www.hbr.org

 

Want Collaboration?

 

Accept—and Actively Manage—Conflict

 

by Jeff Weiss and Jonathan Hughes

 

The quest for harmony and common goals can actually obstruct teamwork. Managers get truly effective collaboration only when they realize that conflict is natural and necessary.

 

Reprint R0503F This document is authorized for use only in Laureate Education, Inc.’s WAL WMBA 6010 Managing People and Promoting Collaboration at Laureate Education – Baltimore from Dec 2018 to

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Want Collaboration?

 

Accept—and Actively Manage—Conflict

 

by Jeff Weiss and Jonathan Hughes

 

harvard business review • march 2005 page 1

 

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The quest for harmony and common goals can actually obstruct teamwork. Managers get truly effective collaboration only when they realize that conflict is natural and necessary.

 

The challenge is a long-standing one for senior managers: How do you get people in your or- ganization to work together across internal boundaries? But the question has taken on ur- gency in today’s global and fast-changing busi- ness environment. To service multinational accounts, you increasingly need seamless col- laboration across geographic boundaries. To improve customer satisfaction, you increas- ingly need collaboration among functions ranging from R&D to distribution. To offer so- lutions tailored to customers’ needs, you in- creasingly need collaboration between prod- uct and service groups.

Meanwhile, as competitive pressures contin- ually force companies to find ways to do more with less, few managers have the luxury of re- lying on their own dedicated staffs to accom- plish their objectives. Instead, most must work with and through people across the organiza- tion, many of whom have different priorities, incentives, and ways of doing things.

Getting collaboration right promises tre- mendous benefits: a unified face to customers,

faster internal decision making, reduced costs through shared resources, and the develop- ment of more innovative products. But despite the billions of dollars spent on initiatives to im- prove collaboration, few companies are happy with the results. Time and again we have seen management teams employ the same few strategies to boost internal cooperation. They restructure their organizations and reengineer their business processes. They create cross-unit incentives. They offer teamwork training. While such initiatives yield the occasional suc- cess story, most of them have only limited im- pact in dismantling organizational silos and fostering collaboration—and many are total failures. (See the sidebar “The Three Myths of Collaboration.”)

So what’s the problem? Most companies re- spond to the challenge of improving collabora- tion in entirely the wrong way. They focus on the symptoms (“Sales and delivery do not work together as closely as they should”) rather than on the root cause of failures in co- operation: conflict. The fact is, you can’t im-

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Want Collaboration?

 

harvard business review • march 2005 page 2

 

Jonathan Hughes

 

(jhughes@ vantagepartners.com) and

 

Jeff Weiss

 

(jweiss@vantagepartners.com) are partners at Vantage Partners, a Boston- based consulting firm focused on strategic relationship management. Hughes heads the Sourcing and Sup- plier Management Practice, and Weiss heads the firm’s Alliance Management Practice. The authors have had consult- ing relationships with a number of the companies mentioned in this article.

 

prove collaboration until you’ve addressed the issue of conflict.

This can come as a surprise to even the most experienced executives, who generally don’t fully appreciate the inevitability of conflict in complex organizations. And even if they do recognize this, many mistakenly assume that efforts to increase collaboration will signifi- cantly reduce that conflict, when in fact some of these efforts—for example, restructuring in- itiatives—actually produce more of it.

Executives underestimate not only the inev- itability of conflict but also—and this is key— its importance to the organization. The dis- agreements sparked by differences in perspec- tive, competencies, access to information, and strategic focus within a company actually gen- erate much of the value that can come from collaboration across organizational bound- aries. Clashes between parties are the crucibles in which creative solutions are developed and wise trade-offs among competing objectives are made. So instead of trying simply to reduce disagreements, senior executives need to em- brace conflict and, just as important, institu- tionalize mechanisms for managing it.

Even though most people lack an innate un- derstanding of how to deal with conflict effec- tively, there are a number of straightforward ways that executives can help their people— and their organizations—constructively man- age it. These can be divided into two main ar- eas: strategies for managing disagreements at the point of conflict and strategies for manag- ing conflict upon escalation up the manage- ment chain. These methods can help a com- pany move through the conflict that is a necessary precursor to truly effective collabo- ration and, more important, extract the value that often lies latent in intra-organizational dif- ferences. When companies are able to do both, conflict is transformed from a major liability into a significant asset.

 

Strategies for Managing Disagreements at the Point of Conflict

 

Conflict management works best when the par- ties involved in a disagreement are equipped to manage it themselves. The aim is to get people to resolve issues on their own through a process that improves—or at least does not damage— their relationships. The following strategies help produce decisions that are better in-

formed and more likely to be implemented.

 

Devise and implement a common method for resolving conflict.

 

Consider for a moment the hypothetical Matrix Corporation, a com- posite of many organizations we’ve worked with whose challenges will likely be familiar to managers. Over the past few years, sales- people from nearly a dozen of Matrix’s prod- uct and service groups have been called on to design and sell integrated solutions to their customers. For any given sale, five or more lead salespeople and their teams have to agree on issues of resource allocation, solution de- sign, pricing, and sales strategy. Not surpris- ingly, the teams are finding this difficult. Who should contribute the most resources to a par- ticular customer’s offering? Who should re- duce the scope of their participation or dis- count their pricing to meet a customer’s budget? Who should defer when disagree- ments arise about account strategy? Who should manage key relationships within the customer account? Indeed, given these thorny questions, Matrix is finding that a single large sale typically generates far more conflict inside the company than it does with the customer. The resulting wasted time and damaged rela- tionships among sales teams are making it in- creasingly difficult to close sales.

Most companies face similar sorts of prob- lems. And, like Matrix, they leave employees to find their own ways of resolving them. But without a structured method for dealing with these issues, people get bogged down not only in what the right result should be but also in how to arrive at it. Often, they will avoid or work around conflict, thereby forgo- ing important opportunities to collaborate. And when people do decide to confront their differences, they usually default to the ap- proach they know best: debating about who’s right and who’s wrong or haggling over small concessions. Among the negative conse- quences of such approaches are suboptimal, “split-the-difference” resolutions—if not out- right deadlock.

Establishing a companywide process for re- solving disagreements can alter this familiar scenario. At the very least, a well-defined, well- designed conflict resolution method will re- duce transaction costs, such as wasted time and the accumulation of ill will, that often come with the struggle to work though differences. At best, it will yield the innovative outcomes

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The Three Myths of Collaboration

 

Companies attempt to foster collaboration among different parts of their organizations through a variety of methods, many based on a number of seemingly sensible but ultimately misguided assumptions:

 

Effective collaboration means “teaming.”

 

Many companies think that teamwork training is the way to promote collabora- tion across an organization. So they’ll get the HR department to run hundreds of managers and their subordinates through intensive two- or three-day training pro- grams. Workshops will offer techniques for getting groups aligned around common goals, for clarifying roles and responsibili- ties, for operating according to a shared set of behavioral norms, and so on.

Unfortunately, such workshops are usu- ally the right solution to the wrong prob- lems. First, the most critical breakdowns in collaboration typically occur not on actual teams but in the rapid and unstructured interactions between different groups within the organization. For example, someone from R&D will spend weeks un- successfully trying to get help from manu- facturing to run a few tests on a new proto- type. Meanwhile, people in manufacturing begin to complain about arrogant engi- neers from R&D expecting them to drop everything to help with another one of R&D’s pet projects. Clearly, the need for collaboration extends to areas other than a formal team.

The second problem is that breakdowns in collaboration almost always result from fundamental differences among business functions and divisions. Teamwork train- ing offers little guidance on how to work together in the context of competing objec- tives and limited resources. Indeed, the fre- quent emphasis on common goals further stigmatizes the idea of conflict in organiza- tions where an emphasis on “polite” be- havior regularly prevents effective problem solving. People who need to collaborate more effectively usually don’t need to align around and work toward a common goal. They need to quickly and creatively solve problems by managing the inevitable con- flict so that it works in their favor.

 

An effective incentive system will ensure collaboration.

 

It’s a tantalizing proposition: You can hard- wire collaboration into your organization by rewarding collaborative behavior. Sales- people receive bonuses not only for hitting targets for their own division’s products but also for hitting cross-selling targets. Staff in corporate support functions like IT and procurement have part of their bo- nuses determined by positive feedback from their internal clients.

Unfortunately, the results of such pro- grams are usually disappointing. Despite greater financial incentives, for example, salespeople continue to focus on the sales of their own products to the detriment of selling integrated solutions. Employees continue to perceive the IT and procure- ment departments as difficult to work with, too focused on their own priorities. Why such poor results? To some extent, it’s because individuals think—for the most part correctly—that if they perform well in their own operation they will be “taken care of” by their bosses. In addition, many people find that the costs of working with individuals in other parts of the organiza- tion—the extra time required, the aggrava- tion—greatly outweigh the rewards for doing so.

Certainly, misaligned incentives can be a tremendous obstacle to cross-boundary collaboration. But even the most carefully constructed incentives won’t eliminate ten- sions between people with competing business objectives. An incentive is too blunt an instrument to enable optimal res- olution of the hundreds of different trade- offs that need to be made in a complex or- ganization. What’s more, overemphasis on incentives can create a culture in which people say, “If the company wanted me to do that, they would build it into my comp plan.” Ironically, focusing on incentives as a means to encourage collaboration can end up undermining it.

 

Organizations can be structured for collaboration.

 

Many managers look for structural and procedural solutions—cross-functional task forces, collaborative “groupware,” complex webs of dotted reporting lines on the organization chart—to create greater internal collaboration. But bringing people together is very different from getting them to collaborate.

Consider the following scenario. Indi- vidual information technology depart- ments have been stripped out of a com- pany’s business units and moved to a corporatewide, shared-services IT organi- zation. Senior managers rightly recognize that this kind of change is a recipe for con- flict because various groups will now es- sentially compete with one another for scarce IT resources. So managers try mightily to design conflict out of, and col- laboration into, the new organization. For example, to enable collaborative decision making within IT and between IT and the business units, business units are re- quired to enter requests for IT support into a computerized tracking system. The system is designed to enable managers within the IT organization to prioritize projects and optimally deploy resources to meet the various requests.

Despite painstaking process design, re- sults are disappointing. To avoid the inevi- table conflicts between business units and IT over project prioritization, managers in the business units quickly learn to bring their requests to those they know in the IT organization rather than entering the requests into the new system. Conse- quently, IT professionals assume that any project in the system is a lower priority— further discouraging use of the system. People’s inability to deal effectively with conflict has undermined a new process specifically designed to foster organiza- tional collaboration.

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that are likely to emerge from discussions that draw on a multitude of objectives and perspec- tives. There is an array of conflict resolution methods a company can use. But to be effec- tive, they should offer a clear, step-by-step pro- cess for parties to follow. They should also be made an integral part of existing business ac- tivities—account planning, sourcing, R&D budgeting, and the like. If conflict resolution is set up as a separate, exception-based process— a kind of organizational appeals court—it will likely wither away once initial managerial en- thusiasm wanes.

At Intel, new employees learn a common method and language for decision making and conflict resolution. The company puts them through training in which they learn to use a variety of tools for handling discord. Not only does the training show that top management sees disagreements as an inevitable aspect of doing business, it also provides a common framework that expedites conflict resolution. Little time is wasted in figuring out the best way to handle a disagreement or trading accu- sations about “not being a team player”; guided by this clearly defined process, people can devote their time and energy to exploring and constructively evaluating a variety of op- tions for how to move forward. Intel’s system- atic method for working through differences has helped sustain some of the company’s hall- mark qualities: innovation, operational effi- ciency, and the ability to make and implement hard decisions in the face of complex strategic choices.

 

Provide people with criteria for making trade-offs.

 

At our hypothetical Matrix Corpo- ration, senior managers overseeing cross-unit sales teams often admonish those teams to “do what’s right for the customer.” Unfortunately, this exhortation isn’t much help when conflict arises. Given Matrix’s ability to offer numer- ous combinations of products and services, company managers—each with different training and experience and access to different information, not to mention different unit pri- orities—have, not surprisingly, different opin- ions about how best to meet customers’ needs. Similar clashes in perspective result when ex- asperated senior managers tell squabbling team members to set aside their differences and “put Matrix’s interests first.” That’s be- cause it isn’t always clear what’s best for the company given the complex interplay among

Matrix’s objectives for revenue, profitability, market share, and long-term growth.

Even when companies equip people with a common method for resolving conflict, em- ployees often will still need to make zero-sum trade-offs between competing priorities. That task is made much easier and less contentious when top management can clearly articulate the criteria for making such choices. Obvi- ously, it’s not easy to reduce a company’s strat- egy to clearly defined trade-offs, but it’s worth trying. For example, salespeople who know that five points of market share are more im- portant than a ten point increase on a cus- tomer satisfaction scale are much better equipped to make strategic concessions when the needs and priorities of different parts of the business conflict. And even when the cri- teria do not lead to a straightforward answer, the guidelines can at least foster productive conversations by providing an objective focus. Establishing such criteria also sends a clear signal from management that it views conflict as an inevitable result of managing a complex business.

At Blue Cross and Blue Shield of Florida, the strategic decision to rely more and more on alliances with other organizations has signifi- cantly increased the potential for disagree- ment in an organization long accustomed to developing capabilities in-house. Decisions about whether to build new capabilities, buy them outright, or gain access to them through alliances are natural flashpoints for conflict among internal groups. The health insurer might have tried to minimize such conflict through a structural solution, giving a particu- lar group the authority to make decisions con- cerning whether, for instance, to develop a new claims-processing system in-house, to do so jointly with an alliance partner, or to license or acquire an existing system from a third party. Instead, the company established a set of crite- ria designed to help various groups within the organization—for example, the enterprise alli- ance group, IT, and marketing—to collectively make such decisions.

The criteria are embodied in a spreadsheet- type tool that guides people in assessing the trade-offs involved—say, between speed in get- ting a new process up and running versus en- suring its seamless integration with existing ones—when deciding whether to build, buy, or ally. People no longer debate back and forth

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across a table, advocating their preferred out- comes. Instead, they sit around the table and together apply a common set of trade-off crite- ria to the decision at hand. The resulting in- sights into the pros and cons of each approach enable more effective execution, no matter which path is chosen. (For a simplified version of the trade-off tool, see the exhibit “Blue Cross and Blue Shield: Build, Buy, or Ally?”)

 

Use the escalation of conflict as an op- portunity for coaching.

 

Managers at Matrix spend much of their time playing the organi- zational equivalent of hot potato. Even people who are new to the company learn within weeks that the best thing to do with cross-unit conflict is to toss it up the management chain.

Immediate supervisors take a quick pass at re- solving the dispute but, being busy them- selves, usually pass it up to

 

their

 

supervisors. Those supervisors do the same, and before long the problem lands in the lap of a senior- level manager, who then spends much of his time resolving disagreements. Clearly, this isn’t ideal. Because the senior managers are a number of steps removed from the source of the controversy, they rarely have a good un- derstanding of the situation. Furthermore, the more time they spend resolving internal clashes, the less time they spend engaged in the business, and the more isolated they are from the very information they need to re- solve the disputes dumped in their laps. Mean-

 

Blue Cross and Blue Shield: Build, Buy, or Ally?

 

One of the most effective ways senior manag- ers can help resolve cross-unit conflict is by giving people the criteria for making trade- offs when the needs of different parts of the business are at odds with one another. At Blue Cross and Blue Shield of Florida, there are often conflicting perspectives over whether to build new capabilities (for exam- ple, a new claims-processing system, as in the hypothetical example below), acquire them, or gain access to them through an alliance. The company uses a grid-like poster (a sim- plified version of which is shown here) that

helps multiple parties analyze the trade-offs associated with these three options. By checking various boxes in the grid using per- sonalized markers, participants indicate how they assess a particular option against a vari- ety of criteria: for example, the date by which the new capability needs to be implemented; the availability of internal resources such as capital and staff needed to develop the capa- bility; and the degree of integration required with existing products and processes. The table format makes criteria and trade-offs easy to compare. The visual depiction of peo-

ple’s “votes” and the ensuing discussion help individuals see how their differences often arise from such factors as access to different data or different prioritizing of objectives. As debate unfolds—and as people move their markers in response to new information— they can see where they are aligned and where and why they separate into significant factions of disagreement. Eventually, the cri- teria-based dialogue tends to produce a pre- ponderance of markers in one of the three rows, thus yielding operational consensus around a decision.

 

Required Implementation

Time Frame

Organizational Experience

Level

Availability of Internal Resources

Volatility of Environment

Complexity of Solution

Availability of External Resources

Required Degree of

Integration Required Control

New Claims-Processing System

>12 months

<6 months

6–12 months

High

Low

High

High to moderate

Moderate to low

Low

Medium

High

Low

High

Moderate

Low

High

Moderate

High

Medium

Low

High

Medium

Low

BUILD

BUY

ALLY Medium

Source: Blue Cross and Blue Shield of FloridaParticipant 1 = Participant 2 = Participant 3 = Participant 4 = Participant 5 =

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harvard business review • march 2005 page 6

 

while, Matrix employees get so little opportu- nity to learn about how to deal with conflict that it becomes not only expedient but almost necessary for them to quickly bump conflict up the management chain.

While Matrix’s story may sound extreme, we can hardly count the number of companies we’ve seen that operate this way. And even in the best of situations—for example, where a companywide conflict-management process is in place and where trade-off criteria are well understood—there is still a natural tendency for people to let their bosses sort out disputes. Senior managers contribute to this tendency by quickly resolving the problems presented to them. While this may be the fastest and easiest way to fix the problems, it encourages people to punt issues upstairs at the first sign of diffi-

culty. Instead, managers should treat escala- tions as opportunities to help employees be- come better at resolving conflict. (For an example of how managers can help their em- ployees improve their conflict resolution skills, see the exhibit “IBM: Coaching for Conflict.”)

At KLA-Tencor, a major manufacturer of semiconductor production equipment, a mate- rials executive in each division oversees a num- ber of buyers who procure the materials and component parts for machines that the divi- sion makes. When negotiating a companywide contract with a supplier, a buyer often must work with the company commodity manager, as well as with buyers from other divisions who deal with the same supplier. There is often conflict, for example, over the delivery terms for components supplied to two or more

 

IBM: Coaching for Conflict

 

Managers can reduce the repeated escalation of conflict up the management chain by help- ing employees learn how to resolve disputes themselves. At IBM, executives get training in conflict management and are offered on-

line resources to help them coach others. One tool on the corporate intranet (an edited ex- cerpt of which is shown here) walks manag- ers through a variety of conversations they might have with a direct report who is strug-

gling to resolve a dispute with people from one or more groups in the company—some of whom, by design, will be consulted to get their views but won’t be involved in negotiat- ing the final decision.

 

“Everyone still insists on being a decision maker.”

The people your report is deal- ing with remain concerned that unless they have a formal voice in making the decision— or a key piece of the decision— their needs and interests won’t be taken into account.

“You might want to explain why people are being consulted and how this information will be used.”

“Are there ways to break this decision apart into a series of subissues and assign decision-making roles around those subissues?”

“Consider talking to the group about the costs of having everyone involved in the final decision.”

“How would you ask someone for input? What would you tell her about your purpose in seeking it? What questions would you ask? What would you say if she put forth a solution and resisted discussing other options?”

“Is there a way to manage the risk that she will try to block your efforts other than by not consulting her at all? If you consult with her now, might that in fact lower the risk that she will try to derail your efforts later?”

“What are the ground rules for how decisions will be made? Do all those in the group need to agree? Must the majority agree? Or just those with the greatest competence?”

“What interests underlie the objective of having everyone agree? Is there another decision-making process that would meet those interests?”

The person you are coaching may be overlooking the risks of not asking for input—mainly, that any decision arrived at without input could be sabo- taged later on.

The right people were included in the negotiating group, but the process for negotiating a final decision was not determined.

“If I consult with this person up front, he might try to force an answer on me or create roadblocks to my efforts to move forward.”

“I have consulted with all the right parties and have crafted, by all accounts, a good plan. But the decision makers cannot settle on a final decision.”

And you could help your report by saying something like…

If you hear from someone reporting to you that . . .

The problem could be that . . .

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divisions under the contract. In such cases, the commodity manager and the division materi- als executive will push the division buyer to consider the needs of the other divisions, alter- natives that might best address the collective needs of the different divisions, and the stan- dards to be applied in assessing the trade-offs between alternatives. The aim is to help the buyer see solutions that haven’t yet been con- sidered and to resolve the conflict with the buyer in the other division.

Initially, this approach required more time from managers than if they had simply made the decisions themselves. But it has paid off in fewer disputes that senior managers need to resolve, speedier contract negotiation, and improved contract terms both for the com- pany as a whole and for multiple divisions. For example, the buyers from three KLA-Ten- cor product divisions recently locked horns over a global contract with a key supplier. At issue was the trade-off between two variables: one, the supplier’s level of liability for materi- als it needs to purchase in order to fulfill or- ders and, two, the flexibility granted the KLA- Tencor divisions in modifying the size of the orders and their required lead times. Each di- vision demanded a different balance between these two factors, and the buyers took the conflict to their managers, wondering if they should try to negotiate each of the different trade-offs into the contract or pick among them. After being coached to consider how each division’s business model shaped its pref- erence—and using this understanding to jointly brainstorm alternatives—the buyers and commodity manager arrived at a creative solution that worked for everyone: They would request a clause in the contract that al- lowed them to increase and decrease flexibil- ity in order volume and lead time, with corre- sponding changes in supplier liability, as required by changing market conditions.

 

Strategies for Managing Conflict upon Escalation

 

Equipped with common conflict resolution methods and trade-off criteria, and supported by systematic coaching, people are better able to resolve conflict on their own. But certain complex disputes will inevitably need to be de- cided by superiors. Consequently, managers must ensure that, upon escalation, conflict is resolved constructively and efficiently—and

in ways that model desired behaviors.

 

Establish and enforce a requirement of joint escalation.

 

Let’s again consider the situa- tion at Matrix. In a typical conflict, three sales- people from different divisions become in- volved in a dispute over pricing. Frustrated, one of them decides to hand the problem up to his boss, explaining the situation in a short voice-mail message. The message offers little more than bare acknowledgment of the other salespeoples’ viewpoints. The manager then determines, on the basis of what he knows about the situation, the solution to the prob- lem. The salesperson, armed with his boss’s decision, returns to his counterparts and shares with them the verdict—which, given the process, is simply a stronger version of the solution the salesperson had put forward in the first place. But wait! The other two sales- people have also gone to

 

their

 

managers and carried back stronger versions of

 

their

 

solu- tions. At this point, each salesperson is locked into what is now “my manager’s view” of the right pricing scheme. The problem, already thorny, has become even more intractable.

The best way to avoid this kind of debilitat- ing deadlock is for people to present a dis- agreement jointly to their boss or bosses. This will reduce or even eliminate the suspicion, surprises, and damaged personal relationships ordinarily associated with unilateral escala- tion. It will also guarantee that the ultimate decision maker has access to a wide array of perspectives on the conflict, its causes, and the various ways it might be resolved. Further- more, companies that require people to share responsibility for the escalation of a conflict often see a decrease in the number of prob- lems that are pushed up the management chain. Joint escalation helps create the kind of accountability that is lacking when people know they can provide their side of an issue to their own manager and blame others when things don’t work out.

A few years ago, after a merger that re- sulted in a much larger and more complex or- ganization, senior managers at the Canadian telecommunications company Telus found themselves virtually paralyzed by a daily bar- rage of unilateral escalations. Just determin- ing who was dealing with what and who should be talking to whom took up huge amounts of senior management’s time. So the company made joint escalation a central

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tenet of its new organizationwide protocols for conflict resolution—a requirement given teeth by managers’ refusal to respond to uni- lateral escalation. When a conflict occurred among managers in different departments concerning, say, the allocation of resources among the departments, the managers were required to jointly describe the problem, what had been done so far to resolve it, and its possible solutions. Then they had to send a joint write-up of the situation to each of their bosses and stand ready to appear together and answer questions when those bosses met to work through a solution. In many cases, the requirement of systematically document- ing the conflict and efforts to resolve it—be- cause it forced people to make such efforts— led to a problem being resolved on the spot, without having to be kicked upstairs. Within weeks, this process resulted in the resolution of hundreds of issues that had been stalled for months in the newly merged organization.

 

Ensure that managers resolve escalated conflicts directly with

 

their

 

counterparts.

 

Let’s return to the three salespeople at Matrix who took their dispute over pricing to their re- spective bosses and then met again, only to find themselves further from agreement than before. So what did they do at that point? They sent the problem

 

back

 

to their bosses. These three bosses, each of whom thought he’d al- ready resolved the issue, decided the easiest thing to do would be to escalate it themselves. This would save them time and put the con- flict before senior managers with the broad view seemingly needed to make a decision. Unfortunately, by doing this, the three bosses simply perpetuated the situation their sales- people had created, putting forward a biased viewpoint and leaving it to their own manag- ers to come up with an answer. In the end, the decision was made unilaterally by the senior manager with the most organizational clout. This result bred resentment back down the management chain. A sense of “we’ll win next time” took hold, ensuring that future conflict would be even more difficult to resolve.

It’s not unusual to see managers react to es- calations from their employees by simply pass- ing conflicts up their own functional or divi- sional chains until they reach a senior executive involved with all the affected func- tions or divisions. Besides providing a poor ex- ample for others in the organization, this can

be disastrous for a company that needs to move quickly. To avoid wasting time, a man- ager somewhere along the chain might try to resolve the problem swiftly and decisively by herself. But this, too, has its costs. In a complex organization, where many issues have signifi- cant implications for numerous parts of the business, unilateral responses to unilateral es- calations are a recipe for inefficiency, bad deci- sions, and ill feelings.

The solution to these problems is a commit- ment by managers—a commitment codified in a formal policy—to deal with escalated conflict directly with their counterparts. Of course, doing this can feel cumbersome, especially when an issue is time-sensitive. But resolving the problem early on is ultimately more effi- cient than trying to sort it out later, after a de- cision becomes known because it has nega- tively affected some part of the business.

In the 1990s, IBM’s sales and delivery orga- nization became increasingly complex as the company reintegrated previously independent divisions and reorganized itself to provide cus- tomers with full solutions of bundled products and services. Senior executives soon recog- nized that managers were not dealing with es- calated conflicts and that relationships among them were strained because they failed to con- sult and coordinate around cross-unit issues. This led to the creation of a forum called the Market Growth Workshop (a name carefully chosen to send a message throughout the com- pany that getting cross-unit conflict resolved was critical to meeting customer needs and, in turn, growing market share). These monthly conference calls brought together managers, salespeople, and frontline product specialists from across the company to discuss and resolve cross-unit conflicts that were hindering impor- tant sales—for example, the difficulty salespeo- ple faced in getting needed technical resources from overstretched product groups.

The Market Growth Workshops weren’t suc- cessful right away. In the beginning, busy se- nior managers, reluctant to spend time on is- sues that often hadn’t been carefully thought through, began sending their subordinates to the meetings—which made it even more diffi- cult to resolve the problems discussed. So the company developed a simple preparation tem- plate that forced people to document and ana- lyze disputes before the conference calls. Se- nior managers, realizing the problems created

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Want Collaboration?

 

harvard business review • march 2005 page 9

 

by their absence, recommitted themselves to attending the meetings. Over time, as complex conflicts were resolved during these sessions and significant sales were closed, attendees began to see these meetings as an opportunity to be involved in the resolution of high-stakes, high-visibility issues.

 

Make the process for escalated conflict res- olution transparent.

 

When a sales conflict is resolved by a Matrix senior manager, the word comes down the management chain in the form of an action item: Put together an offer- ing with this particular mix of products and services at these prices. The only elaboration may be an admonishment to “get the sales team together, work up a proposal, and get back to the customer as quickly as possible.” The problem is solved, at least for the time be- ing. But the salespeople—unless they have been able to divine themes from the patterns of decisions made over time—are left with lit- tle guidance on how to resolve similar issues in the future. They may justifiably wonder: How was the decision made? Based on what kinds of assumptions? With what kinds of trade- offs? How might the reasoning change if the situation were different?

In most companies, once managers have re- solved a conflict, they announce the decision and move on. The resolution process and ra- tionale behind the decision are left inside a managerial black box. While it’s rarely helpful for managers to share all the gory details of their deliberations around contentious issues, failing to take the time to explain how a deci- sion was reached and the factors that went into it squanders a major opportunity. A frank discussion of the trade-offs involved in deci- sions would provide guidance to people trying to resolve conflicts in the future and would help nip in the bud the kind of speculation— who won and who lost, which managers or units have the most power—that breeds mis- trust, sparks turf battles, and otherwise im- pedes cross-organizational collaboration. In general, clear communication about the reso- lution of the conflict can increase people’s will- ingness and ability to implement decisions.

During the past two years, IBM’s Market Growth Workshops have evolved into a more structured approach to managing escalated conflict, known as Cross-Team Workouts. De- signed to make conflict resolution more trans- parent, the workouts are weekly meetings of

people across the organization who work to- gether on sales and delivery issues for specific accounts. The meetings provide a public forum for resolving conflicts over account strategy, solution configuration, pricing, and delivery. Those issues that cannot be resolved at the local level are escalated to regional workout sessions attended by managers from product groups, services, sales, and finance. Attendees then communicate and explain meeting resolutions to their reports. Issues that cannot be resolved at the regional level are escalated to an even higher-level workout meeting attended by cross-unit executives from a larger geographic region—like the Americas or Asia Pacific—and chaired by the general manager of the region presenting the issue. The most complex and strategic issues reach this global forum. The overlapping at- tendance at these sessions—in which the managers who chair one level of meeting at- tend sessions at the next level up, thereby ob- serving the decision-making process at that stage—further enhances the transparency of the system among different levels of the com- pany. IBM has further formalized the process for the direct resolution of conflicts between services and product sales on large accounts by designating a managing director in sales and a global relationship partner in IBM glo- bal services as the ultimate point of resolu- tion for escalated conflicts. By explicitly mak- ing the resolution of complex conflicts part of the job descriptions for both managing direc- tor and global relationship partner—and by making that clear to others in the organiza- tion—IBM has reduced ambiguity, increased transparency, and increased the efficiency with which conflicts are resolved.

 

Tapping the Learning Latent in Conflict

 

The six strategies we have discussed constitute a framework for effectively managing organi- zational discord, one that integrates conflict resolution into day-to-day decision-making processes, thereby removing a critical barrier to cross-organizational collaboration. But the strategies also hint at something else: that con- flict can be more than a necessary antecedent to collaboration.

Let’s return briefly to Matrix. More than three-quarters of all cross-unit sales at the com- pany trigger disputes about pricing. Roughly

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Want Collaboration?

 

harvard business review • march 2005 page 10

 

half of the sales lead to clashes over account control. A substantial number of sales also pro- duce disagreements over the design of cus- tomer solutions, with the conflict often rooted in divisions’ incompatible measurement sys- tems and the concerns of some people about the quality of the solutions being assembled. But managers are so busy trying to resolve these almost daily disputes that they don’t see the patterns or sources of conflict. Interest- ingly, if they ever wanted to identify patterns like these, Matrix managers might find few signs of them. That’s because salespeople, who regularly hear their bosses complain about all the disagreements in the organization, have concluded that they’d better start shielding their superiors from discord.

The situation at Matrix is not unusual— most companies view conflict as an unneces- sary nuisance—but that view is unfortunate. When a company begins to see conflict as a valuable resource that should be managed and exploited, it is likely to gain insight into prob- lems that senior managers may not have known existed. Because internal friction is often caused by unaddressed strains within an organization or between an organization and its environment, setting up methods to track conflict and examine its causes can provide an interesting new perspective on a variety of is- sues. In the case of Matrix, taking the time to aggregate the experiences of individual sales- people involved in recurring disputes would likely lead to better approaches to setting prices, establishing incentives for salespeople, and monitoring the company’s quality control process.

At Johnson & Johnson, an organization that has a highly decentralized structure, conflict is

recognized as a positive aspect of cross-com- pany collaboration. For example, a small inter- nal group charged with facilitating sourcing col- laboration among J&J’s independent operating companies—particularly their outsourcing of clinical research services—actively works to ex- tract lessons from conflicts. The group tracks and analyzes disagreements about issues such as what to outsource, whether and how to shift spending among suppliers, and what supplier capabilities to invest in. It hosts a council, com- prising representatives from the various operat- ing companies, that meets regularly to discuss these differences and explore their strategic im- plications. As a result, trends in clinical research outsourcing are spotted and information about them is disseminated throughout J&J more quickly. The operating companies benefit from insights about new offshoring opportunities, technologies, and ways of structuring collabora- tion with suppliers. And J&J, which can now piece together an accurate and global view of its suppliers, is better able to partner with them. Furthermore, the company realizes more value from its relationship with suppliers—yet another example of how the effective manage- ment of conflict can ultimately lead to fruitful collaboration.

J&J’s approach is unusual but not unique. The benefits it offers provide further evidence that conflict—so often viewed as a liability to be avoided whenever possible—can be valuable to a company that knows how to manage it.

 

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