Conflict Management and Dispute Resolution

Table of Content

Conflict and dispute are normal phenomenon in society and human relationships. When using different resolution techniques, conflicting parties could get both constructive and destructive outcomes. Good decisions from negotiation can bring a ‘win-win’ prospect to interested parties. This essay firstly proves the inevitability of conflict and dispute on commercial projects, reviewing some basic definitions and theories. Then, some useful and effective dispute resolution techniques in standard forms of commercial projects are discussed and compared.

Lastly, four methods and the potential use of principled negotiation is evaluated for Chinese construction industry in the 21st century. Inevitability of conflict and dispute on commercial projects 2. 1 Some basic theory and knowledge of conflict From ancient times, conflict is always existing in everyday life if there is more than one individual. Conflict was defined as a “process which involves incompatible differences between parties that result in interference or opposition, often finding expression in antagonism and the violation of roles and procedures”(Thomas,1992).

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Also, conflict was defined as a “breakdown in the decision-making apparatus resulting in difficulty in selecting alternative courses of action” (Assael,1969; Lisa, 2006). According to these theories, where there is a competitive setting among two or more parties, there comes conflict. For example, fighting for a toy between boys can be regarded as a conflict, and a war between countries definitely is a big severe conflict as well. Thus, conflict occurs among most individuals,organizations, and even countries. Apart from that, conflict is always related to needs, politics, beliefs, values, power, and different goals.

Those with the most resources always exercise great power over others with limited resources, leading to the emergence of a conflict. Different perspectives on conflict varies at different times, such as the unitary, pluralist, and interactionist perspective (Mckenna, 2006). The exact explanation of these three perspectives are as below: Unitary perspective In early researches, conflict was regarded as a harmful process that usually result in negative outcomes of poor communication, lack of trust between people, and the inability of responding to the needs (Mckenna, 2006).

It was highly pointed that conflict should be avoided as much as possible. Fox (1974) believed that most conflict are abnormal and dysfunctional, and only same goals could lead to success. Pluralist perspective From 1950s to the mid-1970s, diverse perspectives came out, showing that conflict was a natural phenomenon that existed in people’s everyday life. More scholars found that conflict could have positive effect on the performance between groups. Fox (1974) emphasized an expectation for groups to have divergent needs and interests was increasing dramatically.

Also, conflict was not a insoluble problem but a opportunity to create new thoughts. Interactionist perspective Current thinking of conflict is the interactionist perspective which is described as functional or constructive conflict. It is said that a proper lever of conflict can make sure the creativity, viability and self-critical of a group (Mckenna, 2006). 2. 2 Functional conflict and Dysfunctional conflict Different people at different times view conflict as negative or positive.

In some cases, conflict could be regard as a negative phenomenon to society and groups, because it could very easily damage the relationship and cooperation between individuals and organizations, which cause bad impact to each party. This is often resulted in miscommunication between people with opposing needs, values, beliefs, or goals. Although it has been long in people’s percept that bad outcomes are brought by conflict, more and more sociological theories focus on the positive aspect of conflict. Innovative thoughts and social changes would never come out without debate and negotiation.

Pinkley & Northcraft (1994) emphasized that it is important to get a ‘win-win’ result between parties in conflict management, maximizing benefits for every party. It is true that positive conflict promotes understanding and leads to successful goals. Based on the outcomes, conflict is usually divided into two types: functional conflict and dysfunctional conflict (Balabanis, 1998). 2. 2. 1 Functional conflict Functional or constructive conflict is described as a process which can “facilitate the attainment of the group’s goals and to improve performance”(Mckenna, 2006).

It is helpful for individuals or groups to create innovative thoughts and approaches to solve problems, and to performance better in the long run. Perlow (2003) also argues that constructive decisions will be finally made by reasonable people even they hold different opinions in uncertain conditions. This means functional conflict focuses on finding a resolution to the problem. One premise of the functional conflict is that people involved in the negotiation should be willing to listen to one another and be interested in getting a solution that suits both sides.

With this premise, conflict can provide an important opportunity for growth. If the people is paranoid and selfish who only considers his own profit or interest but cannot tolerant different opinions from one anther, there won’t be any chances for the success of the negotiation between both parties. Destructive consequences will arise from unfriendly negotiation such as arbitration and litigation, leading to long-term exhausting trails. 2. 2. 2 Dysfunctional conflict When managing conflict, negotiators from each party could not always achieve a ‘win-win’ settlement. It is quite often to lose control over a conflict.

When that happens, the dysfunctional or destructive conflict could be generated and will stand in the way of making progress. Compared with the functional conflict, dysfunctional conflict can destroy the effectivity and functions of different parties. It also could produce a threat to the group’s survival. Members of the group usually feel less satisfactory and less loyal to the organization. Dysfunctional conflict usually stems from several reasons as bellow: To begin with, it is always regarded that misunderstanding and lack of communication are the most major factors leading to dysfunctional conflict.

Inevitably, different values, beliefs, goals, and needs do exist among parties, communication and negotiation should be proper ways to resolve those problems. But, if parties cannot communicate well, wrong information will be conveyed by mistake and conflicts could not be solved. Then, resorting to coercion is another reason for dysfunctional conflict. People are not willing to accept others’ view in a tense situation, and if opinions and feeling are expressed too strongly, increased tension may result in anxiety uncertainty, hostility and frustration among individuals and groups.

Therefore, dysfunctional conflict should be avoided all the time. 2. 2. 3 Dispute When a conflict is out of control, few new ideas come from a negotiation and a stressful tension spreads among parties, conflict has translated into dispute. To some degree, dispute can be viewed as dysfunctional conflict that conflicting parties cannot manage by themselves. Then, a third party is needed to play the role of problem solver. A third party can use unbiased services of individuals or panels to resolve dispute, using conciliation, mediation, arbitration or litigation.

More specific interpretation of these dispute resolution techniques will be given in the next chapter. Compared with conflict, dispute is usually expensive and time consuming, sometimes even bringing destructive outcome. Definitely, it is not pleasant to put a problem into court or public, so dispute should be avoided as soon as possible (Fenn, 2011). 2. 3 Social conflict and commercial conflict 2. 3. 1 Social conflict Social conflict is a generalized conflict which occurs among every social groups in people’s daily life.

Parties of social conflict can be individuals, groups, organizations, communities or crowds, rather than single individuals (Oberschall, 1978 ). Basically, social conflict refers in common interaction in parties who pursuit their own goals and interests. Coser’s(1967) study showed that social conflict contain a wide range of phenomena: “class, religious, racial, and communal conflicts; riots, rebellions, revolutions; strikes and civil disorders; marches, demonstrations, protest gatherings, and the like”.

Social conflict can be constructive when it is well managed, while it also can be destructive if the social actors with the major social power seek to control others. Promoting the progress of society is a major positive influence of social conflict. 2. 3. 2 Commercial conflict The word ‘commerce’ generally means an activity from which people can generate revenue and make profit. It is always about buying and selling processes. Construction projects, IT projects or engineering projects are all commercial projects.

As a business activity, commercial projects involve different interested parties combined by various contracts. Then, different types of conflicts and disputes would emerge throughout the life circle of a commercial project. Inevitability of conflict and dispute on commercial projects will be discussed later. 2. 4 Inevitability of conflict and dispute on commercial projects Basically, conflict is inevitable on commercial projects, but dispute can be avoided when conflict is well managed. As discussed before, conflict is a ormal phenomenon which results from people’s different needs, goals, beliefs, or interests. Commercial projects involve a wide range of stakeholders such as contractors, subcontractors, clients and suppliers, which means misunderstandings are likely to happen when there is a lack of communication among them. Apart from that, most conflict and dispute are based on commercial contracts. For example, most claims arise from the contractual relationship between parties in commercial projects. Increase of cost and changes of scope also can be regarded as major factors which leads to conflict and dispute.

Therefore, conflict and dispute are everywhere in commercial projects, and they are both difficult to be avoided even by using resolution techniques. Some major reasons of the inevitability lying in conflict and dispute on commercial project are presented as below: 2. 4. 1 Difficulty of communication As can be seen from above, commercial project involves different stakeholders, and each of them has its own needs, interests and goals, even between individuals. It is not easy to spread and share information among so many parties, so incorrect and inaccurate information may cause misunderstanding within the scope of a project.

As a result, conflict and dispute occur when people are confused with each other. For example, during the project design stage, if the design team do not communicate well with the contractor to know about their technical capacity, conflict would emerge in the project execution stage when contractors argue that they don’t have ability to manufacture the product designed by the designed team. This kind of conflict and dispute exist in every stage of a commercial project, and it is usually inevitable. 2. 4. 2 Contractual conflict

Contract management can be considered as the core section in project management. Most conflict and dispute are related to contract, because it is the bond between different parties. For example, ambiguity and changes of a conflict will cause inconvenience for contractors, such as changing procedures, expanding workforce, or reselecting subcontractors(McKenna, 2006). On the contrary, if contractors do not totally conduct the project following the owner’s contract, the owner would regard the project as a failure, not giving the contractor payment on time.

Besides, poor quality, cost over-run and time over-run also can be regarded as contractual conflicts and disputes within the process of a commercial project. They are definitely inevitable especially on some projects in developing countries. 2. 4. 3 Misleading and personal factors None successful commercial projects are competed without good leaders. Without a authentic leading, conflict and dispute will occur inside groups or organizations between leaders and followers. As a leader, one cannot always please all followers, so it is inevitable to avoid conflict and disputes when leading and managing commercial projects.

In addition to this, personal factors cannot be ignored when analyzing the inevitability of conflict and dispute. Sometimes people dislike each other with no reasons. Gender discrimination and sexual harassment are still exist in most workplaces as a source of conflict and dispute(Lengnick-Hall, 1995). Dispute resolution techniques in commercial contracts It is well known that in the 21st century, cooperation and collaboration play a major role among different groups, communities and companies in commercial activities. In commercial project management, one of the most different task is managing contracts.

Contracts bond different parties together in a legal approach, and every activities should be carried out under the conditions of the contract. Although contractual governance provides one such mechanism for fostering cooperation (Dwyer, Schurr, and Oh, 1987), it can also bring conflict and dispute to parties. According to the content presented above, conflict and dispute are inevitable on commercial projects, and most of them result from contracts. Dispute sometimes occurs when things go wrong with contracts, such as ambiguous condition of conflicts, misunderstanding of conflicts, or external factors.

Based on the seriousness of dispute in commercial contracts, dispute resolution techniques can be divided into two types as follow: non-binding techniques(negotiation, mediation, conciliation, neutral evaluation, adjudication), binding techniques (arbitration, expert determination, litigation) Comparisons and contrasts among five major techniques will be discussed as below. 3. 1 Core non-binding techniques 3. 1. 1 Negotiation Negotiation is the most common way of dispute resolution. This technique is often used in less tensed situation just among the conflicting parties.

Positional negotiation and principled negotiation are two types of negotiation. Positional negotiation always leads to a ‘win-lose’ outcome,which means one party has to submit another because it is always difficult to deal with people who has different views and goals(The negotiation experts, 2006). Visibility is a major factor of the success of negotiation. While principled negotiation aims at maximizing interests between different parties, using integrative approach to get a mutual outcome(Fisher and Ury, 1991). ‘Win-win’ is the basic idea of principled negotiation. 3. 1. 2 Mediation

When conflicting parties cannot resolve their dispute, a third party is needed to become the problem solver. Mediation is the most popular but informal form of dispute resolution. With the help of mediator, professional advice will be given to each party in accordance to Commercial Mediation Rules. Also, mediation is a time-saving and cost-saving technique, and creative thoughts and solutions often come from it. 3. 2 Core binding techniques 3. 2. 1 Adjudication and arbitration To be compared with mediation, adjudication and arbitration would not give an compromise decision but a contract bonding legal judgment.

An impartial adjudicator or arbitrator will make a judgment after reviewing their disagreements, and both techniques are confidential and flexibly controlling. However, Fenn’s lecture (2012) shows that adjudication is less formal than arbitration to make a decision and is under a tight timescales. As a result, inexpensive can be a feature of adjudication. 3. 2. 2 Litigation The last approach of dispute resolution would be litigation which is the most formal, expensive, exhausting, and inflexible process, being extremely costly.

It is also be brought to court and conducted in public. Depended on different types of claims, judge or jury will make a final settlement to the dispute, sometimes even after years. Therefore, litigation should be avoided as much as possible in resolving dispute. Principled negotiation in Chinese construction industry 4. 1 Principled negotiation theory Negotiation takes place every day and everywhere in the world. Because of people’s different values, goals, beliefs, or needs, negotiation is always not easy to be done.

Then, the way of negotiation becomes the most important factor through negotiation. Wrong negotiation approaches would turn functional conflict into dysfunctional conflict, leading to a destructive outcome. Principled negotiation, which was firstly proposed by Fisher & Ury (1991), gives a brand new way to negotiation of conflict. It has been considered as one of the most effective and useful approaches for resolving conflict in both social life and commercial activities. Four basic principles of method are as below: ? Separate the people from the problem; Focus on interests, not positions; ? Invent options for mutual gain; ? Insist on using objective criteria. These four principles points out that negotiators should avoid focusing on personalities or egos which could bring hostile arguments, removing ‘I’, ‘We’, or ‘your’ from the negotiation (Nielsen, 2012). Strong emotions, misunderstandings, and personal perceptions should be avoided as well. Instead, it is important to find common interests and benefits behind the negotiation parties, and to develop multiple solutions for each party to choose before making a final decision.

Moreover, objective principles, standards or concepts can provide a fair platform for parties to negotiate, but not a feeling of controlling by another party. 4. 2 Potential use of principled negotiation in Chinese construction industry During the past 30 years, China has become one of the most economic influential country in the world. Especially in Infrastructure and construction industry, not as complete as western countries, China still has a long way to develop in these two area. According to National Bureau of Statistics of China(2002) ,”contribution of the construction industry to the country’s GDP has risen from 3. percent in 1978 to 6. 7 percent in 2002″. This number will still ascend in the next few years. New multination and domestic construction projects come in to operation everyday in China in recent years. Cooperation is a more and more common phenomenon between groups, organizations, companies. Inevitably, conflict and dispute occur in construction industry all the time because of contract problems, misunderstanding of contracts, cost over-run or time over-run. Under this circumstance, appropriate negotiation method like principled negotiation is high needed to resolve the issues.

In conclusion, compared with other conflict management and dispute resolution techniques like arbitration and litigation, principled negotiation a much better method because it is time-saving and cost-saving. Most importantly, all parties can benefit from a mutual decision and built a cooperative relation through principle negotiation. Thus, the use of principle negotiation is essential and highly recommended in Chinese construction industry. Conclusion Conflict and dispute are unavoided on commercial projects, due to the diversity of beneficial perspectives.

In this essay, I briefly went through the causes of the inevitability, the resolution proposals, and the extend of its potential use in Chinese construction industry. The conflict theory and the functional vs disfunctional theory are employed, with practical examples demonstration. However, the essay is more like a theoretical summary than a practical scheme. It lacks the value of directing conflict managing and dispute resolution in the real world. I genuinely hope it could serve Chinese construction industry in a proper way, no matter academically or pragmatically.

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Conflict Management and Dispute Resolution. (2016, Nov 04). Retrieved from

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