aritcles

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-AND ACTIVELY MANAGE CONFLICT by Jeff Weiss and Jonathan Hughes

T HE 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 ques- tion has taken on urgency in today's global and fast-changing business en- vironment. To service multinational ac- counts, you increasingly need seamless collaboration across geographic bound- aries. To improve customer satisfaction, you increasingly need collaboration among functions ranging from R&D to distribution. To offer solutions tailored to customers' needs, you increasingly need collaboration between product and service groups.

Meanwhile, as competitive pressures continu- ally force companies to find ways to do more with less, few managers have the luxury of relying on their own dedicated staffs to accomplish their ob- jectives. Instead, most must work with and through people across the organization, many of whom have different priorities, incentives, and ways of doing things.

Getting collaboration right promises tremen- dous benefits: a unified face to customers, faster internal decision making, reduced costs through shared resources, and the development of more innovative products. But despite the billions of dollars spent on initiatives to improve collabora- tion, 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 cre- ate cross-unit incentives. They offer teamwork

training. While such initiatives yield the occasional success story, most of them have only limited impact 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 compa- nies respond to the challenge of improv-

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

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 significantly reduce that con- fiict, when in fact some of these efforts - for ex- ample, restructuring initiatives - actually produce more of it.

Executives underestimate not only the inevita- bility of conflict but also - and this is key - its im- portance to the organization. The disagreements sparked by differences in perspective, competen- cies, access to information, and strategic focus within a company actually generate much of the value that can come from collaboration across or- ganizational boundaries. 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

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

Even though most people lack an innate understanding of how to deal with confiict effectively, there are a num- ber of straightforward ways that executives can help their people-and their organizations-constructively manage it. These can be divided into two main areas: strategies for managing 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 move through the confiict that is a necessary precursor to truly effective collaboration and, more important, extract the value that often lies latent in intra-organizational differ- ences. 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 Confiict management works best when the parties in- volved 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 - t h e i r relationships. The following strategies help produce decisions that are better informed and more likely to be implemented.

Devise and implement a common method for re- solving conflict. Consider for a moment the hypothetical Matrix Corporation, a composite of many organizations we've worked with whose challenges will likely be famil- iar to managers. Over the past few years, salespeople from nearly a dozen of Matrix's product 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 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 particular customer's offering? Who should reduce the scope of their participation or discount their pricing to meet a cus- tomer's budget? Who should defer when disagreements arise about account strategy? Who should manage key re- lationships within the customer account? [ndeed, given these thorny questions. Matrix is finding that a single large sale typically generates far more confiict inside the com- pany than it does with the customer. The resulting wasted time and damaged relationships among sales teams are making it increasingly difficult to close sales.

Most companies face similar sorts of problems. 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 con- flict, thereby forgoing important opportunities to collab- orate. And when people do decide to confront their dif- ferences, they usually default to the approach they know best: 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 very least, a well-defined, well-designed conflict resolution method will reduce 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 that are likely to emerge from discussions that draw on a multitude of objectives and perspectives. There is an array of confiict resolution meth- ods a company can use. But to be effective, they should offer 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 organizational appeals court-it will likely wither away once initial man- agerial enthusiasm 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 leam to use a variety of tools for handling discord. Not only does the training show that top management sees dis- agreements as an inevitable aspect of doing business, it also provides a common framework that expedites con- flict resolution. Little time is wasted in figuring out the best way to handle a disagreement or trading accusations 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 systematic method for working through differences has helped sustain some of the company's hallmark qualities: innovation, opera- tional efficiency, 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 Corporation, senior manag- ers overseeing cross-unit sales teams often admonish

Jonathan Hughes (jhughes@vantagepartners.com) and Jeff Weiss Ow^iss@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 consulting relationships with a number of the companies mentioned in this article.

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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 but ultimately misguided assumptions:

Effective collaboration means "teaming." Manycompanies think that teamwork training is the way to promote collaboration 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 programs. Workshops will offer techniques for getting groups aligned around common goals, for clarify- ing roles and responsibilities, for operating according to a 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 teams but in the rapid and unstructured interactions between different 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 on a new prototype. Meanwhile, people in manufacturing begin to complain about arrogant engineers from R&D ex- pecting 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 training of- fers little guidance on how to work together in the context of competing objectives and limited resources. I ndeed, the frequent emphasis on common goals further stigmatizes the idea of conflict in organizations where an emphasis on "polite" behavior regularly prevents effective problem solving. People who need to collaborate more effectively usually 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 works in their favor.

An e f f e c t i v e i n c e n t i v e s y s t e m will e n s u r e l l b * 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 hitting cross-selling targets. Staff in corporate support functions like IT and procurement have part oftheir bonuses deter- mined by positive feedback from their internal clients.

Unfortunately, the results of such programs are usually disappointing. Despite greater financial incentives, for ex- ample, salespeople continue to focus on the sales oftheir own 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 on their 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 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 organization-the extra time required, the aggravation-greatly outweigh the rewards fordoing so.

Certainly, misaligned incentives can be a tremendous obstacle to cross-boundary collaboration. But even the most carefully constructed incentives won't eliminate tensions between people with competing business objec- tives. An incentive is too blunt an instrument to enable op- timal resolution ofthe hundreds of different trade-offs that need to be made in a complex organization. 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 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 getting them to collaborate.

Consider the following scenario. Individual information technology departments have been stripped out of a com- pany's business units and moved to a corporatewide, shared-services IT organization. Senior managers rightly recognize that this kind of change is a recipe for conflict because various groups will now essentially compete with one another for scarce IT resources. So managers try mightily to design conflict out of, and collaboration into, the new organization. For example, to enable collaborative decision making within IT and between IT and the busi- ness units, business units are required to enter requests for IT 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 in the business units quickly learn to bring their requests to those they know in the IT organization rather than enter- Ing the requests into the new system. Consequently, IT professionals assume that any project in the system is a lower priority-further discouraging use ofthe system. People's inability to deal effectively with conflict has un- dermined a new process specifically designed to foster organizational collaboration.

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those teams to "do what's right for the customer." Unfor- tunately, this exhortation isn't much help when conflict arises. Given Matrix's ability to offer numerous combina- tions of products and services, company managers- each with different training and experience and access to dif- ferent information, not to mention different unit priori- ties-have, not surprisingly, different opinions about how best 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 always clear 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 common method for resolving conflict, employees often will still need to make zero-sum trade-offs between competing priorities. That task is made much easier and less conten- tious when top management can clearly articulate the criteria for making such choices. Obviously, it's not easy to reduce a company's strategy to clearly defined trade-offs, but it's worth trying. For example, salespeople who know that five points of market share are more important than a ten point increase on a customer 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 criteria do not lead to 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 how their 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 of disagreement. 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

Required Implementation

Time Frame

Organizational Experience

Level

Availabilrty ofInternai Resources

Volatility of Environment

Complexity of Solution

Availability of External Resources

Required Degree of

integration Required Control

BUILD

Participant 1 = v Participani2-y Participant3 = ' ^ Participant4- X Partidpant5 = Source: Blue Cross and Blue Shield of Florida

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CLASHES BETWEEN PARTIES are the crucibles in which creative solutions are developed and

wise trade-offs among competing objectives are made.

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 significantly increased the potential for disagreement in an organization long accustomed to de- veloping capabilities in-house. Decisions about whether to build new capabilities, buy them outright, or gain ac- cess to them through alliances are natural flashpoints for conflict among internal groups. Tbe health insurer might have tried to minimize such confiict through a structural solution, giving a particular group the authority to make decisions concerning 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 exist- ing system from a third party. Instead, the company es- tablished a set of criteria 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 getting a new process up and run- ning versus ensuring its seamless integration with existing ones-when deciding whether to build, buy, or ally. Peo- ple no longer debate back and foriih across a table, advo- cating their preferred outcomes, instead, they sit around the table and together apply a common set of trade-off criteria to the decision at hand. The resulting insights into the pros and cons of each approach enable more effective execution, no matter which path is chosen. (For a simpli- fied 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 opportunity for coaching. Managers at Matrix spend much of their time playing the organizational equivalent of hot potato. Even people who are new to the company leam within weeks that the best thing to do with cross-unit confiict is to toss it up the management chain. Immediate supervisors take a 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 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 understanding ofthe situation. Fur- thermore, 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 resolve the disputes dumped in their laps. Meanwhile, Matrix employees get so little opportunity 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 pre- sented to them. While this may be the fastest and easiest way 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 help employees 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 each division oversees a number of buyers who procure the materials and component parts for machines that the division makes. When negotiating a companywide con- tract with a supplier, a buyer often must work with the company commodity manager, as well as witb 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 divisions under 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, alternatives that might best address the collective needs ofthe different divisions, and the standards to be applied in assessing the trade-offs between alternatives. Tbe aim is to help tbe buyer see solutions tbat haven't yet been

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Want Collaboration? Accept- and Actively Manage-Conflict

considered and to resolve the conflict witb tbe buyer in the 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 tbat senior managers need to resolve, speedier contract negotiation, and improved contract terms both for the company as a whole and for multiple divisions. For example, the buyers from three KLA-Tencor product divisions recently locked horns over a global contract with a key supplier. At issue was the trade-off between two variables: one, the sup- plier's level of liability for materials it needs to purchase in order to fulfill orders and, two, the fiexibility granted the 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 different trade-offs into tbe contract or pick among them. After being coached to consider how eacb division's business model shaped its preference-and using this understand- ing 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 allowed them to increase and decrease fiex- ibility in order volume and lead time, with corresponding changes in supplier liability, as required by changing mar- ket conditions.

IBM: Coaching for Conflict Managers 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 someone The problem reporting to you t h a t . . . could be t h a t . . .

And you could help your report by saying something l i k e . . .

"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 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."

"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?"

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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 confiict on their own. But certain complex disputes wil! 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 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, one of them decides to hand the problem up to his boss, ex- plaining the situation in a short voice-mail message. The message offers little more than bare acknowledgment of the 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, 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 ofthe solution the salesperson had put forward in the first place. But wait! The other two salespeople have also gone to their managers and carried back 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 thorny, has become even more intractable.

The best way to avoid this kind of debilitating deadlock is for people to present a disagreement jointly to their boss or bosses. This will reduce or even eliminate the sus- picion, surprises, and damaged personal relationships or- dinarily associated with unilateral escalation. 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. Furthermore, com- panies that require people to share responsibility for the escalation of a conflict often see a decrease in the number of problems 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 resulted in a much larger and more complex organization, senior managers at the Canadian telecommunications company Telus found themselves virtually paralyzed by a daily barrage of uni- lateral escalations. Just determining 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 tenet of its new organiza- tion wide protocols for conflict resolution - a requirement given teeth by managers' refusal to respond to unilateral escalation. When a conflict occurred among managers in

different departments concerning, say, the allocation of resources among the departments, the managers were re- quired 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 ofthe situation to each oftheir bosses and stand ready to appear together and an- swer questions when those bosses met to work through a solution. In many cases, the requirement of systematically documenting the conflict and effoits to resolve it-because 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 reso- lution of hundreds of issues that had been stalled for months in the newly merged organization.

Ensure that managers resolve escalated conflicts di- rectly with their counterparts. Let's return to the three salespeople at Matrix who took their dispute over pricing to their respective 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 already resolved the issue, decided the easiest thing to do would be to escalate it themselves. This would save them time and put the conflict before senior managers with the broad view seemingly needed to make a deci- sion. Unfortunately, by doing this, the three bosses simply perpetuated the situation their salespeople had created, putting forward a biased viewpoint and leaving it to their own managers 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 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 escalations from their employees by simply passing conflicts up their ovm functional or divisional chains until they reach a se- nior executive involved with all the affected functions or divisions. Besides providing a poor example 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 significant implications for numerous parts ofthe business, unilateral responses to unilateral escalations are a recipe for inefficiency, bad decisions, and ill feelings.

The solution to these problems is a commitment by managers - 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 the problem early on is ultimately more efficient than trying to sort it out later, after a decision becomes known be- cause it has negatively affected some part ofthe business.

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Want Collaboration? Accept - and Actively Manage - Conflict

In the 1990s, IBM's sales and delivery organization be- came increasingly complex as the company reintegrated previously independent divisions and reorganized itself to provide customers with full solutions of bundled prod- ucts and services. Senior executives soon recognized that managers were not dealing with escalated conflicts and that relationships among them were strained because they failed to consult and coordinate around cross-unit issues. This led to the creation of a forum called the Mar- ket Growth Workshop (a name carefully chosen to send a message throughout the company that getting cross-unit conflict resolved was critical to meeting customer needs and, in turn, growing market share). These monthly con- ference calls brought together managers, salespeople, and frontline product specialists from across the company to discuss 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 right away. In the beginning, busy senior managers, reluctant to spend time on issues that often hadn't been carefully tliought through, began sending their subordinates to the

meetings - which made it even more difficult to resolve the problems discussed. So the company developed a sim- ple preparation template that forced people to document and analyze disputes before the conference calls. Senior managers, realizing the problems created by their absence, recommitted themselves to attending the meetings. Over time, as complex conflicts were resolved during these ses- sions 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 resolution 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 of- fering with this particular mix of products and services at 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 tbe salespeople-unless they have been able to divine themes from the patterns of decisions made over time - are left with little guidance on how to resolve similar issues in tbe future. 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 change if the situation were different?

In most companies, once managers have resolved a conflict, they announce the decision and move on. The resolu- tion process and rationale behind tbe decision are left inside a managerial black box. While it's rarely helpful for managers to share ali the gory details of their deliberations around conten- tious issues, failing to take the time to explain how a decision was reached and the factors that went into it squan- ders a major opportunity. A frank dis- cussion of the trade-offs involved in decisions 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 mistrust, sparks turf battles, and otherwise im- pedes cross-organizational collabora- tion. In general, clear communication about the resolution ofthe conflict can increase people's willingness and abil- ity to implement decisions.

During the past two years, IBM's Mar- ket Growth Workshops have evolved into 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 across the organization who work together on sales and delivery issues for specific accounts. The meetings provide a pub- lic forum for resolving conflicts over account strategy, so- lution 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 re- gional 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 genera! manager ofthe region presenting the issue. The most complex and strategic issues reach this global forum. The overlapping attendance at these sessions-in which the managers who chair one level of meeting attend sessions at the next level up, thereby ob- serving the decision-making process at that stage -further enhances the transparency ofthe system among different levels of the company. IBM has further formalized the process for the direct resolution of conflicts between ser- vices and product sales on large accounts by designating a managing director in sales and a global relationship partner in IBM global services as the ultimate point of res- olution for escalated conflicts. By explicitly making the resolution of complex conflicts part of the job descrip- tions for both managing director and global relationship partner-and by making that clear to others in the orga- nization - IBM has reduced ambiguity, increased trans- parency, and increased the efflciency with which conflicts are resolved.

Tapping the Learning Latent in Conflict The six strategies we have discussed constitute a frame- work for effectively managing organizational 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 conflict 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 company trigger disputes about pricing. Roughly half of the sales lead to clashes over account control. A substantial number of sales also produce disagreements over the design of customer solu- tions, with the conflict often rooted in divisions' incom- patible measurement systems and the concerns of some people about the quality of the solutions being assem- bled. But managers are so busy trying to resolve these almost daily disputes that they don't see the patterns or

sources of conflict. Interestingly, if they ever wanted to identify patterns like these. Matrix managers might find few signs of them. That's because salespeople, who regu- larly hear their bosses complain about all the disagree- ments in the organization, have concluded tbat they'd better start shielding their superiors from discord.

The situation at Matrix is not unusual - most compa- nies view conflict as an unnecessary nuisance - but that view 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 senior managers may not have known existed. Because intemal friction is often caused by unaddressed strains within an organization or between an organization and its environ- ment, setting up methods to track conflict and examine its causes can provide an interesting new perspective on a variety of issues. In the case of Matrix, taking the time to aggregate the experiences of individual salespeople in- volved in recurring disputes would likely lead to better approaches to setting prices, establishing incentives for salespeople, and monitoring the company's quality con- trol process.

At Johnson & Johnson, an organization that has a highly decentralized structure, conflict is recognized as a posi- tive aspect of cross-company collaboration. For example, a small internal group charged with facilitating sourcing collaboration among J&J's independent operating com- panies-particularly their outsourcing of clinical research services-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 shift spending among suppliers, and what supplier capabili- ties to invest in. It hosts a council, comprising representa- tives from the various operating companies, that meets regularly to discuss these differences and explore their strategic implications. As a result, trends in clinical re- search outsourcing are spotted and information about them is disseminated throughout J&J more quickly. The operating companies benefit from insights about new off- shoring opportunities, technologies, and ways of struc- turing collaboration with suppliers. And J&J, which can now piece together an accurate and global view of its sup- pliers, 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 management of conflict can ultimately lead to fruitful collaboration.

J&J's approach is unusual but not unique. The bene- fits it offers provide further evidence that conflict - so often viewed as a liability to be avoided whenever possi- b l e - c a n be valuable to a company that knows how to manage it. ^

Reprint R0503F To order, see page 151.

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