To start a new business with a team has become the main form of building startups. It is expected that members of the founding team should have the same goal and uphold the same kind of ethical principles, and they should look after each other and render help when needed. However, we also witnessed many dramas of internal conflicts and power struggles. The legendary Steve Jobs was once fired by Apple due to his conflict with partner Mark Kula. The power struggle triggered by the divorce of LI Guoqing and Yu Yu, co-founders of Dangdang.com, became the headlines of mainstream media in 2020. The legal department of Dangdang.com issued an official notice stating that the divorce will not affect the operation and management structure of the company, yet such an event will inevitably induce people to think about how the founding CEO should handle the fight for a dominant position in the founding team to ensure the integrity of the company’s reputation and performance.

Conventional Chinese wisdom teaches us that a leader should have an inclusive mindset that is similar to “the ocean taking in hundreds of rivers to achieve its greatness” or “the prime minister’s broad-mindedness allows a boat to sail in his belly”. The inclusiveness is usually regarded as personal merit, while the relationship between the inclusiveness of a leader and team conflict or team efficiency has never been closely tied together. This article examines how the inclusiveness of the founding CEO could resolve the conflict among the founding team members. The research starts with analyzing the interpersonal emotions within an organization and team goals coordination, and ends with suggestions for achieving effective management of a diverse team.

Status Conflict – Inherent Problem with Startup Teams

Conflict management is unavoidable for all teams. The common forms of conflict are task conflict, relationship conflict, and status conflict among which status conflict is probably the most typical type of conflicts inherent in any startup team. Chinese society embraced a social status structure that accepts a huge distance between different levels of social stance. In contrast to Western society’s emphasis on social equality, Oriental societies such as China attaches greater importance to social stance and ranking. To grab the real and symbolic meaning that accompanied social stance, status conflict is more prominent in Chinese startup teams.

Status conflict is defined as the conflicts derived from individuals’ struggle to maintain or raise their relative position within an organization. In a defined organization, higher rank means more influence, more resources, and more obedience and respect from subordinates, and it indicates more discourse power and control.

Status conflict is common among startup teams. The conflict is induced by social environment and cultural atmosphere, but it is more likely to be incubated by the team’s inherent characteristics:

(1) Members of the startup team has a high dependency on each other, and they share the same interest.

Founding members’ personal interests are closely tied up with that of the startup, which induces a strong sense of ownership within each member’s mind. Every founding member wishes to expand his/her clout in the team and then in the whole company. They expect to build up higher respect, garner more discourse power and control. Such expectations implicitly increased the potential of status conflict.

(2) Startup teams show strong characteristics of heterogeneity and diversity.

Members of the startup team usually have unique resources. They each possess knowledge and skills that are better than other members. At the same time, the startup members are usually people with strong capabilities and great courage, and they are equipped with a strong personality, self-confidence, and ego. Members of the team may be “intolerant to others”, and prone to compare one’s advantage with the other’s shortcomings. They are sensitive to the change of status of themselves and the others, and therefore more prone to induce conflict.

(3) Position, power, and status of the founding members are usually fixed at the very beginning.

Unlike regular senior management teams and working teams, the position, power, and status of the founding team members are usually fixed at the founding of the company. It is based on how much monetary investment, or how much personal contribution one can make to the startup. With the growth of the company and the change of the external environment, the company may face more questions and need more solutions, and there will be questioning or challenge to the original designation of power and position. There could be a requirement of redistribution of positions and power arising from the startup team, and this could further lead to status conflict.

Research shows that status conflict could lead the members to take a defensive and competitive position against each other; it could result in low-efficiency internal communication and sharing, low trust and cohesion amongst the team, and internal friction. Status conflict is a zero-sum game; one party’s status rise will inevitably lead to the fall of another party. The two parties involved in a conflict will seek an alliance with other members within the team or the company; potentially extend the scope of the conflict. When such a fight broke out in a high diversity team, the fierceness of the conflict could be further exacerbated by the difference between the team members’ personalities and ways of doing things. It could lead to task conflict and relationship conflict within a team, causing the downgrade of business capability, reputation damage, and negative impact on overall organizational performance.

The Inclusiveness of the CEO – the Pressure Release Valve for Status Conflict

The status of team members is largely determined by the leader of the team (especially the CEO), and status conflict within the startup team is closely related to the diversity of team members. Diversity management has become a priority for the CEO of the startup team. Diversity management dictates that the CEO must retain the brainstorms and liveliness of a diverse group of people, and reduce impact from any potential conflict. Under such circumstances, the inclusiveness of the leader has become the focal point for diversity management.

Inclusive thinking was first introduced in the field of education. It was advocated that people of different social status, race, and gender should be given fair treatment in an educational environment. Nembhard and Edmondson first raised the idea of “inclusive leadership” in their 2006 research, officially making inclusive leadership a theme for organizational management research.

The inclusiveness of the CEO is gauged against how much a CEO can encourage diverse individuals to participate in a team effort, to complete team tasks, and to do their best to contribute. The inclusiveness of the CEO also emphasizes bilateral relations, emphasizes the involvement of all interested parties in the governing and management of the organization. It is considered collective leadership progress with equality at its center. Inclusiveness means equality, fairness, and participation, it helps the members of an organization to gain fair chances at decision-making and to reach a certain level of status, and it encourages people to devote to their work. In an organization where diverse cultures co-exist, the inclusive leaders attend to the needs from different subordinates, listen to the views of the subordinates, acknowledge the contributions of the subordinates, enable the subordinates to realize their full potential, and eventually driving the continued growth of the whole organization. Empirical studies have found that the inclusiveness of the leaders generates a positive effect on the satisfactory levels, organizational commitment, and work performance of the staff.

Then, how could the inclusiveness of the CEO resolve status conflict within the startup team?

(1) Inclusiveness can weaken team members’ perception of identity threat.

Previous research has identified identity threat being one of the important driving forces for individuals to take part in the fight for resources. People challenge the status of the others in an attempt to occupy more resources and to reconfirm their own importance within the organization. In more colloquial terms, everyone needs to prove himself/herself, to “refresh the idea of their own existence”. An inclusive CEO respects the diversity of his/her team, by allowing interested parties to involve themselves in organizational management, members of the founding team may acquire discourse power without official designation, and therefore reducing the possibility of status conflict derived from “identity threat”.

(2) Inclusiveness can create a good atmosphere for the organization.

According to previous research, a fight for resources triggered status conflict, but individual features and the team’s interpersonal relationship can also influence it. A harmonious, collaborative, and friendly atmosphere is less likely to see an outburst of status conflict. The inclusive leader can create an inclusive, open, just, and fair work environment by forming mutually respectful, acknowledging, responsive, and answerable relationships with his/her staff. Members of the team may feel happier in such an atmosphere, and it is less likely that they will challenge the status of the others.

(3) Inclusiveness can strengthen team members’ mental security.

People fight for status out of the need to elevate their own position, but also out of the concern that the rise of the others may pose a negative impact on themselves, that is to say, the change of other people’s status may weaken people’s sense of mental security. Previous research revealed that the inclusiveness of the leader is positively linked to the staff’s mental security. An inclusive leader makes his staff believe in his trustworthiness, the staff believes that he/she will not be suppressed even when they are on the lower end of the relationship. They may hear different opinions even if they decide not to act upon them. Such inclusive behavior weakens the mental stress of team members or staff in a working environment, reduces the protective or defensive positions they may adopt, and further lower the competitive mindset for more power or higher status.

Goal Congruence – the Moderator for Status Conflict of the Startup Team

The inclusiveness of the CEO functions through inclusion and respect for diverse group members. It reduces identity threat while maintains mental security to make status conflict subside through a positive emotional experience, and its functions are more restrained on an emotional level. Goal congruence, on the other hand, is to make members of the team realize that their personal goal is highly consistent with that of the company. It is a more direct and effective inhibitor and moderator for status conflict than the emotion factor.

Goal congruence means the degree by which the members of a company acknowledge the overall goals of the company or the degree of consistency between the company’s goal and the individual’s goal. According to conflict management theory, team conflict can be moderated, but the way team members adopt to tackle the conflict is crucial. During a conflict scenario, the team members will gauge if their goal is aligned with that of the opponent, the answer to this question will determine whether to cooperate or to compete with the other side, and it will determine their perception of the nature of the conflict and the specific actions they will take.

A higher degree of goal congruence within a startup team means the overall and essential interests among the individuals are aligned. Under such circumstance, the fight for status and various resources within a team is meant to exert more personal influence on the organization, or to have more contribution in achieving the organizational goal, and it means members of the team would not discard the interests of the team and of the company. Goal congruence and interest alignment push team members to take positive actions to avoid intensifying the conflict, as an attempt to avoid negative impact on reputation and performance. As such, the negative impact of status conflict will be restrained to a low level. The proactive responses to team conflict management driven by goal congruence are termed “the cooperative conflict management approach”.

In contrast, if the goal of team members has already broken apart, then it is most likely the team members will assume a completely different attitude toward conflict. They don’t believe the company’s interest will reflect their personal interests, and even assume a righteous stance when taking over resources for themselves because they think they are rectifying a derailed company, and what they do can put the company back into the right track. Once such a situation becomes reality, the company’s interests will surely be forfeited during the fight for power. Guided by such attitude, mutual understanding and cooperation will be replaced by competition. In contrast to the “cooperative conflict management approach”, the process of team conflict management caused by a recognition of mutual rejection is called the “competitive conflict management approach”.

It is obvious that cooperation driven by goal congruence is better than the competition in resolving team conflict and in achieving effective organization operation.

Suggestions to the Founding CEO

As a typical representative of diversified management, inclusive CEO respects the differences of subordinates, pays attention to and emphasizes the important role of followers in interactive relationships, promotes the organizational identity of team members and subordinates through emotional support, and has management advantages in startup teams with prominent diversity. At the same time, goal congruence within the startup team significantly reduces the negative impact of status conflict on the company. Based on the above conclusions, the following suggestions are put forward for the founding CEO:

(1) The founding CEO must respect the different characteristics of the team and the organization and must raise their level of inclusiveness.

Inclusiveness may be an inherent personality, but inclusiveness is a kind of ability that needs to be exercised and cultivated in management practice, especially in diversified startup teams and start-up enterprises. Specifically, the CEO should: ① realize that diversity is the source of innovation, respect and tolerate the diversity of team members, respect the differences of team members in character, ability, and style, etc.; ② create a fair and just interpersonal atmosphere, so that team members can gain a sense of mental security and identity recognition. ③ encourage team members to actively participate in organizational decision-making to avoid the weakening or loss of “sense of existence” of team members, and ④ affirm and appreciate the contribution of the subordinates in terms of words and deeds. Only by letting team members get emotional support from leaders and feel valued by the organization will it be helpful for them to have a sense of responsibility to contribute to the organization.

(2) The CEO must acknowledge the existence of status conflict within the team and the company and adopt scientific approaches to deal with the conflict. Emotion cohesion and goal congruence are both necessary.

Many leaders may assume an attitude of “avoiding it like a plague” to the conflicts in the team, while they are even more repulsive to the status conflicts of “striving for power and profit”. Status conflict does have a negative impact on the company, but the status conflict within the startup team and the company is inevitable, and the conflict is not irreconcilable. The CEO should face the status conflict of the startup team squarely. In addition to tolerating and respecting team differences, creating a good organizational atmosphere, and reducing the probability of conflict through emotion cohesion, the CEO should also pay attention to the degree of goal congruence of the team and the whole company, strengthen the guidance of common goals to the team and the company, promote employees’ organizational identity recognition with goal congruence, ease status conflicts, thus to improve the efficiency of the team and organization.

Note: This article was adapted from An Analysis of the Relationship between the Inclusiveness of the Founding CEO and the Performance of a Startup Company in an Interpersonal Coordination Perspective by WEI Feng, CAO Xing, and BEI Yulian. The original article was published on the second issue of 2020 in the Industrial Engineering and Management journal.