For businesses that want more to retain their control and sovereignty in decision-making; for those who like to keep their affairs private and for those who realise that business is about making the best decisions in an imperfect world, mediation is a viable and successful option.
Conflict in business is typically considered a bad thing. It is a shame really because a certain amount of ‘conflict’ is part of the nature of business and for family business it is a key dynamic, heightened by the special nature of the internal relationships which can even drive the entire business.
Conflicting views, conflicts in choices, in approaches to strategy and investment - these are normal and they canoften generate good risk assessment, innovation and leadership. It is the degree of conflict, how personal it is and how it is managed that definesthe usefulness or otherwise of conflict. Businesses that have well-developed decision making skills and processes that routinely address differences are healthier and more resilient than those which do not.
Disputes, on the other hand, are bad for business and especially for internal and external relationships, conceivably the fuel for successful business. It matters not how cash or asset rich the business might be and how capable they are of funding disputes, they confuse, delay and divert attention. In doing so they derail well thought through plans, essential growth, undermine reputations, de-motivate and cause stress. All that is very expensive.
The conditions for disputes can be summarised as:
• someone’s behaviour was unacceptable to someone else;
• someone broke their word either unintentionally or because it no longer suited them to keep it;
• someone is unwilling or unable to take their share of responsibility or continue with their undertakings.
In the current climate of uncertainty, many are also either simply changing their minds or cannot continue with what they signed up to with the fear factor changing behaviour across the board.
Some of the precursors to these conditions are more obvious in family business because there are the additional dynamics of, for example, sibling rivalry or outsiders versus family members to name two. These conspire to keep conflict beneath the surface only to emerge when the ‘straw breaks the camel’s back.’
Whether an internal or an external dispute, if you are on the receiving end of bad behaviour or broken promises, it doesn’t matter what the intention was - only how the effects are felt and experienced. More often than not the worst possible intention will be ascribed to the ‘wrong-doer’ and reactions will bebased on emotional responses even if those responses are rationalised later. The sense of being wronged, of injustice or unfairness, speaks to fundamental human values. Hence the development of arbitration in modern times to seek out a more equitable decision making process by finding a ‘judge’ who might better understand the underlying issues and dispense fairness. Many have been disappointed and the process of appealing an arbitrator’s decision, if possible, is uncommon and costly. The paradox is that arbitration can sometimes result in a deeply unsatisfactory outcome, often leaving both sides feeling frustrated and powerless. The same can be said for litigation.
What is surprising is that for businesses who have significant amounts of freedom, independence, financial resources and a strong desire for autonomy, they might want to hand over their decision making to someone who can never know the whole story. Equally surprising is that the benefits of mediation in maintaining freedom, control, independence and conserving resources, are not widely understood or better used by business as a first port of call. It may be that litigation is seen as a weapon. It may be that there is some mythology around the enforceability of the agreement, which speaks to the desire for certainty of outcome. However, simple questions come to mind: If an agreement is reached voluntarily (in contrast to one that imposed), what is the likelihood that it will not be implemented as intended? If the parties have agreed a solution after exploring many options, how will they feel about their decision-making?
There are other considerations when choosing a dispute resolution method. The majority of court proceedings either settle or are abandoned before any trial. In the UK for example, that figure is 95% if you include small claims. It is 75% for fast track and multi-track claims. Given that 75% of claims never reach trial, businesses might reasonably consider structured negotiation with the assistance of a totally independent mediator. An option which is further enhanced by confidentiality of both process and outcome, speed, effective use of time and the inclusion of matters which would not make it into the pleadings. Add to that the freedom to seek a solution or remedy that could not be considered by either judge or arbitrator. In this fast moving world of change and development, what business can afford to wait for the law to catch up or has the will to finance a precedent even if the cost is not an issue?
Mediation is about better decision-making and the opportunity for principals to lead their business in a way, which suits their needs and interests. It is not a panacea nor should it be viewed as an idealistic process - as those who have used mediation will tell you. It does, in experienced hands, deliver results. Around 75% of mediations settle on the day or shortly afterwards.
Apart from the practical benefits for dealing with external disputes, there are important aspects of mediation, which speak to family businesses in particular with regard to the challenges they face internally.
The psychology underpinning family businesses is unique. The qualities and characteristics are quite different from other business types. These generate rich humus for conflict and disputes and they are not generally or easily resolved by court-like processes.
Matters around succession are a good example where personal style, long established undercurrents and individual aspirations can make planning and strategy a supremely difficult undertaking. Equally, the effectiveness of directors and senior managers can be compromised by the fluctuations in key relationships.
Interestingly, mediators do not advise. So what do they bring to the table? Independence, experience in brokering agreement and interpersonal skills that help create the right environment for finding agreement. For the mediator, the client is the settlement or resolution; the mediator is on no one’s side and alongside everyone. That makes all the difference to the levels of trust and the quality of information exchange, which helps the mediator to really understand the underlying issues and where the parties need to be. The process and the approach of the mediator are future focused and pay more than a nod of attention to the emotional and people dynamics, something that is of no interest to a judge or an arbitrator.
As with all things that are good for your ‘health’ it often takes intervention by the state to encourage people down the right path. In the UK there is no mandatory mediation at the moment. There is however, a European Directive, which obliges any EU-based company in dispute with a company in another country (EU or not) to attempt mediation before their case can proceed to trial.
Often when the state imposes new rules, people affected spend a good deal of time trying to get around the rules. That too is human nature. In this case it would be a shame because there are many parties who would have liked to mediate but they could not persuade their counterparts to agree. Now at least in cross-border disputes where one of the parties is based in an EU country, they have a better chance and a further advantage since mediation is not affected by jurisdiction - an issue which can takes months or years to decide in some cases.
The difference between arbitration and mediation
Arbitration is private dispute resolution that does not take place in a public court. All parties will be bound by the decision of the arbitrator or arbitration panel. The preference for arbitration by some business sectors may be explained by the freedom to choose the arbitrator(s) and therefore to have some control over fairness by choosing someone with sector specific knowledge; someone who knows ‘how things are done.’ The process provides the same kind of certainty for the parties as litigation and because the discovery/evidence/witness requirements are arguably not as onerous as litigation, it can be cheaper and save time. Parties can agree their own date and place for the hearing; they are not dependent on availability of court time.
Mediation is also private dispute resolution and can be either binding or non-binding at the choice of the parties. Nothing said or suggested is binding unless and until it forms part of an agreement, is reduced in writing and signed by the parties at which point it becomes a contract with all the legal certainty of any contract. This is why the mediation process is frequently described as ‘assisted negotiation.’
Mediation differs from arbitration and litigation in a number of respects: the mediator does not make a decision according to legal precedent or based on the evidence presented. There are no rules about who must attend, what can be discussed or how the mediation is structured; with the expertise of the mediator, the process can be designed to suit the problem and the parties. Participation is voluntary: parties and lawyers share, in confidence, information they feel will help them get to where they need to be. Probably the most important benefit is that the mediation itself and all information exchanged (unless it would be available in the normal course of discovery) remains strictly confidential and cannot be used in any subsequent litigation. This allows parties to explore options and only agree to something, which meets their needs.
