CEOs, regulators, academics and consultants have all recently converged with remarkable consistency on a simple fact: how employees behave and interact with each other plays a determining role in the fate of a company, from the risks it takes to the revenues it makes.

From the sweeping policies codified in employee handbooks to specific guidelines for employees in various roles, behaviour is key to an organisation’s success – or failure. Two areas of behaviour that many struggle with – in both commercial and non-profit domains – are conflict and challenge.

Conflict

In a world of limited resources (whether in terms of money, staffing levels or time) and more demand than supply, conflict is inevitable. In fact, conflict can be an effective “clearing mechanism” for settling competing demands.

In addition, at a time when new technologies are causing disruptive changes to the way services are provided, it is natural for knowledge workers to carry differing perspectives. These differences may give rise to “good-faith conflict”, where various opinions are respected.

However, in large, complex organisations, where the end result of individual work may not be directly visible, it is easy to fall into what Sigmund Freud called “the narcissism of small differences” – where political disagreements are strongest when the stakes involved are smallest.

When it comes to managing workplace conflicts, three rules are sacrosanct:

1. Conflict must be issue based and not personality based. The fact that you disagree with me does not mean that I should question your intent or your integrity.

2. The fact that you disagree with me on one topic does not mean that I should disagree with you on another topic, just to retaliate. Issues should be compartmentalised with no spillover.

3. Once there is closure on a topic – irrespective of whether the outcome goes in my favour or not – I should not drag it along ad infinitum.

Challenge

Do we challenge ourselves enough? Do we spend enough time considering alternatives, suspending judgement while we do so? Do we reevaluate our decisions when facts change, or do we defend them with all our lives?

Beyond ourselves, we are of course entitled to challenge one another in a constructive way. We don’t have to agree with every decision, but in most cases, we are entitled to an explanation when things don’t go our way. In challenging decisions or colleagues, it’s important to get the right tone:

1. No grandstanding or showmanship. A challenge does not have to be at the expense of courtesy.

2. Remember that a “constructive” challenge is one that seeks to reach a solution. A “how I would do it differently” approach is better than lobbing a grenade for the sake of it. As the American businessman Ross Perot is credited with saying: “The activist is not the man who says the river is dirty. The activist is the man who helps clean up the river.”

It is also important to receive a challenge in the right spirit:

1. No foot-dragging or “filibustering” (as they say in the US Congress), hoping that the question will simply go away.

2. It’s incumbent on the senior professional to foster relationships where challenges are professionally accepted and not seen as a sign of disloyalty.

3. Not only should we tolerate challenges, we should actively seek out challenges to our beliefs and positions. Similar to diversity, this can contribute to the resilience of any workplace and boost the organisation’s performance.

Making the most of employees’ potential is a continual quest. However, for the modern corporation to evolve to the next stage of effectiveness – especially with Generation Y making up a growing proportion of the employee base – behaviour needs to be an explicit area of focus.

Lutfey Siddiqi is adjunct professor at the Risk Management Institute, National University of Singapore and a managing director at UBS Investment bank. He is also a World Economic Forum Young Global Leader.

This article was first published by the World Economic Forum.