Inside and outside stakeholders, such as employees, management, and shareholders, however, competes over their share of the rewards and resources that the organization generates. To grow, change, and survive, an organization must manage both cooperation and competition among stakeholders (Gasparino & Raghavan, 2001; March, 1962). Organizational conflict is the clash that occurs when the goal-directed behavior of one group blocks or thwarts the goals of another.
Conflict can be beneficial because it can overcome organizational inertia and lead to organizational learning and change (Coser, 1956; Robbins, 1974). When conflict within an organization or conflict between an organization and elements in its environment arises, the organization and its managers must reevaluate their view of the world. Conflict between different managers or between different stakeholder groups can improve decision-making and organizational learning by revealing new ways of looking at a problem or the false or erroneous assumptions that distort decision-making. For example, conflict at AT&T between the board of directors and top managers about the slow pace at which top managers were restructuring the company caused a radical change in managerial attitudes (Hymowitz, 2001; Bernstein et al, 2000). A new top-management team was appointed to increase the pace of change and to overcome AT&T's conservative approach. Similarly, conflict between divisional managers at IBM resulted in a major change in organizational focus, from a purely mainframe focus to a more consulting-oriented focus (Nugent, 2002).
Beyond a certain point, however, conflict stops being a force for good and becomes a cause of organizational decline. Innovation is, of course, more or less impossible in such a setting. An organization in trouble spends a lot of time making decisions-time that it cannot afford because it needs to adapt quickly to turn itself around. Thus, although some conflict can jolt an organization out of inertia, too much conflict can cause organizational inertia: As different groups fight for their own positions and interests, they fail to arrive at consensus, and the organization drifts along; failure to change makes the organization go from bad to worse (Amason, 1996).
At first, many organization theorists regarded conflict as wholly dysfunctional because it was believed to be the antithesis of cooperation. It was generally interpreted as a sign of a defective or an incomplete social structure. Therefore, early conflict theorists proposed that the appropriate response was the creation of structural mechanisms for dealing with issues that generate conflict. Committees, task forces, liaison roles, and many other forms of coordination were recommended for this purpose (Galbraith, 1977).
The second phase of theorizing about organizational conflict developed around American organization theorist Louis Pondy's observation that, although conflict may be unpleasant, it is an inevitable part of organizing (1967). In Pondy's view conflict may still be regarded as dysfunctional, however, as a natural condition, conflict is unavoidable and should be accepted. This phase of study led to theoretical interest in the sources of conflict, and a search for understanding of its fundamental conditions. The natural view of conflict helped managers confront conflicts they could not alter