MEDIATION: AN EXECUTIVE'S GUIDE TO MANAGING CONFLICT
(Article Courtesy of the San Diego Daily Transcript Law Journal,
"An Executive's Guide to Managing Conflict",
Volume 1, No. 2, May 11, 1998)
Business executives are spending increasing amounts of their time and money resolving legal disputes. When executives want to be concentrating on sales and marketing, new technologies, financial and strategic planning, they are instead dealing with attorneys and paying legal fees to solve legal problems. Although solving legal disputes does not make money, leaving them unmanaged causes costs to skyrocket, negatively impacting the "bottom line" and leaving businesses vulnerable to litigation that may last for years. Additionally, if disputes are not resolved quickly, the parties may become entrenched in their positions and the costs may escalate to the point where a business oriented solution is no longer attainable. Unless conflict can be effectively managed to obtain an early and practical solution, businesses may find themselves in the quagmire of litigation and unmanageable legal budgets.
Executives are increasingly turning to mediation as a technique for managing conflict early and in a cost-effective manner. Mediation is a dispute resolution process in which a neutral mediator assists the parties in reaching their own settlement of a dispute. The process is voluntary and no binding decision will be made unless the parties themselves agree to it. Unlike court where a judge or jury will decide for the parties, in mediation the parties make their own decisions. In a sense, mediation can best be thought of as a "supercharged negotiation."
The mediation process itself generally consists of a private meeting between the parties, attorneys, insurance representatives and the mediator to discuss the dispute and explore options for settlement. The process can be initiated at any point during the life of the dispute. The mediator controls the proceeding by establishing a structure in which the parties can express their views and explore options for settlement while avoiding many of the obstacles present in direct negotiations. Most mediations are completed in a day or less at a fraction of the cost of litigated matters. When a skilled mediator is used, the negotiation will result in a settlement 80% of the time. The obvious benefit is that it dramatically reduces the costs of attorneys' fees, time-consuming litigation evaporates, and executives can again concentrate on meeting business goals and increasing the bottom line.
If executives are not aware of mediation as an alternative to litigation, they may ignore this cost effective manner of solving problems early. It is important to recognize the types of disputes that are appropriate for mediation and to think of mediation up front as a mechanism for solving these disputes. Mediation is quite effective in resolving employer-employee disputes, personal injury claims, construction and leasing matters, partnership and shareholder controversies, and contract disputes of all types. Many companies have adopted a policy requiring use of mediation wherever possible, slashing legal budgets by as much as two-thirds.
Business executives often turn disputes over to their insurance carriers, believing that costly business insurance should protect them from annoying and potentially damaging lawsuits. While this may avoid the immediate cost of resolving the dispute, and they can forget the matter for the time being, the long range costs associated with litigation continue to affect the bottom line. More companies are recognizing the dramatic impact of the "soft costs" of unresolved conflict and, particularly, of lawsuits. These soft costs include the use of the company's employees and other resources to help in the dispute resolution process. Because executives and employees are often required to spend days at a time testifying at depositions, assembling and reviewing internal documents, and meeting with attorneys to gather facts, plan strategy and review opposition papers, the result is that a substantial cost to business is incurred over and above the hard dollar cost of paying lawyers and other direct litigation-related expenses. Therefore, even when an insurance company is defending a business, the cost to that business is substantial.
You may be thinking that if you choose mediation you forego your right to be represented by legal counsel. That is not true. Not only will you have your choice of attorneys, but you need to understand that more and more attorneys are embracing mediation as the best way to satisfy client needs. In reality, mediation is a "win-win" situation for both the attorneys and the clients.
So here is the new "bottom line" for conflict resolution: contact an experienced mediator whenever a dispute is brought to the attention of business executives and company attorneys. Mediators will often provide valuable ideas and assistance in persuading the other party to agree to use mediation. Sometimes a phone call to explain the process will convince the other party to participate. After all, everyone's legal dollars and time may be better spent on a day of negotiation rather than months, perhaps years, of protracted litigation. Of course, sometimes there are valid internal reasons a company determines that litigation is the best course of action. But when that is not the decision, the executive's first and strongest tool for managing conflict should be consultation concerning the use of mediation.
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