A conflict of interest is when an individual has competing interests or loyalties, often between professional and personal affairs. This could two relationships that might compete for a person's loyalties – this could be a conflict between loyalty to an employer and loyalty to a family member. The conflict of interest causes an employee to experience a struggle between diverging interests, points of view, or allegiance.
Conflicts of interest can arise at any time for anyone, as a result of personal interests that are at odds with their business. As a result, everyone needs to remain alert at this possibility, and know how to react when they do arise.
It is important to deal with conflicts of interest efficiently to prevent legal problems and stop accusations of biased decision-making – both issues that can damage the reputation of your business.
There are different types of conflicts of interests:
- Part-time jobs – If an individual works for more than one business, they could have a conflict of interest because they're trying to support two companies at the same time
- Business resources – Using business resources, facilities, or equipment, for personal gain is a conflict of interest
- Gifts – If you receive gifts or personal discounts from customers, competitors, or suppliers, it can become a conflict of interest because it could sway your professional decision
- Workforce – Hiring, promoting and supervising friends and family results in a conflict of interest because favouritism can quickly occur
- Personal relationships – Striking up a relationship with someone at work should be avoided as this can cause a loss of professionalism
Steps to follow
The individual with the conflict of interest should be the one to disclose it to the relevant people in the business, but this isn't always the case, and this is when people can get in trouble. This is why others should be keeping an eye out for conflicts of interests occurring.
It is better to be too open if anything when deciding if something should be disclosed. More often than not, situations are not clear-cut. If an individual is uncertain about whether or not something constitutes a conflict of interest, it is safer and more transparent to disclose the situation anyway. The matter is then out in the open, and others can be the judge of the situation, and decide whether the situation is serious enough to warrant any further action.
Time is important too, the matter should be flagged and discussed with the relevant person as soon as the conflict of interest is identified. In most cases, the relevant person will be superior to them in the workplace, such as their manager.
Once the conflict has been declared, the right steps need to be taken to remove or mitigate the situation.
Conflict of interest policy
Having a good policy in place allows for employees to understanding where the business stands on conflicts of interests in the first place.
- Who - Your conflict of interest policy must be specific to the individuals it applies to. You can do this by listing every category of individuals that are included in the policy – employees, management and contractors.
- Examples - Specify what constitutes as a conflict of interest by listing different situations that count as a conflict of interest. The conflict of interest examples should then be followed by an explanation as to why it is classed as a conflict of interest, and why that is inappropriate. As well as providing detailed examples, stress that this is just some examples of cases that could arise, the spirit of the policy will be followed if a conflict of interest arises that is not listed.
- Disclosure - Your policy should tell people how they can disclose a conflict of interest. This could be a written form, an online tool, or a good old-fashioned face-to-face meeting.
- Update - Keep the policy up to date to reflect changes in your company's position. Moreover, by maintaining a relevant and fresh policy, it doesn't get forgotten and neglected.
- Apply – Always apply the policy whenever there is suspicion of conflict. Using the policy on all situations, no matter how big or small, means that it grows in authority. As a result, employees will see that you don't turn a blind eye to anything and could prevent such behaviour in the future too.
- Training – Put your policy into practice with training too, this increases the understanding that staff have and makes the process all the more interactive and engaging, hopefully with results that reduce the chances of a conflict occurring at all.