held companies.

Erwin G. Krasnow heads the Communication and Information Technology Group at the law firm of Garvey Schubert Barer. He is an experienced mediator and also is a Senior Associate with BMC Associates. He serves as BCFM’s Washington counsel.