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Better Ways to Handle Business Conflict

Instead of litigation, dispute resolution expert L. Randolph Lowry urges entrepreneurs to manage conflict themselves or take advantage of mediation

Conflict between entrepreneurs and their partners, suppliers, employees, and customers hampers operations and often contributes to business failures, says L. Randolph Lowry, president of Lipscomb University in Nashville. He encourages business owners and managers to learn and use conflict management techniques and low-cost or free legal mediation. Lowry spoke recently to Smart Answers columnist Karen E. Klein. Edited excerpts of their conversation follow. Karen E. Klein: You have been at the forefront of the dispute resolution movement in the U.S. What was the reaction when you founded the Straus Institute for Dispute Resolution at Pepperdine University in 1986? L. Randolph Lowry: At that time, no one had heard of it. Now every law school teaches mediation, and there are about 400 nonprofit neighborhood justice centers or community mediation centers around the country. Many small business owners can also go to small claims court and get mediation to help settle their disputes. And in some parts of the country, the Better Business Bureau offers mediation services. Why is dispute resolution, or conflict management, so important? Dispute resolution is the legal term for resolving a tangible dispute. Conflict management is the business term. I prefer it because it implies that conflicts are normal, they happen all the time, and we have to manage them. For a small business, litigation can be devastating. Take a small business person who has a $20,000 dispute with a supplier. Where do they go? In Los Angeles, an attorney can't make any money even on a $50,000 case. It turns out that only one of every 10 legal disputes ever involves a lawyer. Of those, only half will go to court. And only 3 percent to 4 percent of those in court ever go to trial. So we find ways to resolve multiple disputes by daily interaction, as opposed to using the legal system. Can you lay out some principles for good conflict management? It's wise to start with a time when there isn't conflict and think about how your organization is going to deal with conflict when it arises. Any good business, even a very small business, can set up processes they're going to use with customers who are dissatisfied or employees who think they weren't treated fairly. Why is the process so important? In many cases, having some sense of process is more important to resolving the conflict than the substantive outcome. In our American system, we each take a position. Then we try to fight it out. But our underlying interests tend to be fairly abstract. In conflict management, we have to meet the underlying interests of all the parties. The reason mediation is so successful is because it takes the legal conflict and goes to motivations. Once you get there, most of the time people can find a solution, especially in a small business where litigation costs will be devastating. So you want to get past the entrenched positions and decipher the underlying motivations of each side? Yes. And when we do that, most of the time we can find something more creative that helps us find a solution. People need to be satisfied with the outcome of a mediation, and they've got to feel like the process had integrity, and you've got to feel like you were treated O.K. as a person. People will take less in terms of the outcome if you treated them well with a process that had integrity. Can you give an example? I was in Dallas one time and had an awful experience with a National car rental. As the day got hotter, the car smelled worse and worse. I had to keep it two days, and by the end, even I smelled awful. When I turned the car in on a Friday night, a machine asked me a series of questions, including one that said, "Were you satisfied with your rental?" I pressed "no," and nothing happened. I fumed all weekend and decided that no one from my university would ever rent from National again. On Monday, 10 minutes after I got to work, I got a phone call. It was an executive from National asking what had been wrong with my rental and how they could fix it. Wow! There was no way they could fix the product or take care of my two days of smelling. But they called me and they treated me very well as a person. Years later, I still rent from National anywhere I go in the country. How can you apply that lesson to a small business? For a small business person, customers are even more valuable than they are to big corporations. You have to resolve things for them. You might have to invest a little bit, but if you can turn that person who's upset or angry, think about what it will mean for your company. Good conflict management really comes from good customer service. How do you deal with the emotions that arise during conflicts? A good process will manage those emotions. Once I worked with a Southern California law firm that had six partners who had lots of trouble getting along. We put in some ground rules for them. First, talk to the person you have a conflict with, rather than talking with someone else who agrees with you. If the first talk did not resolve the issue, you were to take somebody else with you and talk to the person again. The third step was to share the conflict with all the partners at the Friday meeting. Because there's a process, part of the problem goes away. No one wanted to have to bring up the problem at the partners' meeting, so they'd get things resolved between them. So many conflicts stem from ego clashes or simply disliking someone you work with. That's true. What we try to do is separate the people from the problem. So instead of focusing on the person you're irritated with, focus on making progress on the problem. When I mediate, people start off hating each other in the morning. They may still hate each other in the afternoon, but they have an agreement that allows them to move on. There's a difference between resolution and reconciliation. My heart always wants to get to reconciliation, but it doesn't always happen. What does happen, especially in a small business, is that we're all charged with having an organization that has sufficient peace and harmony so we can get something done. That's a powerful motivator.

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