Organizations and their Conflicts

by Dentons


Some Considerations on Overcoming Difficulties in Business Relationships 

The life of organizations, like that of individuals, is often an odyssey across a sea of conflicts. Some conflicts are small, some are large scale; some conflicts are frequent and some are rather rare; some are justified, some are not; but most of them are unavoidable, just like natural calamities. This is a fact. No matter how cautious a helmsman one may be, no matter how much of a pacifist, appeaser or how wise one may prove to be, these things happen and, as long as one wants to keep sailing – and remain afloat in the business world – one must come to terms with them. We live on an insurgent, restless sea. People and companies live one with another, they regularly encounter one another, or – even worse – they collide with one another. There can be no other way.

One cannot ignore the fact that one may not always win (and victory often has its own price). Reason and statistics show quite clearly that losses come from such confrontations. The more direct the confrontations are, the more they involve total conflict of the “all or nothing” variety, the more destructive they are. The most damaging conflicts are, of course, the traditional battles in court. There one may lose, therefore having to indemnify the opponent, or one may – albeit after years of aggravation – win, but at the cost of losing a business partner and incurring not necessarily pecuniary but unquantifiable and intangible  expenditure throughout the hostilities. So, one loses either way.

Is this just something that is an unavoidable, inescapable, burdensome tribute? Recently companies in developed economies have focused on finding and implementing strategies that are likely to, if not eliminate, at least mitigate the corrosive effects of conflicts and to substitute legal wars with something else. This might be something that would not dispense with the legal expertise provided by the experts, by lawyers, but that would include some nuance and complete it with innovative elements and with knowledge gained from other disciplines. This is what I will briefly outline in this article.

Types of Conflict

There are two major categories of conflict that disrupt the processes of business organizations: external (inter-organizational) and internal (intra-organizational) ones.

The former type is usually perceived to be the more dangerous one, and more significant resources are allocated to resolve it. In the case of external conflicts, if  informal negotiations (the most common form of negotiation, but one often  intuitively conducted, without any structure, therefore without sufficient preparation) end in failure, they are followed by court trials (very rarely by arbitration proceedings), with all their costs and problems. Companies take legal action against vendors, creditors, debtors, clients, competitors, partners, against almost everybody. Obviously, the pecuniary cost – which is usually seen as the most significant cost – is high, particularly when companies lose in court. However, win or lose, the efforts put in are extensive, while the compromising of business or financial relationships has a markedly adverse impact on the company.

As for internal conflicts, there is a tendency among organizations to conceal or cover them up, to ignore them, or to use internal coercive solutions – if possible – to smother them, thereby leaving them unresolved. This can make it even more costly for such a conflict can worsen over time and lead to a crisis, or at least a rupture that severely impairs the organization's smooth operation. Such a conflict may erupt among employees, between supervisors and employees, but also among functional departments or, even worse, among corporate bodies (so-called corporate conflicts), involving shareholders, shareholder assemblies, boards of directors and boards of supervisors, factions within these, committees, etc.

Two other categories of conflict that may involve companies are hybrid conflicts (e.g. labor disputes with employees, collective disputes or disputes with consumers) and administrative conflicts with various government agencies (in charge of taxation, environmental protection, competition, etc.).

For all four major categories of conflict outlined above, in developed countries there are now available new legal advisory and assistance services that aim to identify faster, more efficient, friendlier, less risky and less costly ways to resolve disputes out of court or, at the very least, ways to better prepare for any type of resolution. Those services originate in law-adjacent disciplines such as economics, psychology, sociology and, particularly, a new science that has been taking shape in recent years called conflictology and its sub-branch economic conflictology. This knowledge must be combined in a professional and structured manner with the above-mentioned legal knowledge in a synthesis to meet the demanding needs and requirements of today's corporate clients. It is only natural that those services should now become available in Romania too, in a new paradigm, foretelling the future of the profession.

A New Approach

Exploring the possibilities of out-of-court corporate conflict resolution is not something new in itself. But doing so requires a specialized portfolio comprising mixed legal and advisory services. Some services are new, others are... very new.

Among the new ones, there are various types of proceedings currently operational in developed countries labelled as alternative dispute resolution (ADR) methods. The best known among them are arbitration, conciliation and mediation, with their variations and combinations. We shall not describe these here, as they are well known, at least in principle. In my opinion, they are valid solutions, and are usually preferable to the courts. Unfortunately, particularly in this part of Europe, they have not been fully assimilated and frequently used, for various reasons, including cultural ones. Furthermore, they are not appropriate for all cases. They are therefore not sufficient and no longer constitute the state of the art in conflictology, but they should definitely be maintained, adapted and customized as part of the above mentioned service portfolio.

Moving to the very new assistance and advisory services, in order to make these better understood, we shall make use of an analogy between a corporation in conflict and a person who finds themselves to be ill.

Paradoxically, what an individual or legal entity needs to do at the onset of a severe conflict that could lead to a trial, is to untangle, to explain the conflict, even if merely to themselves. This is a phase similar to looking at a patient's medical history in order to assess the patient's state of health. This is  at first sight paradoxical, as that party may believe that, since they are a party to that dispute, they have very good (if not the best) knowledge of that conflict. That is true, but their knowledge is factual and subjective. They do know their own grief, with (some) of its symptoms. What is most frequently missing is an objective, structured and organized picture containing the actors – classified by their roles –their relationships and types, the rights and interests of the parties, the assessed causes, the sequence of events, the likely significant incidental matters of the law, etc. This is a phase where the objective elements must be segregated from the subjective ones (the latter bearing some significance too, at least from an emotional standpoint), which is hard to do by someone who is directly involved and not a professional in that matter.

Therefore, the aim at the beginning of the consult is to create a radiography of the conflict and to map out the case context as completely and as truthfully as possible.

The second preliminary, yet very useful – and mostly overlooked – step is the diagnosis. The professional diagnosis in a dispute both resembles and does not resemble investigating a patient suffering from a specific disease.

It resembles because it too requires a diagnostician who is professionally qualified in this matter. It also resembles as dispute diagnosis needs to go beyond the general verdict of “sick” (i.e. “conflict”) in order to name and describe the dispute, identifying its causes.

It is not quite the same thing as the science of conflictology has developed multiple angles to examine and diagnose conflict. The “disease” has different names and treatments according to the types of relationships. It is all up to the diagnostician's skill and experience to choose the most appropriate diagnosis method in any given case or – for more complex matters – to use multiple procedures in order to carry out a multi-pronged diagnosis.

In keeping with the same analogy, the next phase is determining the stage and severity of conflict evolution, by assessing it. Once again, depending on the chosen diagnosis type and on the tools used by the professional, there are various assessment scales, which are designed to identify the severity of the situation and the paths to follow towards a resolution.

Finally, the most complex and delicate part is the professional's intervention in the conflict. It may be similar to therapy or even surgery, however this also requires using techniques to involve the parties, and even getting them to participate throughout the process.

Intervention implies using some special strategies, which are specific to each type of diagnosis. It may therefore focus on information, rights, interests, values, structures, external drivers, power balance elements, needs, wants, emotions, expectations, interdictions and barriers, trust and undermining/regaining trust, communication and communication faults, cognitive and behavioral dimensions, social styles, psychological aspects, etc. This may be done individually or – in complex interventions – together.

The radiography – diagnosis – assessment – intervention process is the most complex, modern and efficient path a conflictology professional can provide to the parties, with their consent, in order to resolve any organizational or commercial conflict arising between them. To the best of our knowledge, it is not yet well enough known or applied in Romania. Maybe not even at all.

A second approach, already mentioned above, particularly for purely commercial disagreements, is to use an alternative dispute resolution technique, with the best being, in our opinion, mediation and – especially – conciliation (the latter also being basically unknown in Romania). Furthermore, as a very up-to-date trend, it is worth mentioning the possibility of creating custom-designed ADR solutions, according to the specific types of clients and cases.

Even if conflict resolution is achieved because of the cooperation of the parties, prudence dictates diligent efforts should be made for solution implementation and post-conflict assistance. With the consent of the parties, the practitioner can also provide these kind of services, which would have been equally useful if requested in the very first stages of new contractual relationships between partners as a kind of prophylactic action against potential conflict.

The client can received individual assistance from conflictology professionals, if the other party does not consent to the endeavor to find an out-of-court conflict resolution. First, completing an adapted radiography – diagnosis – assessment sequence with the client alone. This sequence can be afterwards supplemented with processing the data on hand in a creative and multidisciplinary way, which involves studying and determining the opponent's profile, the business context, the competition, the legal standing, etc.

Then they can move on to specifically preparing and training the party, to generating (commercial) war strategies, including legal strategies, whether in the law court or in the arbitration tribunal.

According to the response and moves made by the other party, the practitioner may subsequently assist the client in negotiations (after complex preparation in this extensive area) or, eventually, even before a court or tribunal.

In Lieu of Conclusions

A company's life is neither simple, nor easy in today's business climate. It may have to face at every step various conflicts, whether small or large-scale, whether internal or external. Most of the times conflicts go to court, and the cost, regardless of the judgment, is high and has a significant impact on the organization's progress.

It is true that this warlike saga gave birth to a mutually beneficial symbiosis between merchants and their legal advisors (lawyers or consultants). There are still, nonetheless risks, unavoidable costs, pecuniary or relationship losses, stress, departures from the planned paths, failures.

In this context, the reasonable thing to do is try and find such tools from a qualitative standpoint. The theory and practice in this new field of knowledge, conflictology, has started providing the economic entities with a portfolio of dedicated, original services. It is a true revolution summarizing the law and elements of the theory of conflict, psychology, psycho-sociology, communication, negotiation, economy, etc. It also provides a new paradigm for the client - (legal) advisor relationship and a dramatic change in the very paradigm of business law services.

This article aims to announce and explain these matters to companies operating in Romania. We hope that both these companies and the legal, consultancy and representation professionals will discover this phenomenon, which is already present mainly in developed economies, and which deserves to be known, looked into, and possibly – as it should be – harnessed in our country too. Should this happen, we will be glad to revisit and elaborate on this dialogue, with detailed examples and explanations.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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