- Disagreements between top company leaders are a normal part of running a business. But figuring out how to solve business conflict can be tricky
- ESSEC Business School research sheds some light on the intricate dynamics of boardroom conflict
- Traditional conflict resolution methods like open discussions and decision enforcement are generally ineffective in conflict resolution, the research finds
Far from the public eye, critical decisions are shaped within the confines of a boardroom. As concerns about growth, investment, and future strategies arise, so does disagreement. This potentially sets the stage for high-stake discussions and business conflict that can determine the trajectory of a company.
Take, for instance, the Pearson-Hardman law firm meetings in the popular television series Suits. In season four, a lucrative opportunity of representing a major pharmaceutical company comes along – Harvey, ever the rainmaker, wants to pursue this case aggressively, while Jessica, the managing partner, believes in taking a more cautious approach. This difference in perspective sparks a tense and dramatic boardroom confrontation.
At its core, the conflict reflects a clash between short-term financial gains and long-term ethical considerations, highlighting the complex interplay between employee concerns and managerial priorities.
Well – real boardroom stalemates are not as dramatic. You may think that continuing to have an open discussion and trying to enforce a decision are good ways of getting rid of business conflict. But what if these aren’t actually effective strategies?
Understanding top management stalemates
Disagreements between top company leaders are a normal part of running a business. But figuring out how to solve these problems can be tricky.
Recent research from ESSEC Business School delves into this topic, offering valuable insights into how venture leaders navigate and manage business conflict within senior executive teams.
The researchers, CJ Rhee and Sam Garg, analysed 21 top management team stalemates in four Hong Kong fintech ventures and introduced a contingency framework for managing this business conflict.
They found that conflicts within top management teams (TMTs) are often multi-level and nuanced.
Horizontal stalemates occur between individuals at similar hierarchical levels within the TMT, like department heads or functional leads. These are usually centred around task-related issues like strategic initiatives or operational decisions.
Conversely, vertical stalemates arise between individuals at different hierarchical levels within the TMT, such as between the CEO and department heads or between the CEO and the board of directors. These conflicts typically stem from differing priorities (as in the case of Suits), which can significantly impact vision alignment.
Beyond talk it out and force it through: what does not work?
We’ve all seen it in movies – high-powered executives locked in a heated debate around the boardroom table. But how effective are traditional conflict resolution methods in this setting? This research sheds light on a surprising truth: open discussions and enforced decisions, often seen as go-to solutions, can actually make things worse.
While talking things out seems logical, open discussions can sometimes fuel the fire, leading to entrenched positions and heightened tension within the senior leadership team.
Enforcing a decision might seem like a way to get things moving, but, instead of achieving closure, it can create further polarisation and resistance among team members. The team becomes less likely to cooperate and more likely to resent the imposed decision.
Garg said: “We find open discussion and decision enforcement by the venture leaders – two actions suggested in prior conflict management literature – to be ineffective for all types of stalemates in our data.
“Beyond venture professionalisation, our research offers a fresh lens on conflict management as brokering by highlighting the space and hierarchy in the brokering process.”
From business conflict to collaboration: what’s the solution?
With open discussion and decision enforcement discarded, three key resolution approaches emerged from the study:
Private Mediation
Private mediation involves one-on-one discussions between conflicting parties to resolve disputes outside the formal boardroom setting. This approach fosters empathy and understanding among disputing parties, leading to more constructive resolutions. By keeping things confidential, everyone feels safe to spill the beans. This helps the educator understand what’s really bugging each side.
The Chartered Governance Institute of the UK and Ireland also emphasised the significance of conducting one-to-one meetings for making more focused decisions, as outlined in their report.
However, there is a catch – this approach does not work in every situation. For example, when venture leaders use private mediation to advise a new executive to be more accommodation to subordinates’ needs, it can be perceived as undermining their authority.
Structural Crafting
Imagine the top leaders are constantly bumping heads because their roles and responsibilities are unclear, or they disagree on the company’s goals. Structural crafting is like rearranging the furniture in the company to avoid these clashes.
It involves:
- Making things clear – defining each leader’s role and who they report to explicitly. This sets out delineations of authority and accountability with the senior teams. For example, in the case of horizontal stalemates, where conflicts arise between individuals at similar hierarchical levels, clarifying roles can help mitigate misunderstandings and turf battles.
- Establishing a clear decision-making system – essential to understand how things get done. This may include identifying decision-making criteria, specifying decision rights, and establishing mechanisms for resolving disagreements or conflicts that may arise during the decision-making process.
- Aligning everyone’s goals – crucial for fostering collaboration and synergy. This may involve conducting regular goal-setting sessions, facilitating dialogue to reconcile divergent perspectives, and fostering a shared understanding of organisational objectives.
An article by Grant Thornton touches upon the importance of also setting out the right corporate governance practices. For example, having a formal shareholder agreement that sets out rules for how the business is run, including key issues such as succession planning, can help prevent conflicts of interest among board members.
Depersonalisation
According to the findings from a CPP Global Human Capital Report, 27% of employees have observed conflicts escalating into personal attack, while 25% indicate that avoiding conflict has led to sickness or absenteeism from work. This stresses the need for more realistic solutions to address the root causes and promote a work environment more conducive to productivity and employee well-being.
In their academic paper, the Henley Business School, University of Reading, places a substantial focus on the mechanisms for managing and resolving these boardroom tensions.
One key approach is to depersonalise to maintain focus on the board’s overarching goals. By separating the individuals involved from the issues at hand, boards can avoid unnecessary conflicts and keep discussions centered on matters of substance.
Thriving through the turbulence
In navigating boardroom statements, it is evident that traditional approaches may not always yield the desired outcomes. Embracing innovative strategies can offer more effective pathways to resolution.
The series – ‘Inside the Storm: Lessons from the Boardroom‘ – delves into the high-stakes world of corporate leadership and global business decisions that saved some companies, while others crashed.
Companies like Kodak, Starbucks, Apple navigated through challenges and emerged stronger, showcasing the importance of strategic decision-making in testing times.
Kerry Patterson – “We’re so uncomfortable with the immediate conflict that we accept the certainty of bad results to avoid the possibility of uncomfortable conversation.”
Conflict itself isn’t inherently problematic. The success of a business hinges on effective communication and the sheer willingness to address internal issues.
By Gowri Ramesh
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