Problem
Solving in Challenging Times
Charlie
Woods and
What do you
do when the financial assumptions on which you've based a development agreement
or contract begin to crumble?
Recently
mediators have been involved in the renegotiation of a commercial deal where,
owing to the economic downturn, the contracting parties found themselves in a
changed situation from that envisaged when the original deal was struck.
Changing land values meant that the pricing on which the deal was based would
not work. The key players could have fought it out through lawyers but, in
reality, the best way forward was to look at things afresh and come up with a
workable solution. Mediation enabled that to be done.
In
Scotland, recent mediations have involved plc’s, SME’s, public sector bodies and
lawyers from all over Scotland – and from London and other parts of England and
from Northern Ireland, the Republic of Ireland, Australia, Denmark, Oregon and
New York. Some of these have involved multi-national and cross border projects,
contracts and disputes, others more local difficulties and conflicts.
Disputes
with partners, customers, suppliers, or within the business can be costly
distractions at the best of times, but in an increasingly challenging economic
environment their consequences can be potentially much more threatening to a
firm. Mediation offers a cost-effective way of resolving conflict or nipping it
in the bud before too much damage is done.
Most
businesses are currently under increasing pressure on a number of fronts -
falling consumer confidence, more aggressive competition to win or maintain
market share, increased costs, fluctuating exchange rates, increased uncertainty
etc. Problems don’t disappear in difficult times; indeed they probably multiply
as everyone is under more pressure and the assumptions under which deals were
done are rendered meaningless.
The
disruption caused by disputes is often overlooked in assessing the costs of
ongoing conflict. Yet, when on average 20% of senior management time is spent on
dispute resolution (with over three-quarters of cases involving the CEO), this
can take the eye off the ball when it can be least afforded. Therefore what is
needed is a way of resolving disputes quickly, cheaply and with greater
certainty and less disruption.
Traditionally,
litigation has been used to deal with disputes and claims. Why are far-sighted
businesses increasingly turning to mediation to address
problems?
The
most obvious reason is cost, with some firms reporting savings of up to 80%. In
total in the
With
the vast majority of mediations producing a satisfactory agreement often in a
day, building on excellent preparation and with the thoughtful guidance of
professional advisers, the mediation process offers a faster option.
As
well as being faster and cheaper, mediation can also provide a better outcome.
The parties in a dispute retain and feel much more in control of the process.
The mediator does not make a decision. Rather, mediation is designed to help the
key players involved find a mutually acceptable solution for themselves in a
confidential, voluntary environment. As a result, any solution will tend to be
‘win-win’ in nature, addressing each party’s underlying business interests
rather than the polarising positions which are often taken in an adversarial
setting, or when under pressure. At the very least mediation gives the
decision-makers the opportunity to make business choices about whether to
prolong the dispute or agree to move on. It is about managing risk.
Mediation
is a creative process that adds value, not a destructive war of attrition in
which there has to be a loser and a winner (often a pyrrhic victory). A
‘win-win’ solution is also much more likely to enable any business relationship
between the parties to continue and develop. This can be particularly important
for two companies relying on each other in a supply chain where both would
benefit from continuing to do business – or where a senior employee is in
conflict with management.
Mediation
has been used across all sectors and types of business. Recent disputes have
included the construction, financial services, agriculture and energy sectors to
name but a few, and have covered major corporations, family businesses,
partnerships, charities and public services. They have ranged from legal
disputes about contracts, services, IP rights, HR and other disputed claims to
differences at management level or at policy level between organisations.
The
benefits of mediation to individual companies can be multiplied across the whole
economy as a whole. Increased productivity is at the heart of better economic
performance. With its focus on achieving better outcomes, more quickly and at
lower cost, mediation can make an important contribution to overall productivity
and economic performance – and to surviving during a serious economic downturn.
There
is scope to use mediation in other spheres. For example the Scottish Government
has recently commissioned the preparation of a guide to using mediation in land
use planning. There are opportunities across the planning system to use
mediation to improve outcomes and speed up the process. These may include
achieving more effective community engagement in development planning and
speeding up appeals. It may be particularly appropriate where there is a greater
focus on investment in pre-application consultation and the use of hearings as
opposed to more formal enquiries.
Tackled
early, through effective mediation, problems can be nipped in the bud before
they become all-consuming. By using their experience of why things go wrong down
the line, mediators can also play a valuable role at initial stages in project
planning, by reverse engineering to help prevent problems from occurring in
joint ventures and other partnerships. In a world where, according to the IBM
Institute for Business Value, ‘perpetual collaboration’ will be the order of the
day, this will become increasingly valuable.
In
summary, mediation can help to ensure that the resources devoted to dispute
resolution – and dispute prevention - are proportionate and aligned with
business needs. It can be speedy and cost-effective. It encourages participation
by key players and addresses issues of transparency, risk and uncertainty. It
can help to build bridges and dialogue where that is essential and to reconcile
apparently differing goals and policies. Above all, it focuses attention on the
real interests of participants as opposed to the positions that are adopted in
the heat of battle. It is therefore ideally suited to problem solving in these
challenging times.
Copyright John Sturrock and Charlie Woods