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Conflicts as well as Dispute are for sure inevitable in most of the commercial projects whether big or small. To be precise, Conflict and Dispute is always there, not only in commercial projects but are a part of our daily life. There is always a conflict going on; on as big as on an international level like ongoing dispute between Israel and Palestine to small issues like a husband and wife having a confrontation as where to go out for dinner.
Conflict in simple words can be defined as a disagreement over a situation between two or more parties/individuals where they have there own vested interests. Conflict is short termed and is easy to resolve, while on the other hand, dispute is when it becomes deep-rooted and none of the parties seems to be able to reach an agreement. Conflict can be resolved easily while on the other hand there is a need for a third party intervention to resolve a dispute, which itself is time-consuming, expensive and unpleasant. In other words, we can say that conflict can be managed, but to an extent of preventing it. If not, it leads to dispute.
CLASSIFICATION OF CONFLICT
Conflict can further be classified as Functional and Dysfunctional, depending on the outcome. Earlier, scholars believed that conflict is a bad thing and should be avoided at all costs, but this was contradicted by Mary Parker Follett (1925), who coined the idea that effective conflict management ought not to conceive conflict as a wasteful outbreak of incompatibilities, but a normal process whereby socially valuable differences register themselves for the enrichment for all concerned.
- Functional Conflict: It works towards the goal of a project. Mary Parker Follett (1925) called it ‘Constructive Conflict’, which increases the information and ideas, encourage innovative thinking, unshackles different point of views and reduces stagnation at any stage of the project.
- Dysfunctional Conflict: It is destructive in nature and blocks the project from reaching the goal. It brings tension, anxiety and stress for everyone involved. It drives out low conflict tolerant people form the project and reduces the trust for everyone involved, resulting in poor decision making arising due to withheld or distorted information and diversion of resources on the conflict rather than the project.
Conflict, in general, can be dealt with by following three methods:
- Lose-Lose method – In this, each side gives up some of its interests. This is done by Avoidance by staying away from the problem or withdrawing but it is not a permanent solution. The other option is Compromise which is done by bargaining and negotiating, in which each side looses something.
- Win-Lose method – Also known as domination, in which there is a victory of one side over other and is done by Dominance where one party overwhelms the other party. Authoritative Command is another aspect where the person with authority rules in favor of one party.
- Win Win Method: Also known as Integration where each side refocuses there efforts so that neither side loses anything and in fact gains. This is done by finding the root causes of the problem, due to which conflict has arisen and then try to meet the interests of all the parties which in the end leaves everyone happy.
TYPES AND LEVELS OF CONFLICT
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- Intra-organization Conflict: As the name suggests, conflicts that occur within an organization, at the interfaces of organizational functions. It can occur along the vertical and horizontal hierarchy of the organizations i.e. between the managers and subordinates or between different departments and workgroups.
- Intra-group Conflict: It is between the members of a group, and is usually due to ways of doing the tasks or achieving goals.
- Inter-personal Conflict: It is between two or more people due to differences in opinions and views. This may also be due to differences in orientation to work and time in different parts of an organization.
- Intra-personal Conflict: It is more of a psychological issue. It occurs within an individual, when a person feels threatened to one’s values, has a feeling of unfair treatment.
- Inter-organizational Conflict: It is between two or more organizations, when they are working together, especially on a project. It is not related to competition. Typical example can be that of a conflict between a supplier and distributor.
CONFLICT AND DISPUTES ARE INEVITABLE
Conflict and Disputes as mentioned are an unavoidable part of any commercial project by the virtue of the nature of the project. Any commercial project involves a variety of transactions as well as relationships on a local, national as well as international level. Due to the complexity of a commercial project involving client, consultant, contractors, subcontractors and suppliers it becomes inevitable. There can be a number of issues for ambiguity between different parties like project delays, change in scope of work, payment issues, design issues, change in specifications, administrative problems, personal damages, inflation etc to name a few. Managers have to build up, nurture and maintain a network of relationships to make there projects a success.
Project Delays: Time management is very crucial for any commercial project. All the activities in a project are lined up one after another and are interlinked. Any kind of delay in this causes the whole project to be delayed, affecting the cash-flow as well as ruining the relationship of all the involved. In many cases financial losses are also incurred by those involved due to delay caused by one of the involved. For example, project handing over got delayed due to delay caused by one sub contractor, and for which the main contractor gets penalized. This penalty he will try to distribute evenly between all his sub contractors, which in turn will not be accepted by those who have finished there scope of work on time, hence leading to conflict.
Change in Scope/Specifications: Once everything had been finalized, any change in the scope of work or change in specifications can have a direct impact on the financial as well as the lead time of the project, which can result in the conflict between the parties involved. For example for a project, contractor has already procured some material, or has outsourced a particular job, but when asked to incorporate those changes by the client/consultant, he suffers a financial loss or he has to change the supplier with whom he has placed the order to meet the required specifications.
Payments: Conflict can arise due to delay in payments either by one of the parties involved in the project, due to financial crunch or because there has been some delay or there is some defective performance in terms of quality by the other. Whatever the case maybe, it disrupts the cash-flow whole project, affecting parties involved e.g. If a contractor doesn’t pays to a sub-contractor, he in turn cannot make the payments to his suppliers as well as employees and defaults, which directly affects the progress of the project leading to conflict between the sub-contractor and the contractor.
Administrative Problems: It is another issue for conflict arising due to mismanagement or lack of coordination between different agencies involved, which lead to project delays, cost over-run which in turn results in loss for the project. For example, in a project, scope of work of two sub-contractors is interdependent. If there is no coordination between them, it will result in unnecessary delay for the project.
The above mentioned are a few aspects of conflict which are common in any commercial project, whether it’s a construction, development or an IT project. From here we can infer that conflict is a set of inter-related elements namely: parties, issues, dynamics and context. Since it is very difficult in any commercial project, involving large number of players, to maintain a balance between all these elements, conflict becomes inevitable. Conflict if taken in a positive note, and if resolved appropriately, can leads towards betterment and successful delivery of a project. If not they lead towards dispute which itself is unpleasant, diverts valuable resources from the overall aim, is time consuming, costly and destroys the relationship between those involved which may have taken years to develop. Dispute at all cost should be avoided and should be resolved still when it’s at a level of conflict.
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DISPUTE RESOLUTION TECHNIQUES IN A COMMERCIAL CONTRACT
In any commercial project, there is always discrepancy/disagreement regarding the scope of work, deadlines, etc which leads to conflicts and when they get out of hand, leads to Dispute. Disputes in general, in a commercial contract are addressed to by the following three methods:
Negotiation is a tool by which we deal with our differences. These differences may be over the price of everyday grocery, or an automobile or a labor contract or maybe an alliance between the two companies. In general as per the academicians and theorists, there are two types of negotiation theories namely Positional Negotiation and Principled Negotiation. While in positional negotiation, negotiation is done in such a way that the other party looses it’s faith in its own case and submits to the first demands of the first party, in Principled negotiation, a softer approach is taken to reach a solution. It is based on the following principles: Separate people from Problem, Focus on interests, not positions and Invent options for Mutual Gains.
Mediation on the other hand gets the involvement of a third party (neutral) to resolve the outstanding issues and helps them to reach an agreement. Unlike negotiation, it is somewhat semi-formal, with the outcome may or may not be binding to the parties, as per the agreement.
In case of Arbitration, it is a formal, private form of an Alternate Dispute Resolution. Here the disputed parties refer to one or more persons (arbitrator or an arbitrator tribunal), who in turn reviews the facts and gives the decision which is legally binding on both the parties. The major difference between Mediation and Arbitration is that mediator always tries to reach a compromise while an arbitrator gives decision which is lawfully binding to both the parties.
While Negotiation is very common and is used frequently as compared to Mediation and Arbitration, Mediation is the fastest means to as compared to the other two options. The cost incurred is solving the dispute is highest in Arbitration but depends on number of factors, but still, as compared to Mediation and Negotiation. While Arbitration is recognized by common law and the decision made by an arbitrator will uphold in court of law, this is not true in case of Mediation and Negotiation, but depends on the mutual agreement of the disputing parties. However, if agreed beforehand, the agreement reached via Mediation can also be binding for all the parties involved.
Apart from these, Litigation is another dispute resolving technique, to which the disputing parties can resort to. This is a formal process in which the case of the disputing parties is taken to the court and the proceedings are held in public. Compared to Negotiation, Mediation and Arbitration, Litigation is a Slow, time consuming and a very expensive process, where the trials are held in public and there is no scope for confidentiality.
THE POTENTIAL USE OF PRINCIPLED NEGOTIATION IN THE INDIAN CONSTRUCTION INDUSTRY
Negotiation is a tool used by means of a dialogue between the two or more parties to resolve issues, bargain or to satisfy one’s vested interests which can be broadly classified into needs, aspirations, fears and desires. Negotiation is classified into two types:
- Positional Negotiation
- Principled Negotiation
Principled Negotiation is a relatively new phenomenon, which was coined in late 70’s by Fisher and Ury. They gave four basic principles for the Principled Negotiation which are as under-.
- Separate people from the Problem
- Focus in interests and not problems
- Invent options for mutual gains
- Select among options by using objective criteria
Charles G. Fields has described Principled Negotiation as a 7 elements framework namely Interests, Options, Legitimacy, Communications, Relationships, Commitments and Alternatives.
INDIAN CONSTRUCTION INDUSTRY AND PRINCIPLED NEGOTIATION
After agriculture, construction sector is the largest industry in India. India being a developing country and estimated to become the third largest economy by 2025, and with an economic growth rate of almost 7%, there is a huge demand for the infrastructure and construction projects. Every year, Billions of US$ are spent, both by public and private sector on construction and infrastructure protects. As the construction market is growing by leaps and bounds, so as the conflict and dispute, which then go to the court of law (litigation) to be resolved. The judicial framework of India moves at a very slow pace and is very expensive, and hence there is a need for an alternative.
Principled Negotiation, on the other hand is much less time consuming and expensive as compared to litigation and also the relationships between the parties are also not destroyed and consequently the disputing parties reach to a satisfactory agreement. Due to this, not only Principle Negotiation technique but Alternate Dispute Resolution Techniques have a good potential in India.
REFERENCES AND BIBLIOGRAPHY:
- Conflict [online], available: http://webhome.idirect.com/~kehamilt/ipsyconf.html [accessed 10 September 2009]
- Gray, C. and Larson, E (2008) Project Management: The Managerial Process, 4th ed., Boston: McGraw-Hill.
- Fisher, R., Ury, W. and Patton, B. (1991) Getting to Yes: Negotiating an Agreement without giving in, Second Edition, Century Business, London.
- Fenn, P and Gameson, R (Eds) (1992), Construction Conflict: Management and Resolutions, Chapman Hall, London
- Trust and conflict within virtual inter-organizational alliances: a framework for facilitating knowledge sharing [online], available: http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8S-4CDJKMV-2&_user=121749&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_searchStrId=1111593104&_rerunOrigin=google&_acct=C000024058&_version=1&_urlVersion=0&_userid=121749&md5=5bf1d2dde69eccc5b0f0becb1595c3f9 [accessed 12 September 2009]
- Rahim, M. Afzalur , Toward a Theory of Managing Organizational Conflict. International Journal of Conflict Management, Vol. 13, No. 3, 2002. [online] Available: http://ssrn.com/abstract=437684 [accessed 12 November 2009]
- Fernandez Jimenez de Cisneros, Inmaculada, Dorado, Miguel Á., Martinez, Ines, Medina, Francisco J. and Munduate Jaca, Lourdes, Types of Conflict and Personal and Organizational Consequences. IACM 15th Annual Conference. [online] Available:
- http://ssrn.com/abstract=305068 or doi:10.2139/ssrn.305068 [accessed 12 November 2009]
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