In business, conflict of interest exists whenever there is a situation where one business investor or business team has an interest that greatly outweighs that of another business team. A conflict of interest rarely happens out of the blue. Sometimes conflicts of interest are the result of a misunderstanding of terms or a clash of egos. Other times, however, a conflict of interest forms because of the particular business structure and the ways in which it was built.
There are several ways that a conflict of interest may occur. A classic conflict of interest is one in which two or more teams have substantial overlapping interests or loyalties. Under these circumstances, one business team has a substantial advantage over the other. In this type of conflict of interest, the conflict between the two teams must be resolved by working through an alternative procedure – one that would ensure a fair outcome for all concerned. Even though the conflict is between competing businesses, the conflict of interest policy of the company must be considered.
There are three types of conflict of interest that arise in organizations: the value conflict, performance conflict, and relationship conflict. The value conflict, also known as performance conflict, occurs when there is a clash between what one business team wants and what another business team expects. Under this situation, the conflict is rooted in the value preferences of individuals within the teams. Performance conflicts often occur during the development of strategic plans, which are designed to satisfy the needs of future customers. Any conflict that arises from this conflict will almost certainly require a review of the plans by higher management.
The second type of conflict of interest is based on the conflict of interest that arises from the existence of a substantial Others’ Power. When one business team has a substantial Others’ Power, the conflict often arises because of the subordinate’s attempt to hold on to its own interests while taking care of the others’ interests. In addition, the existence of a significant Others’ Power can create the potential for a conflict of interest where an individual is trying to protect the interests of the major Others’ Power. In this example, if an individual employee believes that the organization is in poor financial shape because of inaccurate financial data provided to it, that employee may be concerned about eroding his or her position.
The third type of conflict of interest is related to the conflict of interest that arises when employees are trying to work together to perform a difficult or complex task. In many cases, organizations can reduce these conflicts by creating a formal chain of command to define who is meant to receive guidance and approval and who needs to raise concerns. However, in other cases, simple miscommunication can lead to a significant Others’ Power, which can lead to conflict of interest. In these cases, the conflict management process should consider whether training and education are necessary to help workers understand their own and others’ conflict of interest.
All of these three types of conflict are valuable to manage effectively. The first two types of conflict are more easily solved through employee self-monitoring and feedback. On the other hand, task conflict is a more difficult situation to resolve because the source of conflict must be identified and handled. Lastly, relationship conflict is relatively easy to manage as long as good communication channels are in place. However, these three types of conflict are particularly useful in situations where an organization faces a number of different and complex challenges.