February 17, 2003
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| Mediation offers court system alternative for business applications |
| By Robin Hoberman |
Joan and Linda had started a service business together. Everything was going well and the business was booming, but increasingly the partnership became strained. Linda was the creative force and Joan was the business guru, and the two found themselves at odds. Joan didn't feel Linda spent enough time at the business and felt she held too much responsibility for being "the bad guy" with the employees. Despite their financial success, the partnership was in trouble.
Running a business with partners, regardless of whether your company is structured as a partnership, corporation or other entity, can be a challenge. When most people start a new business, they are filled with optimism and share excitement about ideas and potential. Few take the time to consider future legal issues or potential conflicts with business partners. Those that do typically turn to the legal system that, although it can clearly create useful contracts, is often too restrictive to incorporate creative business solutions that might better address the problem.
Mediation, an alternative to the court system, uses a negotiation process to help parties create a contractual arrangement without a judge, jury or arbitrator. The entire premise of mediation is that there is no right or wrong, no winner or loser, and that everyone shares a desire to find a solution. The end product is a contract, signed by all parties, that represents a careful compromise.
In fact, mediation may be more similar to international diplomacy than it is to the court process. For most business relationships, this type of approach is the best fit for resolving conflicts they inevitably will face. Our legal process, as well as the arbitration process, derives from criminal notions of right and wrong. When people are engaged in running a business together, however, these notions and the rigidity that results often force the proverbial "round peg into square hole." Even worse for the people involved is the disempowerment that can result from being subjected to traditional legal confines.
In the example of Linda and Joan, mediation was used to get to the root of the conflict and negotiate a solution so that the business could move forward. Other businesses use mediation to assist in dissolving a business relationship in an equitable way, setting up a new business thoughtfully and creatively, resolving disputes between employees or offering conflict management seminars.
The job of the mediator is to unravel each issue, get it down to its basics and find out what is under the surface of any disagreement. Consider the analogy of two people getting on a bus with only one seat left. One of the people is elderly and the other is carrying a heavy backpack, so they both really want the seat. On the surface, it would seem that there is no way to resolve this conflict in a way that both people will be happy. But when you analyze not just what the people want, but why they want it, the picture changes.
The elderly person wants the seat because he or she physically needs to sit down. The person with the backpack doesn't really want to sit, but needs to put down the heavy bag. Understanding their motivations, perhaps the elderly person can sit down and keep the backpack at his/her feet or on his/her lap. This way, each person has his or her needs met, even though at the outset that seemed impossible. This is also how mediation works - at the beginning of each mediation, resolution may very well seem impossible. A mediator's job is to find a solution and make what seems impossible, possible.
The Mediation Process
The mediation process starts with each person openly and honestly offering his or her version of the dispute and how it would be resolved in their ideal world. The mediator then begins asking questions and delving for details regarding the past, present and future. Often, the parties will speak separately with the mediator, giving each of them time to express themselves in their own way. The lack of opportunity to be heard that is often at the root of conflict, and that is why mediation, more than any other process, can get to the crux of the problem quickly and collaboratively. In contrast, the court and arbitration process often preclude and exclude the freedom of expression under rules of evidence that deem the most important concerns, such as misunderstandings, rumors or explanations, as irrelevant.
During mediation, the participants work through each issue piece by piece, celebrating each agreement. The mediation typically takes place over multiple meetings, and participants may need to seek other legal, accounting or financial advice along the way. The additional professionals become part of a team working toward common solution, rather than adversaries.
In the end, the mediator guides the parties through each issue, until agreements are reached. The agreement is then drafted into a meticulous and legally binding contract signed by all parties. Since it has been negotiated by all parties, rather than mandated by a judge or arbitrator, the contract reflects the ideals and needs of everyone concerned.
When To Call A Mediator
Although a mediator frequently is called on in a time of crisis, the best time to deal with potential problems is before any conflict occurs. In-depth discussions when setting up a new business can help prevent future challenges. Some of these discussions are included in the legal process, but incorporating and including the mediation process offers greater spontaneity in the exchange of ideas and client-specific results.
For instance, in negotiating a partnership contract, a lawyer might ask about a non-compete clause. A mediator would ask, of all partners, "How do you see things evolving between the two of you? What would happen if you each wanted to start a similar business later down the road? What aspects of your business would you deem exclusive and what aspects shared? What aspects of your business do you anticipate working on together and/or separately? What tasks would you desire to be handled autonomously and/or jointly?" This type of mediated dialogue allows for a greater degree of creativity because the ultimate agreement is derived primarily from the parties' desires rather than legally defined parameters.
Under a mediated approach, putting a business together, dissolving a business or restructuring a business becomes more about establishing goals, dreams and direction than anything else. The implementation of those goals and direction follows from there. Opening a dialog from the beginning of any change in business can help create a relationship that will last and prepare for future circumstances.
Mediation is particularly useful to technology companies, because the speed at which technology changes and the important role of intellectual property within the technology arena are well suited to the greater speed, creativity and confidentiality available with mediation. Whether mediation takes place at the formation of the business, or at a time of crisis, critical technology issues such as intangible assets, the sharing of ideas, and the exchange of proprietary information never travel beyond the negotiating table. Also, issues such as the ownership of ideas, source code, business names, logos, and web-related information are not always easily defined in legal terms. In fact, the legal system often is unfamiliar with and ill equipped to address technical concerns such as these. Using a negotiation-based system allows for a better dialogue and the more appropriate handling of these complex issues.
There are, of course, situations when mediation is not an appropriate course of action. These situations tend to be more reflective of the people involved than the topics at issue. One partner may have lied or defrauded the other, or there may be a complete breakdown of trust and communication. These situations probably do not belong in mediation because mediation requires everyone involved work together, at least to some extent. Obviously, joining someone at a negotiating table requires a base level of respect and a mutual commitment to finding a solution. Without that in place, the effort is corrupted and the outside judgment of the legal system may be the only available option.
For most situations, however, the advantages of mediation are attractive. Remember Joan and Linda? Working with a mediator, they developed a greater understanding of each other's roles, negotiated a better communication system between them and compromised on the ways to deal with employees. In the end, they saved their business and their friendship. Finding a mutually agreeable solution allowed them to move forward in their business in a way that was both profitable and comfortable to both of them.
Robin Hoberman is a professional mediator and attorney and is the owner of Solutions First a Chicago-based mediation firm. For more information about Solutions First, please call 312.372.0802.
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