Conflict Management and Dispute Resolution

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Conflict Management and Dispute Resolution Chapter Outline Conciliation 395 Mediation 396 Adjudication 396 Arbitration 397 Litigation 397

Conflict management covers a wide range of areas of disagreement from smoothing out a simple difference of opinion to settling a major industrial dispute. Projects, as life in general, tend to have conflicts. Wherever there are a wide variety of individuals with different aspirations, attitudes, views, and opinions there is a possibility that what may start out as a misunderstanding escalates into a conflict. It is one of the functions of a project manager to sense where such a conflict may occur and, once it has developed, to resolve it as early as possible to prevent a full-blown confrontation that may end in a strike, mass resignations, or a complete stoppage of operations. Conflicts can be caused by differences in opinions, cultural background or customs, project objectives, political aspirations, or personal attitudes. Other factors that tend to cause conflicts are poor communications, weak management, competition for available resources, unclear objectives, and arguments over methods and procedures. Conflict between organizations can often be traced back to loose contractual arrangements, sloppy or ambiguous documentation, and non-confirmation in writing of statements or instructions. Thomas and Kilman published a study on conflict management and suggested five techniques that can be employed for resolving conflicts. These are: • Forcing • Confronting the problem • Compromising • Smoothing • Withdrawing Forcing involves one party using its authority acquired by virtue of position in the organization, rank, or technical knowledge to force through its point of view. While such a situation is Project Management, Planning, and Control. http://dx.doi.org/10.1016/B978-0-08-098324-0.00042-1 Copyright © 2014 Albert Lester. Published by Elsevier Ltd. All rights reserved.

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394  Chapter 42 not uncommon in the armed forces where it is backed up by strict discipline, it should only be used in a project environment where there is a health and safety issue or in an emergency posing a risk of serious physical damage. In most other situations where forcing has been used to solve a conflict, one party almost certainly feels aggrieved with a consequent adverse effect on morale and future co-operation. Confronting the problem is, by contrast, a more positive method. In this situation both parties will try to examine what the actual issue is and will make a concerted effort to resolve it by reasoning and showing mutual respect for the other’s point of view. The most likely situation where this method will succeed is where both parties realize that failure to agree will be disastrous for everybody and where success will enhance both their positions, especially when it is understood that future co-operation is vital for the success of the project. Often there are useful by-products such as innovative solutions or a better understanding of the wider picture. Compromising is probably the most common method to resolve disputes, but generally both parties have to give up something or part with something, whether it is a point of principle, a financial claim, pension rights, or an improvement in conditions. This means that the settlement may only be temporary and the dispute may well flare up again when one of the parties believes itself to be in a better bargaining position. No one really wins, yet both lose something and it may well be the subject of regret later when the effects of the compromise become apparent. Often commercial or time (programme) pressures make it necessary to reach a quick compromise solution, which means that if these pressures had not existed a more rational discussion could have produced a more lasting result. Smoothing is basically one party acceding to the other party’s demands because a more robust stance would not be in their best interest. This could occur where one party has more authority or power (financial, political, or organizational) or where the arguments put forward are more cogent. Smoothing does not mean complete surrender as it may just not be opportune or politically wise at this particular time to be more assertive. Withdrawing in effect means avoiding the issue or ignoring it. While this may appear to be a sign of weakness, there may be good reasons for taking this stance. One may be aware that the dispute will blow over when the other party’s anger has cooled down or when a confrontation is likely to inflame the situation even more. One may also feel that the possibility of winning the argument is small, so that by making what may be considered a small concession, good relations are maintained. In practice this procedure is only suitable for minor issues since by ignoring important ones, the problem is only shelved and will have to be resolved at a later date. If the issue is a major one and unlikely to be resolved by the other four options, it may still be correct for one or both parties to withdraw and agree to take the dispute to adjudication, arbitration, or litigation as described later.

Conflict Management and Dispute Resolution  395 Whatever techniques are adopted in resolving disputes, the personality of the project manager or facilitator plays a major role. Patience, tact, politeness, and cool-headedness are essential irrespective of the strength or weakness of the technical case. Any agreement or decision made by a human being is to a large extent subjective, and human attributes (or even failings) such as honour, pride, status, or face-saving must be taken into account. It is good politics to allow the losing party to keep their self-respect and self-esteem. Team members may or may not like each other, but any such feelings must not be allowed to detract from the professionalism required to do their job. In general, confrontation is preferable to withdrawal, but to follow such a course, project managers should practise the following: • Be a role model and set an example to the team members in showing empathy with the conflicting parties. • Keep an open door policy and encourage early discussion before it festers into a more serious issue. • Hear people out and allow them to open up before making comments. • Look for a hidden agenda and try to find out what is really going on as the conflict may have different (very often personal) roots. Where a dispute involves organizations outside the project team as with suppliers, subcontractors, or labour unions, professional specialized assistance is essential in the form of commercial lawyers or industrial (labour) relations officers. Where the conflict is between two organizations and no agreement can be reached by either discussions or negotiations between the parties, it may be necessary to resort to one of the following five established methods of dispute resolution available to all parties to a contract. These, roughly in order of cost and speed, are: • Conciliation • Mediation • Adjudication • Arbitration • Litigation

Conciliation The main purpose of conciliation, which is not used very often in commercial disputes, is to establish communications between the parties so that negotiations can be resumed. Conciliators should not try to apportion blame, but to focus on the common interests of the parties and the systemic reasons for the breakdown of relationships.

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Mediation In mediation, the parties in dispute contact and engage a third party either directly or via the mediation service of one of the established professional institutions. Although the parties retain control over the final outcome, which is not enforceable, the mediator, who is impartial and often experienced in such disputes, has control over the proceedings and pace of the mediation process. The mediator must on no account show him/herself to be judgemental or give advice or opinions, even if requested to do so. His or her main function is to clarify and explore all the common interests and issues as well as possible options, which may lead to a mutually beneficial and acceptable settlement. Once an agreement has been reached, it must be recorded in writing. If mediation is started early enough before the differences become entrenched, the possibility of an amicable settlement is high. Provided legal advisers are not employed, the only costs are the fees of the mediator, which makes the procedure much cheaper and certainly quicker than any of the three more formal and legally binding dispute resolution procedures described below.

Adjudication Although adjudication has always been an option in resolving disputes, before 1996 it required the agreement of both parties. This also meant that both parties had to agree about who would be the adjudicator. As this in itself was often a source of disagreement, it was not a common method of dispute resolution until the 1996 Construction Act, more accurately called Housing Grants, Construction and Regeneration Act 1996, was passed. This Act allowed one party to apply to one of a number of registered institutions called the Adjudicator Nominating Body (ANB) to appoint an independent adjudicator. The other party is then obliged by law to accept both the adjudication process and the nominated adjudicator. Once appointed, the adjudicator invites the instigating party, called the referring party, to submit details of the dispute, called the referral, and the opposing side, called the responding party, to answer with a response. The adjudicator then reviews these submissions together with any other papers or evidence he may request, and unless extended by special circumstances, is obliged to give a ruling (called a decision) within 28 days. Although in the early days of adjudication, the adjudicator had to be requested to give reasons for his decision, in most cases giving reasons is now the norm. One of the main advantages of adjudication is that the dispute can be resolved while the contract is still running and any financial awards by the adjudicator must be paid within the stipulated period as decided by the adjudicator. Both parties are responsible for their own costs and this, together with the time limit of the process, makes adjudication relatively

Conflict Management and Dispute Resolution  397 inexpensive. However, the losing party can resort to arbitration (where there is an arbitration clause in the contract) or litigation to reverse the decision after the contract has been completed. In case of non-payment of the money awarded to it, the winning party can ask the courts for enforcement.

Arbitration Many contracts contain an arbitration clause, which, in the case of a dispute, requires the parties to either agree to the appointment of an arbitrator, or ask one of the recognized chartered institutions to appoint an independent arbitrator. The arbitrator asks for submissions from both parties (preferably in writing), and has the power to open up all the books and documents relating to the dispute, call witnesses, and seek expert opinions. In most cases both sides will be assisted by legal and technical advisers, which could generate considerable costs. Unlike an adjudicator, the arbitrator has the right to award all or part of the costs of the case against one or both of the parties as he sees fit. Generally there is a three-month time limit, but this can be extended by the arbitrator if necessary. In some cases, especially in overseas contracts, it may be necessary to appoint two arbitrators. If these cannot agree on an award, the matter has to be resolved by a third person called an umpire. In a technical dispute, the arbitrator should ideally be an expert in that field, but if the dispute is of a non-technical nature, it may in the end be better to have the matter resolved by litigation, i.e., in the courts. This, however, means that the privacy afforded by arbitration will be lost. Arbitration was designed to be speedier and cheaper than court proceedings, but nowadays both parties appoint a galaxy of legal advisers and expert witnesses, which may make arbitration as, if not more, costly than court action. As with adjudication, it is now necessary for the arbitrator to give reasons with his decision.

Litigation Any dispute can be taken to court whether it is technical, contractual, financial, legal, environmental, personal, etc., provided that there is an applicable basis for legal action. A court procedure, which is more formal, and, being in open court, lacks the privacy of arbitration, involves the employment of solicitors and barristers who present the case to the judge. In addition there will be expert witnesses recruited by both parties whose evidence may be given under oath and be subject to cross-examination. If such proceedings are not settled before they go to trial, they tend to be very expensive both in terms of the award and subsequent damages, if the case is lost, but also in costs, i.e., the court fees and especially the legal fees

398  Chapter 42 incurred by both sets of legal teams, which can soon escalate if the case takes many weeks or months. Further the rules of what evidence can be presented and how it is presented are not as flexible in court as they are in arbitration. Finally, the court timetable and the need to comply with certain pre-trial procedures may mean it can take some months or even years for a litigation case to get to trial. For these reasons, every effort should be made to settle technical and contractual disputes by one of the other two methods of dispute resolution. In fact where an arbitration clause is part of the contract, a court will require the arbitration procedure to be followed before permitting it to be heard by a judge. The benefits of litigation are that the services of the judge are free and the ruling could be of public interest thus acting as an important precedent for future cases. Furthermore, although there is certainty of enforcement of the award, there is a right of appeal to a higher court. Needless to say, a well-managed project, benefiting from the use of tight but fair and equitable contract documents and change procedures, should never require the project manager to invoke any of these stages. Most arguments and disagreements should be resolved as early as possible by discussions and negotiations before the dispute festers and anger turns into hostility.