Arbitration
by Margaret Heffernan

In 1999, I was asked to take over a company whose Chief Executive had just been fired. This meant that I inherited a lot of people, and a lot of deals, that I hadn’t been responsible for, many of which turned out to be pretty disastrous. But I like a challenge, the company had a lot going for it – so I said yes.

I had to fight on two fronts: I had to breathe some life into the strategic initiatives on which the company’s future depended; that was the fun part. And I had to dismantle the people, the initiatives and the deals that weren’t working. That was not the fun part. What made it worse was that the Chairman who had hired me was furious about agreements made by my predecessor. He didn’t just want out; he wanted blood.

Fortunately for him, I have a pathological hatred of law suits. Not because I’m a wimp but because I’ve seen what they do to people. Legal action takes over peoples’ lives, their brains and their bank accounts. It is, in my opinion, an extreme and an extravagant indulgence. After much hard bargaining, I persuaded my Chairman to try mediation. I was lucky that my opposite party preferred that route too. Between us, we found a way to stay out of court, resolve our differences and salve my Chairman’s ego. No one made money – but we all saved a lot.

Conflict is always the stuff of drama – but, far more than is recognized, it is the stuff of business too. At the Centre for Effective Dispute Resolution, Eileen Carroll estimates that conflict -- contractual, customer and employee disputes -- costs British business some £33 billion a year. And that price tag doesn’t reflect the true cost, which is opportunity cost. The time I spend resolving conflict is time I am not spending on creating new business.

In a law suit, almost everything gets delegated to lawyers; that’s what makes it so appealing. As a Chief Executive, you feel it’s off your desk, in the hands of others. You imagine that will save you time and effort. But it is because it is in the hands of others that everything gets escalated, that lawyers adopt increasingly polarized positions, and that reparations grow costlier and costlier.

"I’ve been the lawyer," Eileen Carroll recalls. "I’ve been there, listening to two interpretations getting further and further apart; the numbers getting bigger and bigger. The parties start to believe it. The lawyers distance themselves. It all becomes slightly unreal. And I was shocked that we spent so much time preparing for court – and then after three years, we’d just do a deal in the corridor! I thought the clients weren’t getting a good deal. They just got lost in the mix.”

By contrast, in our mediation, nothing was delegated. No one was distanced from anything. We each gave up a day, had to meet face to face in a neutral space and to use our very best efforts to define the grievance and design a remedy. I had always thought the arbitrator did the hard work. I was wrong. Everyone worked hard – to stay reasonable but also not to be walked all over. Carroll’s right when she says that mediation isn’t fluffy. Ours was not an immensely complex contract – but finding an honourable way out of it demanded a lot of creative thinking.

Carroll also says that mediation is about dealmaking, not about winning. Maybe that’s why I liked it – and why my Chairman felt so uncomfortable with it. He liked winning – and he could only really believe he’d won when the other guy had been seen to lose. So when our mediation found a solution, I had to sell him it to him. The only way I could do that was to pull together a spreadsheet that set time and legal fees against the business I could bring in when not spending time with lawyers. Sure, I loaded my case – but the comparison amazed even me. He remained sceptical until the new business did materialize. Then even he recognized an excellent investment when he saw one.

What he saw was the money he’d saved. What I saw was the time I’d gained. Taking on this company when I did, I had to deal simultaneously with the past and the future. What I felt then, and what I still believe, is that entrepreneurship is and must be focused on the future. The past is over and spending time on it is just too expensive.

Centre for Effective Dispute Resolution: www.cedr.co.uk

© Margaret Heffernan

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