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.

ACCEPT-ANDACTIVELY MANAGECONFLICTby Jeff Weiss andJonathan Hughes

T HE CHALLENGE is a long~standingone for senior managers: Howdo you get people in your or-

ganization to work together acrossintemal boundaries? But the ques-tion has taken on urgency in today'sglobal and fast-changing business en-vironment. To service multinational ac-counts, you increasingly need seamlesscollaboration across geographic bound-aries. To improve customer satisfaction,you increasingly need collaboration amongfunctions ranging from R&D to distribution. Tooffer solutions tailored to customers' needs, youincreasingly need collaboration between productand service groups.

Meanwhile, as competitive pressures continu-ally force companies to find ways to do more withless, few managers have the luxury of relying ontheir own dedicated staffs to accomplish their ob-jectives. Instead, most must work with and throughpeople across the organization, many of whomhave different priorities, incentives, and ways ofdoing things.

Getting collaboration right promises tremen-dous benefits: a unified face to customers, fasterintemal decision making, reduced costs throughshared resources, and the development of moreinnovative products. But despite the billions ofdollars spent on initiatives to improve collabora-tion, few companies are happy with the results.Time and again we have seen management teamsemploy the same few strategies to boost internalcooperation. They restructure their organizationsand reengineer their business processes. They cre-ate cross-unit incentives. They offer teamwork

training. While such initiatives yieldthe occasional success story, most ofthem have only limited impact indismantling organizational silos andfostering collaboration - and many aretotal failures. (See the sidebar "TheThree Myths of Collaboration.")

So what's the problem? Most compa-nies respond to the challenge of improv-

ing collaboration in entirely the wrongway. They focus on the symptoms ("Sales

and delivery do not work together as closelyas they should") rather than on the root cause

of failures in cooperation: conflict. The fact is,you can't improve collaboration until you've ad-dressed the issue of conflict.

This can come as a surprise to even the mostexperienced executives, who generally don't fullyappreciate the inevitability of conflict in complexorganizations. And even if they do recognize this,many mistakenly assume that efforts to increasecollaboration wili significantly reduce that con-flict, when in fact some of these efforts - for ex-ample, restructuring initiatives - actually producemore of it.

Executives underestimate not only the inevita-bility of conflict but also - and this is key - its im-portance to the organization. The disagreementssparked by differences in perspective, competen-cies, access to information, and strategic focuswithin a company actually generate much ofthevalue that can come from collaboration across or-ganizational boundaries. Clashes between partiesare the crucibles in which creative solutions aredeveloped and wise trade-offs among competingobjectives are made. So instead of trying simply to

MARCH 2005 93

W a n t C o l l a b o r a t i o n ? A c c e p t - a n d A c t i v e l y M a n a g e - C o n f l i c t

reduce disagreements, senior executives need to embraceconflict and, just as important, institutionalize mecha-nisms for managing it.

Even though most people lack an innate understandingof how to deal with conflict effectively, there are a num-ber of straightforward ways that executives can help theirpeople-and their organizations-constructively manage it.These can be divided into two main areas; strategies formanaging disagreements at the point of conflict and strat-egies for managing conflict upon escalation up the man-agement chain. These methods can help a company movethrough the confiict that is a necessary precursor to trulyeffective collaboration and, more important, extract thevalue that often lies latent in intra-organizational differ-ences. When companies are able to do both, confiict istransformed from a major liability into a significant asset.

Strategies for ManagingDisagreements atthe Point of ConflictConfiict management works best when the parties In-volved in a disagreement are equipped to manage itthemselves. The aim is to get people to resolve issues ontheir own through a process that improves - or at leastdoes not damage - the i r relationships. The followingstrategies help produce decisions that are better informedand more likely to be implemented.

Devise and implement a common method for re-solving confiict. Consider for a moment the hypotheticalMatrix Corporation, a composite of many organizationswe've worked with whose challenges will likely be famil-iar to managers. Over the past few years, salespeople fromnearly a dozen of Matrix's product and service groupshave been called on to design and sell integrated solutionsto their customers. For any given sale, five or more leadsalespeople and their teams have to agree on issues of re-source allocation, solution design, pricing, and sales strat-egy. Not surprisingly, the teams are finding this difficult.Who should contribute the most resources to a particularcustomer's offering? Who should reduce the scope oftheir participation or discount their pricing to meet a cus-tomer's budget? Who should defer when disagreementsarise about account strategy? Who should manage key re-lationships within the customer account? Indeed, giventhese thorny questions. Matrix is finding that a single largesale typically generates far more confiict inside the com-pany than it does with the customer. The resulting wastedtime and damaged relationships among sales teams aremaking it increasingly difficult to close sales.

Most companies face similar sorts of problems. And,like Matrix, they leave employees to find their own waysof resolving them. But without a structured method fordealing with these issues, people get bogged down notonly in what the right result should be but also in how toarrive at it. Often, they will avoid or work around con-fiict, thereby forgoing important opportunities to collab-orate. And when people do decide to confront their dif-ferences, they usually default to the approach they knowbest: debating about who's right and who's wrong or hag-gling over small concessions. Among the negative conse-quences of such approaches are suboptimal, "split-the-difference" resolutions -if not outright deadlock.

Establishing a companywide process for resolving dis-agreements can alter this familiar scenario. At the veryleast, a well-defined, well-designed conflict resolutionmethod will reduce transaction costs, such as wasted timeand the accumulation of ill will, that often come with thestruggle to work though differences. At best, it will yieldthe innovative outcomes that are likely to emerge fromdiscussions that draw on a multitude of objectives andperspectives. There is an array of confiict resolution meth-ods a company can use. But to be effective, they shouldoffer a clear, step-by-step process for parties to follow.They should also be made an integral part of existing busi-ness activities-account planning, sourcing, R&D budget-ing, and the like. If confiict resolution is set up as a sepa-rate, exception-based process-a kind of organizationalappeals court-it wil! likely wither away once initial man-agerial enthusiasm wanes.

At Intel, new employees learn a common method andlanguage for decision making and conflict resolution. Thecompany puts them through training in which they leamto use a variety of tools for handling discord. Not onlydoes the training show that top management sees dis-agreements as an inevitable aspect of doing business, italso provides a common framework that expedites con-fiict resolution. Little time is wasted in figuring out thebest way to handle a disagreement or trading accusationsabout "not being a team player"; guided by this clearlydefined process, people can devote their time and energyto exploring and constructively evaluating a variety of op-tions for how to move forward. Intel's systematic methodfor working through differences has helped sustain someof the company's hallmark qualities: innovation, opera-tional efficiency, and the ability to make and implementhard decisions in the face of complex strategic choices.

Provide people with criteria for making trade-offs.At our hypothetical Matrix Corporation, senior manag-ers overseeing cross-unit sales teams often admonish

Jonathan Hughes (Jhughes@vantagepartners.com) and Jeff Weiss Ow^iss@var}tagepartners.com) are partners at VantagePartners, a Boston-based consultingfirm focused on strategic relationship management Hughes heads the Sourcing and Sup-plier Management Practice, and Weiss heads thejirm's Alliance Management Practice. The authors have had consultingrelationships with a number ofthe companies mentioned in this article.

94 HARVARD BUSINESS REVIEW

W a n t C o l l a b o r a t i o n ? A c c e p t - a n d A c t i v e l y M a n a g e - C o n f l i c t

Companies attempt to foster collaboration among differ-ent parts oftheir organizations through a variety of meth-ods, many based on a number of seemingly sensible butultimately misguided assumptions:

Effective collaborationmeans "teaming."Many companies think that teamwork training is the wayto promote collaboration across an organization. So they'llget the HR department to run hundredsof managers andtheir subordinates through intensive two- or three-daytraining programs. Workshops will offer techniques forgetting groups aligned around common goals, for clarify-ing roles and responsibilities, for operating according toa shared set of behavioral norms, and so on.

Unfortunately, such workshops are usually the right so-lution to the wrong problems. First, the most critical break-downs in collaboration typically occur not on actual teamsbut in the rapid and unstructured interactions betweendifferent groups within the organization. For example,someone from R&D will spend weeks unsuccessfiilly try-ing to get help from manufacturing to run a few tests ona new prototype. Meanwhile, people in manufacturingbegin to complain about arrogant engineers from R&D ex-pecting them to drop everything to help with another oneof R&D's pet projects. Clearly, the need for collaborationextends to areas other than a formal team.

The second problem is that breakdowns in collaborationalmost always result from fundamental differences amongbusiness functions and divisions. Teamwork training of-fers little guidance on how to work together in the contextof competing objectives and limited resources. Indeed, thefrequent emphasis on common goals further stigmatizesthe idea of conflict in organizations where an emphasison "polite" behavior regularly prevents effective problemsolving. People who need to collaborate more effectivelyusually don't need to align around and work toward a com-mon goal. They need to quickly and creatively solve prob-lems by managing the inevitable conflict so that it worksin their favor.

An effective incentive systemwill ensure collab '̂̂ '̂ *'"'̂It's a tantalizing proposition; You can hardwire collabora-tion into your organization by rewarding collaborative be-havior. Salespeople receive bonuses not only for hitting tar-gets for their own division's products but also for hittingcross-selling targets. Staff in corporate support functionslike IT and procurement have part oftheir bonuses deter-mined by positive feedback from their internal clients.

Unfortunately, the results of such programs are usuallydisappointing. Despite greater financial incentives,for ex-ample, salespeople continue to focus on the sales oftheirown products to the detriment of selling integrated solu-tions. Employees continue to perceive the IT and procure-

ment departments as difficult to work with, too focused ontheir own priorities. Why such poor results? To some ex-tent, it's because individuals think-for the most part cor-rectly-that if they perform well in their own operation theywill be "taken care of" by their bosses. In addition, manypeopie find that the costs of working with individuals inother parts ofthe organization-the extra time required,the aggravation-greatly outweigh the rewards fordoing so.

Certainly, misaligned incentives can be a tremendousobstacle to cross-boundary collaboration. But even themost carefully constructed incentives won't eliminatetensions between people with competing business objec-tives. An incentive is too blunt an instrumentto enable op-timal resolution ofthe hundreds ofdifferent trade-offs thatneed to be made in a complex organization. What's more,overemphasis on incentives can create a culture in whichpeople say, "If the company wanted me to do that, theywould build it into my comp plan." Ironically, focusing onincentives as a means to encourage collaboration can endup undermining it.

Organizations can be structuredfor collaboration.Many managers look for structural and procedural solu-tions - cross-functional task forces, collaborative "group-ware," complex webs of dotted reporting lines on the or-ganization chart-to create greater internal collaboration.But bringing people together is very different from gettingthem to collaborate.

Consider the following scenario. Individual informationtechnology departments have been stripped out of a com-pany's business units and moved to a corporatewide,shared-services IT organization. Senior managers rightlyrecognize that this kind of change is a recipe for conflictbecause various groups will now essentially compete withone another for scarce IT resources. So managers trymightily to design conflict out of, and collaboration into,the new organization. For example, to enable collaborativedecision making within IT and between IT and the busi-ness units, business units are required to enter requests forIT support into a computerized tracking system. The sys-tem is designed to enable managers within the IT organi-zation to prioritize projects and optimally deploy re-sources to meet the various requests.

Despite painstaking process design, results are disap-pointing. To avoid the inevitable conflicts between busi-ness units and IT over project prioritization, managers inthe business units quickly learn to bring their requests tothose they know in the IT organization rather than enter-ing the requests into the new system. Consequently, ITprofessionals assume that any project in the system is alower priority-further discouraging use ofthe system.People's inability to deal effectively with conflict has un-dermined a new process specifically designed to fosterorganizational collaboration.

MARCH 2005 95

Want Collaboration? Accept -and Actively Manage - Conflict

those teams to "do what's right for the customer." Unfor-tunately, this exhortation isn't much help when conflictarises. Given Matrix's ability to offer numerous combina-tions of products and services, company managers- eachwith different training and experience and access to dif-ferent information, not to mention different unit priori-ties-have, not surprisingly, different opinions about howbest to meet customers' needs. Similar clashes in perspec-tive result when exasperated senior managers tell squab-bling team members to set aside their differences and"put Matrix's interests first." That's because it isn't alwaysclear what's best for the company given the complex in-terplay among Matrix's objectives for revenue, profitabil-ity, market share, and long-term growth.

Even when companies equip people with a commonmethod for resolving conflict, employees often will stillneed to make zero-sum trade-offs between competingpriorities. That task is made much easier and less conten-tious when top management can clearly articulate thecriteria for making such choices. Obviously, it's not easy toreduce a company's strategy to clearly defined trade-offs,but it's worth trying. For example, salespeople who knowthat five points of market share are more important thana ten point increase on a customer satisfaction scale aremuch better equipped to make strategic concessionswhen the needs and priorities of different parts of thebusiness conflict. And even when the criteria do not leadto a straightforward answer, the guidelines can at least

Blue Cross and Blue Shield: Build, Buy, or Ally?One ofthe most effective ways senior managers can help resolve

cross-unit conflict is by giving people the criteria for making

trade-ofFs when the needs ofdifferent parts ofthe business are at

odds with one another. At Blue Cross and Blue 5hield of Florida,

there are often conflicting perspectives over whether to build new

capabilities (for example, 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 simplified 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 personalized markers,

participants indicate how they assess a particular option against

a variety of criteria: for example, the date by which the new capa-

bility needs to be implemented; the availability of internal re-

sources such as capital and staff needed to develop the capability;

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 people's "votes" and the ensuing

discussion help individuals see howtheir differences often arise

from such factors as access to different data or different prioritiz-

ing of objectives. As debate unfolds- and as peopie move their

markers in response to new information - they can see where

they are aligned and where and why they separate into significant

factions ofdisagreement. Eventually, the criteria-based dialogue

tends to produce a preponderance of markers in one ofthe three

rows, thus yielding operational consensus around a decision.

New Claims-Processing System

RequiredImplementation

Time Frame

> 13 months

<6 months

6-12 months

K

OrganizationalExperience

Level

High

Medium

AvailabilrtyofInternaiResources

High

XHigh to /moderate » /

^ ^

Moderate to low

Volatility ofEnvironment

Low

Medium

High

Complexityof Solution

Low

Moderate

Availabilityof ExternalResources

Low

Moderate

RequiredDegree of

integration

High

Medium

/ > V

Low

RequiredControl

High

Medium

Low

[ft

BUILD

k

jALlY

Participant 1 = / Participani 2 ^ y Participant 3 = ' ^ Participant4^ X Partidpant 5 = Source: Blue Cross and Blue Shield of Florida

96 HARVARD BUSiNESS REVIEW

Want Collaboration? Accept -and Actively Manage-Conf l i c t

CLASHES BETWEEN PARTIES are the cruciblesin which creative solutions are developed and

wise trade-offs among competing objectives are made.

foster productive conversations by providing an objectivefocus. Establishing such criteria also sends a clear signalfrom management that it views conflict as an inevitableresult of managing a complex business.

At Blue Cross and Blue Shield of Florida, the strategicdecision to rely more and more on alliances with otherorganizations has significantly increased the potential fordisagreement in an organization long accustomed to de-veloping capabilities in-house. Decisions about whetherto build new capabilities, buy them outright, or gain ac-cess to them through alliances are natural flashpoints forconflict among intemal groups. The health insurer mighthave tried to minimize such conflict through a structuralsoiution, giving a particular group the authority to makedecisions conceming whether, for instance, to develop anew claims-processing system in-house, to do so jointlywith an alliance partner, or to license or acquire an exist-ing system from a third party. Instead, the company es-tablished a set of criteria designed to help various groupswithin the organization-for example, the enterprise alli-ance group, IT, and marketing-to collectively make suchdecisions.

The criteria are embodied in a spreadsheet-type toolthat guides people in assessing the trade-offs involved -say, between speed in getting a new process up and run-ning versus ensuring its seamless integration with existingones-when deciding whether to build, buy, or ally. Peo-ple no longer debate back and forth across a table, advo-cating their preferred outcomes, instead, they sit aroundthe table and together apply a common set of trade-offcriteria to the decision at hand. The resulting insights intothe pros and cons of each approach enable more effectiveexecution, no matter which path is chosen. (For a simpli-fied version of the trade-off tool, see the exhibit "BlueCross and Blue Shield: Build, Buy, or Ally?")

Use the escalation of conflict as an opportunity forcoaching. Managers at Matrix spend much of their timeplaying the organizational equivalent of hot potato. Evenpeople who are new to the company leam within weeksthat the best thing to do with cross-unit confiict is to tossit up the management chain. Immediate supervisors takea quick pass at resolving the dispute but, being busy them-selves, usually pass it up to their supervisors. Those su-pervisors do the same, and before long the problem landsin the lap of a senior-level manager, who then spends

much of his time resolving disagreements. Clearly, thisisn't ideal. Because the senior managers are a number ofsteps removed from the source of the controversy, theyrarely have a good understanding ofthe situation. Fur-thermore, the more time they spend resolving intemalclashes, the less time they spend engaged in the business,and the more isolated they are from the very informationthey need to resolve the disputes dumped in their laps.Meanwhile, Matrix employees get so little opportunity tolearn about how to deal with conflict that it becomes notonly expedient but almost necessary for them to quicklybump conflict up the management chain.

While Matrix's story may sound extreme, we can hardlycount the number of companies we've seen that operatethis way. And even in the best of situations-for example,where a companywide conflict-management process is inplace and where trade-off criteria are well understood-there is still a natural tendency for people to let theirbosses sort out disputes. Senior managers contribute tothis tendency by quickly resolving the problems pre-sented to them. While this may be the fastest and easiestway to fix the problems, it encourages people to punt is-sues upstairs at the first sign of difficulty. Instead, man-agers should treat escalations as opportunities to helpemployees become better at resolving confiict. (For an ex-ample of how managers can help their employees im-prove their conflict resolution skills, see the exhibit "IBM:Coaching for Conflict.")

At KLA-Tencor, a major manufacturer of semiconduc-tor production equipment, a materials executive in eachdivision oversees a number of buyers who procure thematerials and component parts for machines that thedivision makes. When negotiating a companywide con-tract with a supplier, a buyer often must work with thecompany commodity manager, as well as witb buyersfrom other divisions who deal with the same supplier.There is often conflict, for example, over the deliveryterms for components supplied to two or more divisionsunder the contract. In such cases, the commodity man-ager and the division materials executive will push the di-vision buyer to consider the needs ofthe other divisions,altematives that might best address the collective needsofthe different divisions, and the standards to be appliedin assessing the trade-offs between alternatives. The aimis to help tbe buyer see solutions tbat haven't yet been

MARCH 2005 97

Want Collaboration? Accept- and Actively Manage-Conflict

considered and to resolve the conflict with the buyer inthe other division.

Initially, this approach required more time from man-agers than if they had simply made the decisions them-selves. But it has paid off in fewer disputes that seniormanagers need to resolve, speedier contract negotiation,and improved contract terms both for the company as awhole and for multiple divisions. For example, the buyersfrom three KLA-Tencor product divisions recently lockedhoms over a global contract with a key supplier. At issuewas the trade-off between two variables: one, the sup-plier's level of liability for materials it needs to purchasein order to fulfill orders and, two, the flexibility grantedthe KLA-Tencor divisions in modifying the size of the

orders and their required lead times. Each division de-manded a different balance between these two factors,and the buyers took the conflict to their managers, won-dering if they should try to negotiate each ofthe differenttrade-offs into the contract or pick among them. Afterbeing coached to consider how each division's businessmodel shaped its preference-and using this understand-ing to jointly brainstorm alternatives - the buyers andcommodity manager arrived at a creative solution thatworked for everyone: They would request a clause in thecontract that allowed them to increase and decrease flex-ibility in order volume and lead time, with correspondingchanges in supplier liability, as required by changing mar-ket conditions.

IBM: Coaching for ConflictManagers can reduce the repeated escalation of conflict up the

management chain by helping employees learn how to resolve

disputes themselves. At IBM, executives get training in conflict

management and are offered online resources to help them

coach others. One tool on the corporate intranet (an edited ex-

cerpt of which is shown here) walks managers 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 negotiating the final decision.

If you hear from someonereporting to you that . . .

The problemcould be that . . .

And you could help your reportby saying something like...

"Everyone still insists on being

a decision maker."

The people your report is deal-

ing with remain concerned

that unles5 they have a forma!

voice in making the decision -

or a key piece ofthe 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 wiil 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."

"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."

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.

"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?"

"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."

The right people were included

in the negotiating group, but the

process for negotiating a final

dedsion was not determined.

"What are the ground rules for how dedsions will be made? Do all those

in the group need to agree? Must the maiority agree? Or iust those with

the greatest competence?"

"What interests underlie the obiective of having everyone agree? Is there

another decision-making process that would meet those interests?"

98 HARVARD BUSINESS REVIEW

Want C o l l a b o r a t i o n ? Accep t - and A c t i v e l y M a n a g e - C o n f l i c t

Strategies for Managing Conflictupon EscalationEquipped with common conflict resolution methods andtrade-off criteria, and supported by systematic coaching,people are better able to resolve confiict on their own. Butcertain complex disputes wil! inevitably need to be de-cided by superiors. Consequently, managers must ensurethat, upon escalation, conflict is resolved constructivelyand efficiently-and in ways that model desired behaviors.

Establish and enforce a requirement of joint escala-tion. Let's again consider the situation at Matrix. In a typ-ical conflict, three salespeople from different divisions be-come involved in a dispute over pricing. Frustrated, oneof them decides to hand the problem up to his boss, ex-plaining the situation in a short voice-mail message. Themessage offers little more than bare acknowledgment ofthe other salespeoples' viewpoints. The manager then de-termines, on the basis of what he knows about the situa-tion, the solution to the problem. The salesperson, armedwith his boss's decision, returns to his counterparts andshares with them the verdict-which, given the process, issimply a stronger version ofthe solution the salespersonhad put forward in the first place. But wait! The other twosalespeople have also gone to their managers and carriedback stronger versions of their solutions. At this point,each salesperson is locked into what is now "my man-ager's view" ofthe right pricing scheme. The problem, al-ready thomy, has become even more intractable.

The best way to avoid this kind of debilitating deadlockis for people to present a disagreement jointly to theirboss or bosses. This will reduce or even eliminate the sus-picion, surprises, and damaged personal relationships or-dinarily associated with unilateral escalation. It will alsoguarantee that the ultimate decision maker has access toa wide array of perspectives on the conflict, its causes, andthe various ways it might be resolved. Furthermore, com-panies that require people to share responsibility for theescalation of a conflict often see a decrease in the numberof problems that are pushed up the management chain.Joint escalation helps create the kind of accountabilitythat is lacking when people know they can provide theirside of an issue to their own manager and blame otherswhen things don't work out.

A few years ago, after a merger that resulted in a muchlarger and more complex organization, senior managersat the Canadian telecommunications company Telus foundthemselves virtually paralyzed by a daily barrage of uni-lateral escalations. Just determining who was dealing withwhat and who should be talking to whom took up hugeamounts of senior management's time. So the companymade joint escalation a central tenet of its new organiza-tion wide protocols for conflict resolution -a requirementgiven teeth by managers' refusal to respond to unilateralescalation. When a conflict occurred among managers in

different departments conceming, say, the allocation ofresources among the departments, the managers were re-quired to jointly describe the problem, what had beendone so far to resolve it, and its possible solutions. Thenthey had to send a joint write-up ofthe situation to eachoftheir bosses and stand ready to appear together and an-swer questions when those bosses met to work through asolution. In many cases, the requirement of systematicallydocumenting the conflict and efforts to resolve it-becauseit forced people to make such efforts - led to a problembeing resolved on the spot, without having to be kickedupstairs. Within weeks, this process resulted in the reso-lution of hundreds of issues that had been stalled formonths in the newly merged organization.

Ensure that managers resolve escalated conflicts di-rectly with their counterparts. Let's return to the threesalespeople at Matrix who took their dispute over pricingto their respective bosses and then met again, only to findthemselves further from agreement than before. So whatdid they do at that point? They sent the problem back totheir bosses. These three bosses, each of whom thoughthe'd already resolved the issue, decided the easiest thingto do would be to escalate it themselves. This would savethem time and put the conflict before senior managerswith the broad view seemingly needed to make a deci-sion. Unfortunately, by doing this, the three bosses simplyperpetuated the situation their salespeople had created,putting forward a biased viewpoint and leaving it to theirown managers to come up with an answer. In the end, thedecision was made unilaterally by the senior managerwith the most organizational clout. This result bred re-sentment back down the management chain. A sense of"we'll win next time" took hold, ensuring that future con-flict would be even more difficult to resolve.

It's not unusual to see managers react to escalationsfrom their employees by simply passing conflicts up theirovm functional or divisional chains until they reach a se-nior executive involved with all the affected functions ordivisions. Besides providing a poor example for otbers inthe organization, this can be disastrous for a companythat needs to move quickly. To avoid wasting time, a man-ager somewhere along the chain might try to resolve theproblem swiftly and decisively by herself. But this, too, hasits costs. In a complex organization, where many issueshave significant implications for numerous parts ofthebusiness, unilateral responses to unilateral escalations area recipe for inefficiency, bad decisions, and ill feelings.

The solution to these problems is a commitment bymanagers - a commitment codified in a formal policy -to deal with escalated conflict directly with their coun-terparts. Of course, doing this can feel cumbersome, es-pecially when an issue is time-sensitive. But resolving theproblem early on is ultimately more efficient than tryingto sort it out later, after a decision becomes known be-cause it has negatively affected some part ofthe business.

MARCH 2005 99

Want Collaboration? Accept - and Actively Manage - Conflict

In the 1990s, IBM's sales and delivery organization be-came increasingly complex as the company reintegratedpreviously independent divisions and reorganized itselfto provide customers with full solutions of bundled prod-ucts and services. Senior executives soon recognized thatmanagers were not dealing with escalated conflicts andthat relationships among them were strained becausethey failed to consult and coordinate around cross-unitissues. This led to the creation of a fomm called the Mar-ket Growth Workshop (a name carefully chosen to send amessage throughout the company that getting cross-unitconflict resolved was critical to meeting customer needsand, in turn, growing market share). These monthly con-ference calls brought together managers, salespeople, andfrontline product specialists from across the company todiscuss and resolve cross-unit conflicts that were hinder-ing important sales-for example, the difficulty salespeo-ple faced in getting needed technical resources from over-stretched product groups.

The Market Growth Workshops weren't successful rightaway. In the beginning, busy senior managers, reluctant tospend time on issues that often hadn't been carefullytiiought through, began sending their subordinates to the

meetings - which made it even more difficult to resolvethe problems discussed. So the company developed a sim-ple preparation template that forced people to documentand analyze disputes before the conference calls. Seniormanagers, realizing the problems created by their absence,recommitted themselves to attending the meetings. Overtime, as complex conflicts were resolved during these ses-sions and significant sales were closed, attendees began tosee these meetings as an opportunity to be involved in theresolution of high-stakes, high-visibility issues.

Make the process for escalated conflict resolutiontransparent. When a sales conflict is resolved by a Matrixsenior manager, the word comes down the managementchain in the form of an action item: Put together an of-fering with this particular mix of products and servicesat these prices. The only elaboration may be an admon-ishment to "get the sales team together, work up a pro-posal, and get back to the customer as quickly as possible."The problem is solved, at least for the time being. But tbesalespeople-unless they have been able to divine themesfrom the pattems of decisions made over time - are leftwith little guidance on how to resolve similar issues in tbefuture. They may justifiably wonder: How was the deci-

sion made? Based on what kinds of as-sumptions? With what kinds of trade-offs? How might the reasoning changeif the situation were different?

In most companies, once managershave resolved a conflict, they announcethe decision and move on. The resolu-tion process and rationale behind tbedecision are left inside a managerialblack box. While it's rarely helpful formanagers to share ali the gory detailsof their deliberations around conten-tious issues, failing to take the time toexplain how a decision was reachedand the factors that went into it squan-ders a major opportunity. A frank dis-cussion of the trade-offs involved indecisions would provide guidance topeople trying to resolve conflicts in thefuture and would help nip in the budthe kind of speculation - who won andwho lost, which managers or units havethe most power-that breeds mistrust,sparks turf battles, and otherwise im-pedes cross-organizational collabora-tion. In general, clear communicationabout the resolution ofthe conflict canincrease people's willingness and abil-ity to implement decisions.

During the past two years, IBM's Mar-ket Growth Workshops have evolvedinto a more structured approach to

100 HARVARD BUSINESS REVIEW

Want Collaboration? Accept - and Actively Manage - Conflict

managing escalated conflict, known as Cross-Team Work-outs. Designed to make conflict resolution more transpar-ent, the workouts are weekly meetings of people acrossthe organization who work together on sales and deliveryissues for specific accounts. The meetings provide a pub-lic forum for resolving conflicts over account strategy, so-lution configuration, pricing, and delivery. Those issuesthat cannot he resolved at the local level are escalated toregional workout sessions attended hy managers fromproduct groups, services, sales, and finance. Attendeesthen communicate and expiain meeting resolutions totheir reports. Issues that cannot he resolved at the re-gional level are escalated to an even higher-level workoutmeeting attended by cross-unit executives from a largergeographic region-like the Americas or Asia Pacific-andchaired by the genera! manager ofthe region presentingthe issue. The most complex and strategic issues reachthis global forum. The overlapping attendance at thesesessions-in which the managers who chair one level ofmeeting attend sessions at the next level up, thereby ob-serving the decision-making process at that stage -furtherenhances the transparency ofthe system among differentlevels of the company. IBM has further formalized theprocess for the direct resolution of conflicts between ser-vices and product sales on large accounts hy designatinga managing director in sales and a global relationshippartner in IBM global services as the ultimate point of res-olution for escalated conflicts. By explicitly making theresolution of complex conflicts part of the job descrip-tions for hoth managing director and global relationshippartner-and by making that clear to others in the orga-nization - IBM has reduced ambiguity, increased trans-parency, and increased the efficiency with which conflictsare resolved.

Tapping the Learning Latentin ConflictThe six strategies we have discussed constitute a frame-work for effectively managing organizational discord, onethat integrates conflict resolution into day-to-day decision-making processes, thereby removing a critical barrier tocross-organizational collaboration. But the strategies alsohint at something else: that conflict can be more than anecessary antecedent to collaboration.

Let's retum briefly to Matrix. More than three-quartersof all cross-unit saies at the company trigger disputesabout pricing. Roughly half of the sales lead to clashesover account control. A substantial number of sales alsoproduce disagreements over the design of customer solu-tions, with the conflict often rooted in divisions' incom-patible measurement systems and the concerns of somepeople ahout the quality of the solutions being assem-bled. But managers are so busy trying to resolve thesealmost daily disputes that they don't see the pattems or

sources of conflict. Interestingly, if they ever wanted toidentify pattems like these. Matrix managers might findfew signs of them. That's because salespeople, who regu-larly hear their bosses complain about all the disagree-ments in the organization, have concluded that they'dbetter start shielding their superiors from discord.

The situation at Matrix is not unusual - most compa-nies view conflict as an unnecessary nuisance - but thatview is unfortunate. When a company begins to see con-flict as a valuable resource that should be managed and ex-ploited, it is likely to gain insight into problems that seniormanagers may not have known existed. Because intemalfriction is often caused by unaddressed strains within anorganization or between an organization and its environ-ment, setting up methods to track conflict and examineits causes can provide an interesting new perspective ona variety of issues. In the case of Matrix, taking the timeto aggregate the experiences of individual salespeople in-volved in recurring disputes would likeiy lead to betterapproaches to setting prices, establishing incentives forsalespeople, and monitoring the company's quality con-trol process.

At Johnson & Johnson, an organization that has a highlydecentralized stmcture, conflict is recognized as a posi-tive aspect of cross-company collaboration. For exatnpie,a small internal group charged with facilitating sourcingcollaboration among J&J's independent operating com-panies-particularly their outsourcing of clinical researchservices-actively works to extract lessons from conflicts.The group tracks and analyzes disagreements about is-sues such as what to outsource, whether and how to shiftspending among suppliers, and what supplier capabili-ties to invest in. It hosts a council, comprising representa-tives from the various operating companies, that meetsregularly to discuss these differences and explore theirstrategic implications. As a result, trends in clinical re-search outsourcing are spotted and information aboutthem is disseminated throughout J&J more quickly. Theoperating companies beneflt from insights about new off-shoring opportunities, technologies, and ways of struc-turing collaboration with suppliers. And J&J, which cannow piece together an accurate and global view of its sup-pliers, is hetter able to partner with them. Furthermore,the company realizes more value from its relationshipwith suppliers-yet another example of how the effectivemanagement of conflict can ultimately lead to fruitfulcollahoration.

J&J's approach is unusual but not unique. The bene-fits it offers provide further evidence that conflict - sooften viewed as a liability to be avoided whenever possi-ble-can be valuable to a company that knows how tomanage it. ^

Reprint R0503FTo order, see page 151.

MARCH 2005 101