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conflict management and dispute resolution on A Commercial Project

By Michelle Lewis,2015-01-09 00:46
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conflict management and dispute resolution on A Commercial Project

1 Introduction

    Conflict and dispute have been considered as an essential component of human society. In fact, Karl Marx, who is the father of classic social conflict theory, had stated that the history of conflict and dispute, especially class struggles, is the history of all existing societies of human beings in 1848. As a branch of social conflict and dispute, commercial conflict and dispute also haves long-term history since the first commodity transaction had appeared. Subsequently, a vast number of contentions about conflict and dispute on a commercial project have been presented by scholars. One of main contention is whether conflict and dispute are inevitable on a commercial project or not.

    2 Are Conflicts and Disputes inevitable on a Commercial Project?

    In order to discuss this contention, two types of preconditions should be noted. At first, the difference between conflict and dispute should be recognised in the contention. Actually, in spite of the fact conflict and dispute are often interchanged; they are two different words (Fenn and Gameson, 1992). In fact, both conflict and dispute can be explained as a disagreement or argument between at least two parties, but conflict is more intense than dispute. For instance, dispute can destroy the relationship between partners in a commercial project, but conflict could lead to war between different countries. Therefore, conflict and dispute should be discussed separately in this contention.

    Secondly, what is the relationship between conflict and dispute? Majority of scholars considers that conflict can be defined as a sufficient condition or an antecedent of dispute in spite of some distinguish perspectives exist among researchers. Costintino and Merchant (1996) claimed that the dispute is one of the outcomes of conflict, and the other outcomes are conciliation, conflict avoidance, and capitulation. A similar opinion also has been stated by Yarn (1999, p115); he maintained a conflict can exist without a dispute, but a dispute

    cannot exist without a conflict. In other words, conflict can lead to disputation in some situations and a dispute must rely on its existing conflict. This is the second precondition of the contention.

    The two antecedents of the contention have been discovered, and validation of the contention will be discussed below.

    The inevitability of social conflict had been expounded by both classical and modern theories of conflict. The classical theory of conflict is depending on the class struggles which exist in the capitalist societies. According to an account of the dialectical materialist, Marx (1859) pointed out that the societies of capitalism will self-destruct inevitably with their internal conflict just like some previous socioeconomic systems. Gumplowicz (1884) claimed that a series of inescapable social conflicts, such as class conflict, racial conflict and ethnic conflict, is the catalyst for the development of human societies. This means the existence of class and nationality is the causes of social conflict. Similarly, modern scholars also consider that social conflict is unavoidable because of two different aspects: substance and spirit. Mills (1959) stated that social conflict is the result of the unequal allocations of shared substance, such as mutual interests and resources, and this type of inequality could not be avoided in current societies. On the other hand, De Bono (1985) maintained that conflict arises due to the interaction of different perspectives, which belong to the field of spirit. Therefore, social conflict is an essential component of human activities and could not be avoided.

    As a subordinate of social conflict, the conflicts on a commercial project also have the same characteristic. In fact, conflict is a necessary process in business activities because of the fact that business is conducted by interests, which are the source of conflicts. This is the root cause that conflict always has been showed by vast types of commercial projects such as procurement, bidding, contract, and negotiation. For instance, in the context of commercial procurement, both purchaser and seller struggle for more benefits, and disagree with the price which is suggested by another party. In this example, the distinction of price is the point of conflict. Furthermore, a commercial project is an activity which is sponsored and implemented by human beings and could be influenced by different perspectives of the project participants. This means some social conflicts are inevitable between the stakeholders of the project. Therefore, conflict likewise could not be avoided in commercial projects.

    However, in contrast with conflict, dispute is a type of disagreement which could be bypassed. Based on Fenn and Gameson, dispute is a process which is primitive, inadequate, expensive and dangerous because of two reasons. The first account is the damage of relationship. For example, in the context of a commercial project, the relationship between the project manager and his followers is a significant factor which can affect the success of the project. Employees always have stronger motivation and satisfaction when they work for a manager who they believed. Unfortunately, dispute could destroy this type of relationship simply. Secondly, the potential cost of a project could be increased by the dispute. Actually, in the process of dispute, not only capitals, but also some invisible resources, such as time and human resources, have been wasted. As a result of a serious dispute, the projects expenditure of time and capital will rocket dramatically, and the

    quality of the project will additionally decline. Thus, dispute is the nightmare of a project manager and should be avoided.

    Overall, in the context of a commercial project, conflict is a necessary foundation which is inevitable. On the contrary, as an outcome of conflict, dispute is a redundant process of a project and could lead the project to fail. Nevertheless, how to deal with conflict and dispute on a commercial project?

    3 Conflict Management and Dispute Resolution

    3.1 Conflict Management Theory and Techniques

    Based on game theory, Follett (1925) believed that the resolutions of the conflict on a commercial project can be divided into three categories: domination, compromise, and integration. Firstly, domination, which is also called win-lose, is a type of strategy which will lead to the fact that one party of the conflict achieves obvious victory. In spite it is straightforward and often be used in conflict Follett still refused to recommend it due to the fact that this strategy could cause some negative consequences. Secondly, compromise is a method which can lead to the situation of lose-lose. In this strategy, the conflict has not been truly resolved and may revive in the future. Finally, integration reflects the purpose of the win-win situation. It satisfies both parties of the conflict and is accepted by increasing numbers of managers.

    According to these three types of resolutions, a series of resolution techniques of conflict has been discovered in the past several years. The main two types of techniques will be focused on below; they are conflict avoidance and negotiation.

    Firstly, just like risk avoidance, conflict avoidance is a conflict management approach which is used to avoid

    the transformation from common conflict to dispute (Fenn, 2012). It is simple but negative because of the fact that the conflict is covered in this method merely. This means the conflict which has been escaped in one process of a project maybe reappears in other processes. Therefore, conflict avoidance not equals to conflict prevention, but it is still an available approach to evade dispute (Bacal, 1999).

    Secondly, comparing with conflict avoidance, negotiation is demonstrably more effective and positive. It is a process to achieve an agreement or compromise and to prevent or resolve disputes via communications; thus, it belongs to not only conflict management, but also dispute resolution. Fisher et al. (1991) classified negotiation depending on different purposes into positional negotiation and principled negotiation, or distributive negotiation and integrative negotiation. In positional negotiation, each party of the negotiation will adopt an extreme position and focus on how to persuade another side to achieve the position. In practice, the win-lose situation is the most frequent consequence which may appear in the end of positional negotiation. Fisher and his colleagues considered that this type of negotiation can lead to three types of side effects: Unwise agreement, inefficient discussion, and damage of on-going relationship. These disadvantages limit the using of positional negotiation due to the fact that they are unfriendly and difficult to be accepted.

    However, an alternative strategy has already been discovered by Fisher. As a strategy which focuses on expend the common interests and achieve win-win consequence, principled negotiation has become increasingly popular in commercial projects. It is supported by four key points: people, interests, options, and criteria. The first point means the emotions of participants should be considered in principled negotiation. In other words, the problems of people and substance should be discussed separately. Therefore, in principled negotiation, participants will struggle for the resolutions of substance problems instead of people attack. Secondly, interests are the point which indicates not only the fact that participants should pay attention to interests but also the root cause of negotiation. Comparing with position-focused discussion, interest-focused discussion is certainly more efficient and attractive. The third one is options. Option describes the fact that participants will spare no effort to discover optional approaches for the increasing common benefits. Finally, criteria are a key element to maintain fairness. A balanced and objective standard is the most efficient tool to remove the different perspectives and decrease the internal conflicts of a team.

The application of principled negotiation theory in China has several thousand years’ history. Contribute to

    the theory of principled negotiation, a vast number of military alliances were established in ancient China. The most famous ancient principled negotiation in China appeared in the age of three kingdoms (三国时期).

    The settlement of this negotiation affected the military situation of China in the future fifty-year period. Furthermore, not only in ancient China, principled negotiation also has played an increasingly significant role in modern China. Chan and Suen (2005) have discovered the fact that the most commonly used dispute resolution technique in China is negotiation according to their study. Comparing with positional negotiation, principled negotiation, which trends to create the win-win situation, is widely accepted by Chinese because of the Chinese commercial principles: “equality, mutual understanding, mutual trust, mutual benefit, and

    long-term cooperation (Zhao, 2000, p217). By using of these principles, Chinese government resolved the majority of international economic disputes. The data, which were analysed by Zhao, can be utilized as evidence of the principles; 51.6 per cent of negotiations lead to win-win outcomes in total 31 cases of Chinese-foreign business negotiations from 1978 to 1997. This means more than half negotiations adopted principled negotiation strategy in China. Therefore, principled negotiation has been applied as a key conflict management and dispute resolution technique in China.

3.2 Compare and Contrast the Dispute Resolution Techniques

    Subsequently, four types of dispute resolution techniques will be compared. Firstly, mediation is the most widely accepted form of alternative dispute resolutions (ADR). The purpose of mediation is to resolve disputes between the different parties in mediation. The biggest distinction between mediation and negotiation is that a third party mediator, who has not any relationship with both two sides of participants of mediation, will assist and control the processes of the mediation. Fenn (2012) considered mediation can be divided into four categories; facilitative mediation, evaluative mediation, settlement mediation and transformative mediation. In the context of a commercial project, facilitative mediation, which is also called interest based mediation, is widely recommended. A mediator in facilitative mediation, just like a catalyst in a chemical reaction, will assist the two sides of mediation to achieve agreement but not change any standpoint of both two parties. Fenn pointed out that the advantages of mediation can be concluded into the six Cs: (1) consensual. This means both two sides of mediation agree to invite a third party mediator into mediation; (2) control. All of schedule, produce and agenda are agreed by participants; (3) cost savings. Instead of all problems, the key problems will be discussed in mediation; (4) continuing business relations. Mediation will focus on substance problem instead of people problems; (5) confidentiality. Mediation is private and covered; (6) creative. Mediation can avoid the restrictions of legal rules. These benefits lead mediation to increasingly popular on a commercial project.

    The second technique is adjudication. Adjudication is a process to resolve disputes in commercial contracts. It can be used at any time and once adjudication has been required, the adjudicator must adjudicate the dispute in the period of impending 28 days and the major final decisions of the adjudicator will be accepted in practice; hence it is a continent and quick method, which do not need lawyers. Thus, comparing with mediation, adjudication is still a fast, cheap, informal, and confidentiality method. However, because of the schedule and settlement will be decided by an adjudicator, parties will lose their control of time and consequence.

    Thirdly, arbitration is a formal procedure which can bind the parties of the project. It is an ADR of litigation and used to resolve disputes with the law outside the courts. Because of this procedure is a formal process, an arbitrator is independent and impartial and is selected by the parties or on their behalf on the bases of their arbitral/technical expertise, reputation and experience in the field of activity from which the dispute stems (Fenn, 2012, p79). Comparing with mediation and adjudication, arbitration has six types of features: (1) the privacy of the parties of arbitration may not be protected; (2) inadequate flexibility. The arrangement almost could not be changed; (3) arbitrator must be an expert; (4) high cost. The cost of arbitration is more than other techniques; (5) the parties will be bound by the final settlement; (6) the decision of the arbitrator will be enforced by courthouses.

    Finally, litigation is a formal process which is awarded inside of a courthouse. All of the procedures in the processes of litigation must base on applicable civil or commercial laws and the final award will be decided by a judge. In litigation, all of speed, flexibility, cost, and party choice are contingent due to the fact it is depending on different laws, and once these laws have been changed, these factors also will be transformed.

    4 Conclusion

    Overall, conflict on a commercial project is inevitable due to the fact that not only social conflict always exists in human society, but also commercial conflict is an elemental component of business. On contrary,

dispute is the activity which should spare no effort to be avoided in a commercial project because it could

lead to some serious damages of a project. Furthermore, some dispute resolution techniques have been

illustrated in this paper and four main dispute resolution techniques also have been compared and contrasted.

    List of References

Bacal, R. (1999). Performance Management. New York, US: McGraw-Hill.

Chan, E. and Suen, H. (2005). Dispute resolution management for international construction projects in

    China. Management Decision, Vol. 43(4), pp. 589-602.

Costintino, C.A. and Merchant, C.S. (1996). Designing Conflict Management Systems: A Guide to Creating

    Productive and Healthy Organizations. San Francisco, US: Jossey-Bass

De Bono, E. (1985). Conflicts: A Better Way to Resolve Them. London, UK: Harrap.

Fenn, P. (2012). Workbook for MACE 60062. University of Manchester.

    Fenn, P. and Gameson, R. (ed.) (1992). Construction Conflict Management and Resolution. London, UK: E & F N Spon.

    Fisher, R., Ury, W. and Patton, B. (1991). Getting to yes: Negotiating an agreement without giving in. nd2 edition, London: Century Business.

    Follett, M. P. (1925). Constructive Conflict. In Fox, E., M. and Urwick , L., (ed.) Dynamic Administration: The Collected Papers of Mary Parker Follett, pp. 1-20. London, UK: Pitman.

    ndGumplowicz, L. (1884). The Outlines of Sociology. 2 edition, Kitchener, Canada: Batoche Books.

    Marx, K. (1859). A Contribution to the Critique of Political Economy. Available: http://www.marxists.org/archive/marx/works/1859/critique-pol-economy/preface.htm

    Marx, K. and Engels, F. (1848). Manifesto of the Communist Party. Available: http://www.marxists.org/archive/marx/works/download/pdf/Manifesto.pdf

    ndMills, W., C. (1959). The Sociological Imagination. 2 edition, New York, US: Oxford University Press.

    Yarn, H. D. et al. (1999). "Conflict" in Dictionary of Conflict Resolution. San Francisco, US: Jossey-Bass.

    Zhao, J., J.(2000). The Chinese Approach to International Business Negotiation. The Journal of Business Communication, Vol 37(3), pp. 209-236.

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