The purpose of this article is to examine the sources (causes) of conflict, the effect that conflict has on employees in a medium-sized municipality and the types of conflict styles employees apply in conflict situations. Considering the fact that transformation and affirmative action have taken place at an accelerated rate during the past decade in municipalities, it is assumed that interpersonal conflict in these institutions could be the result of unique causes and that it affects employees in different ways. Consequently various styles are used to manage conflict. Addressing this problem of conflict dynamics in a new environment, the purpose of this article is to examine what the causes (sources) of interpersonal conflict constitute, what effect it has on employees, and what conflict-handling styles are applied in conflict situations. The findings of this exploratory study revealed that affirmative action played the most importan