| Tom Stipanowich
The Mediate com. – This Week in Mediation #561
“[Mediation has the] capacity to reorient parties toward each other not by imposing rules on them, but by helping them to achieve a new and shared perception of their relationship, a perception that will redirect their attitudes and dispositions to each other. Lon Fuller.*, Mediation: Its Form and Functions
A quarter century ago many believed we were experiencing a revolution in the way conflict was managed. Nowhere was this more noticeable than in the construction sector, the primary focus of my practice as an advocate and dispute resolution professional. There, frustration with the costs, delays, risks, and limitations of lawyer-driven adjudication prompted growing attention to informal methods aimed at early resolution of disputes, putting those who “owned” the dispute back in the driver’s seat. Contractors, architects and engineers, insurers, agencies and other owners, and, yes, construction attorneys were suddenly talking about collaboration, team-building, early settlement, and interest-based bargaining. It suddenly appeared as though the world might turn upside down, with “advocate-controlled, adversarial, formalized, rights-based, lengthy and costly” giving way in large measure to “client-controlled, cooperative, relational, informal, interest-based, flexible, early, expeditious, and efficient.”
A smorgasbord of options for preventing, managing, and resolving conflict was suddenly on the table. There were strategies aimed at the very roots of conflict, including contractual terms aimed at promoting collaboration and reducing the chance of serious conflict, and partnering, aimed at establishing a “collaborative ethic and working ‘partnership’” on a construction project. There were mechanisms for “real time” dispute resolution on the jobsite by a standing mediator. In Hong Kong, experiments with dispute resolution advisors offered an even more refined, project-centric means of managing conflict. Phased or tiered dispute resolution might include early negotiation and, if necessary, mediation; the latter promised to be a particularly flexible tool for facilitating resolution of individual disputes and promoting improved communications and relationships on project sites.
A generation later, although the “Quiet Revolution” in conflict management has borne considerable fruit, things have not turned out quite the way many of us expected. To be sure, tiered “filtering systems” for resolving construction conflicts are ubiquitous elements of construction contracts, and (as in many other settings) mediation has become a dominant intervention strategy for dispute resolution in the U.S. and other common law countries and is gaining considerable steam elsewhere. But today, mediation is overwhelmingly employed after attorneys have been retained and have taken charge. Instead of becoming a proactive tool for the facilitation of successful relationships, mediation is commonly engaged in as a passage in the dance of litigation. Early expectations regarding “upstream” intervention aimed at managing conflict at its roots and promoting healthy and productive relationships remain largely unfulfilled.
Intriguing Questions Raised by Study of Relational Mediation
Some years ago my co-author Dwight Golann conducted a survey of mediators who had mediated different kinds of cases involving continuing relationships. 2 His intent was to learn more about the situations where mediation plays a part in restoring a relationship or even brings about emotional reconciliation. He found that only about 17% of relationships were restored, although in another 30% of cases a resulting settlement incorporated so-called “integrative” terms—terms that were more valuable to a party than a purely monetary solution.3 The mediators Golann surveyed mentioned that when it comes to restoring relationships, four factors are most important. The most frequently cited factor affecting the repair of a relationship was the stage of the dispute at which mediation occurred.4 The filing of a complaint or demand with a court or agency often greatly diminishes the prospects for a restoration. Over time, moreover, parties’ positions and adversary postures harden. As time passes they may also be more likely to find other partners.5
Another factor was the relative value of the relationship to the parties, including the uniqueness of the relationship and sunk costs.6 Considerations included the perceived value of any alternatives, taking into account transaction costs (including reputational costs).
A third key factor identified by the mediators was the attitudes of parties and counsel. Did the parties have the ability to understand their adversary’s perspective on the dispute? Could they comprehend why their adversary believed they were in the right or why their acts might be excused? Could they recall the good feelings and values that animated the original relationship? An affirmative answer to these questions boded well as a first step to restoration of the relationship.7
The attitudes of counsel were mentioned even more frequently as a factor.8 Lawyers might hinder efforts at restoring relationships by a “narrow, adversarial attitude toward problems, . . . [focus]ing only on legal issues or on distributive bargaining [rather than] . . . broad-ranging discussions.”9 Some lawyers “focus[ed] only on monetary issues, discourage[d] their clients from talking, and refuse[d] to explore relationship-based solutions.”10 Other lawyers, however, understood the value of repairing relationships and were able to assist the mediator in that regard, or “take a back seat.”11
Finally, some of the mediators indicated, it made a big difference if they had the opportunity to meet with the participants prior to the start of the formal mediation process.12 This was regarded as important, first, to permit the mediator to establish a personal relationship with the parties in dispute and, second, to explore imaginative solutions to current disputes that might require discussion of non-legal information and the involvement of people (such as accountants or family members) who would not normally be present in a formal mediation.
These factors affecting the likelihood of restoring relationships raise tantalizing questions. What if we turned this situation on its head and, instead of focusing on repair of relationships in the context of dispute resolution, after parties have lawyered up and perhaps taken legal action, we concentrated on using the skills and insights of mediators to facilitate communication, understanding and collaboration in long-term relationships? Surely there are relational scenarios in which the prospective benefits of employing a proactive, deliberate approach using the skills of a third party to shore up the relationship and create a framework for anticipating and effectively managing conflict. Recognizing the critical importance of addressing issues, conflict and disputes in the workplace, many companies have established multi-faceted systems, including support mechanisms and intervention strategies aimed at real-time management of employment relations.
These experiences have not, however, significantly “cross-pollinated” approaches to conflict management the broad realm of commercial relationships, or even relations between different departmental or corporate cultures within companies. One might conclude that pro-active, deliberate facilitation of communication, understanding and collaboration in commercial relationships has not caught on because, to employ a Hobbesian perspective, companies simply perceive no utility or fit in such approaches. This may be so, but it is a fact that such approaches do exist in the real world and not simply in the realm of imagination.
Object Lessons: Partnering, Standing Neutrals, Dispute Resolution Advisers
By the last decade of the Twentieth Century the U.S. construction industry was sick, concluded the Construction Industry Institute (CII); the malady was the growth of litigation. The Business Roundtable found the construction industry to be one of America’s least efficient sectors, largely because of the “ ‘adversarial dance’ between parties to the construction project, . . . [creating] ‘a constant state of confrontation.’”13 In earlier times construction claims and controversies were usually resolved informally and early through jobsite negotiation, decisions by design professionals, or, if necessary, informal binding arbitration without much lawyer involvement. But things had changed due to the growing size and complexity of the industry, inflationary pressures on contractors, tighter owner budgets and time frames for construction, and risk-shifting by owners. More emphasis was placed on lawyered adversarial processes, with many disputes being postponed and eventually consolidated in massive arbitration or litigation proceedings. The economic, business and relational costs were huge.
Suddenly it seemed everyone was exploring and proposing solutions to the construction industry’s crisis. These included initiatives focused on tackling the roots of construction conflict and promoting jobsite collaboration, including “partnering.” A concept borrowed from the manufacturing and distribution sectors and pioneered by the U.S. Army Corps of Engineers, partnering was designed to encourage collaboration and team work by deliberate early efforts to create an atmosphere of trust and cooperation on projects.14 Facilitated partnering workshops were commonly conducted shortly after contract signing and attended by owner representatives and key members of the design and construction team. The aim was stronger individual bonds, better understanding of each other’s objectives and expectations, and non-adversarial approaches for resolving problems on the job. Many in the industry saw partnering as a superior means of reducing dispute-related time and cost, enhancing understanding, opening channels of communication and preserving job relationships; its usage was expected to grow.
As a partnering facilitator, I saw the potentially positive effect of pro-active relational facilitation, and had the opportunity to apply it not just on construction projects, but other kinds of commercial relationships. One of the transactional attorneys who participated in a partnering conference told me that he found the experience uniquely beneficial in allowing him to better understand the goals and needs of his own client and partners, and to conceptually “put flesh on the bones” of the agreement he had helped negotiate.
From early days construction parties also experimented with the appointment of “standing” dispute resolution professionals, including mediators on-call to facilitate resolution issues as they arose during the course of a construction project. Such approaches have proven valuable in keeping the job on track and helping to limit the number of claims that must be subjected to more formal and expensive dispute resolution procedures.15 As a project neutral on a public works project, I facilitated discussions at job meetings among key construction team members, encouraging clearer communication and action steps to address emerging problems at the outset, thereby avoiding the development of potentially costly and distracting legal disputes.
The same impetus that inspired project partnering gave rise to dynamic, proactive relational conflict management.16 A custom-designed system for the renovation of a Hong Kong hospital incorporated many different elements in a program that represented a quantum leap in the evolution of jobsite dispute resolution and “project neutrals.” Because the contract called for demolition and construction to be performed while keeping the hospital and operating theatres operational, the public owner required a system that would identify and resolve disputes in the shortest possible time and prior to completion of the project. The result was a program with tight time frames for jobsite decision making and handling of claims, and a flexible, dynamic dispute resolution system centered upon the figure of the Dispute Resolution Adviser, a construction expert with dispute resolution skills who would remain throughout the project. The DRA first met with job participants to explain and build support for a cooperative approach to problem solving. Thereafter, the DRA made monthly visits to the site to monitor the status of the job and facilitate discussions regarding emerging issues. In the event of a formal challenge to a project decision, certificate or evaluation, the parties were given time to resolve the matter through negotiation, failing which the DRA could make arrangements for mediation, mini-trial or expert fact-finding. The DRA procedure worked well. Despite the usual problems and several hundred owner-ordered changes, no disputes reached the stage of nonbinding evaluation.
Yet contrary to the early expectations of many in the industry, none of these approaches has come into general usage, though partnering remains a feature of some public construction programs, notably those administered by state departments of transportation, and some studies have indicated that the use of partnering has resulted in more projects being completed on or ahead of schedule, in improved contract administration, reduced claims and disputes, reduced owner engineering and administrative expenses, and more value engineering.17 Dispute Resolution Advisors have seen limited use, but the highly customized and dynamic approach used in Hong Kong has not been widely replicated. And standing mediators are occasionally employed during the course of a project, but this kind of format is relatively rare when compared to the familiar model of “legal mediation” in which parties are represented by lawyers.
It is not entirely clear why these approaches have never achieved the broad usage anticipated by their early proponents, particularly since real-time relational facilitation occurs in other settings, including the workplace, the domestic (family) context, and the health care field. Nevertheless, partnering, Dispute Resolution Advisers and standing or project neutrals illustrate the realm of the possible not just in the realm of construction contracting but also in other kinds of relational scenarios.
The Broad Potential Scope for Facilitation in Key Relationships
What kinds of relationships might be most fitted to the introduction of a form of partnering, or relational facilitation? The most obvious candidates are long-term contracts involving major commitments of resources or high stakes for the partners. Facilitation may be particularly valuable in relational scenarios involving multiple parties and complicated, one-of-a-kind products, such as construction projects or the development of customized software or IT systems. (During my time at the helm of CPR [the International Institute for Conflict Prevention and Resolution] we actually piloted a facilitated partnering program in the latter setting with very positive outcomes.)
Relational facilitation might also produce great benefits in promoting or enhancing cross-cultural communication in multi-national companies or ventures, or even across departments/disciplines (business, engineering, marketing, legal, accounting) within an organization. Ultimately, relational facilitators might even assist sovereign international trading partners navigate the perilous waters of international commerce and politics. After all, in some cultures, a signed contract for a long-term relationship may be viewed as nothing more than a snapshot of the parties’ intentions at a particular moment in time, subject to changing needs and circumstances. In such scenarios, the initial process of “getting to yes” is merely the opening stage in a long progression of possible negotiated adjustments.
Barriers, and Overcoming Them
Just as the use of mediation is resisted by those who do not perceive that it adds value in the resolution of disputes, third-party facilitation for the purpose of building and maintaining a collaborative relationship will not be embraced by organizations that fail to see benefits in excess of its costs. There are sizeable obstacles in the way of promoting such approaches.
It is tempting to lay all of this at the feet of our litigation-oriented legal culture, and the “gravitational pull” it exerts on everything it touches, especially mediation and arbitration. The legal profession inhabits and dominates these vast swathes of the commercial conflict management landscape and is the primary determinant of its contours. Within these realms lawyers largely control the shape and timing of dispute resolution processes, who gets in, and who runs or facilitates the process (typically, lawyers); the shadow of litigation and the litigation model hangs heavy over the scene.
Ultimately, however, our lack of progress in the matter of “upstream” relational facilitation probably boils down to having failed to develop and advance a persuasive value proposition for businesses. When it comes to business relationships, it appears, business people are skeptical of devoting time and resources to a facilitated effort above and beyond the normal process of deal-making and day-to-day contract performance. They may wonder why, if business people are adept at business relationships and lawyers are there to handle the conflict, there is a need for anything or anyone else. Having someone facilitate improved communications, understanding of one another’s perspectives and priorities, and promoting collaboration may conjure up images of a counselor’s couch, sensitivity training, or a homeopathic remedy. In-house attorneys are likely to have even less resonance with such concepts. And outside counsel, full of advice (good or bad) on “lawyered” dispute resolution methods, are likely to be ignorant, suspicious or even hostile to upstream activities of this kind.
It is critical to communicate a clear and persuasive value proposition for relational facilitation aimed at strengthening relationships and avoiding destructive conflict, just as preventive medicine (including the promotion of exercise and proper nutrition) is put forward as a way of avoiding the cost and risk of traditional medical treatment.
The new paradigm would need to be explained in terms of business goals, including:
(1) Establishing closer individual and organizational relationships and improving communications with business partners and even within organizations;
(2) Coming to a better understand of each other’s goals, priorities, and ways of dealing with problems that emerge in the relationship(s);
(3) Managing issues and conflict in the relationship in a constructive way, exploring outcomes that address business objectives and preserve relationships;
(4) Where disputes arise, handling them in such a way as to prevent them from escalating into a costly, protracted and burdensome drain on company resources, and to achieve faster, cheaper and more satisfying results.18
Perhaps the only way to convince businesses and other organizations of the utility of such approaches is through first-hand experience or reliable accounts of other’s success stories. Many business users and counsel became acquainted with mediation as a result of the encouragement– or mandate—of courts of law, and later, administrative agencies; today, mediation is integrated into many stepped contractual dispute resolution programs. Similarly, opportunities must be found to beta-test partnering approaches or other relational facilitation programs, thereby hopeful laying the groundwork for their eventually successful implementation and, ultimately, broader adoption.
1The author, Thomas Stipanowich, is the William H. Webster Chair in Dispute Resolution, Professor of Law, Pepperdine University School of Law; Academic Director, Straus Institute for Dispute Resolution.
*Lon L. Fuller, Mediation: Its Form and Functions, 44 S. Cal. L. Rev. 305, 325 (1971).
2 Dwight Golann, Legal Mediation: A Process of Repair—or Separation? An Empirical Study, and Its Implications, 7 Harv. Negot. L. Rev. 301 (2002).
3 Id. at 311, Table. 1.
4 Id. at 325-26.
5 Id. at 327-28.
6 Id. at 318-25
7 Id. at 328-29.
8 Id. at 329-31.
9 Id. at 329.
10 Id. at 330.
12 Id. at 331.
13 Preventing and Resolving Construction Disputes, supra note , at 1-1.
14 Id. at 5-1; Adam K. Bult, et al, Navigant Construction Forum, Delivering Dispute Free Construction Projects: Part III – Alternative Dispute Resolution (June 2014), at 7-10.
15 See Nicholas Gould, et al, Mediating Construction Disputes: An Evaluation of Existing Practice 17 (2010) (discussing project mediation in the U.K. and CEDR’s Project Mediation package).
16 Colin J. Wall, The Dispute Resolution Adviser in the Construction Industry, in Construction Conflict Management and Resolution (Peter Fenn & Rod Gameson, ed. 1992), at 328.
17 Adam K. Bult, et al, Navigant Construction Forum, Delivering Dispute Free Construction Projects: Part III – Alternative Dispute Resolution (June 2014), at 9.
18 Some of the concepts here presented are inspired by and based in part upon discussions by the author, Peter Benner, Debra Gerardi, Emily Gould, Jeremy Lack, and Bill Logue, who along with Prof. Ann Feyerherm, Karel Kreshek and Nancy Vanderlip planned “Re-Imagining Corporate Conflict Management, a workshop held at Pepperdine University on September 17 and 18, 2014 and co-sponsored by the Straus Institute for Dispute Resolution and the Graduate School of Business Management.
Thomas J. Stipanowich is William H. Webster Chair in Dispute Resolution and Professor of Law at Pepperdine University, as well as Academic Director of the Straus Institute for Dispute Resolution. The Straus Institute was ranked number one among academic dispute Resolution programs each of the last seven years by U.S. News & World Report. He was co-author, with Ian Macneil and Richard Speidel, of the groundbreaking five-volume treatise Federal Arbitration Law: Agreements, Awards & Remedies Under the Federal Arbitration Act, cited by the Supreme Court and many other federal and state courts, which was named Best New Legal Book by the Association of American Publishers.
He also co-authored Resolving Disputes: Theory, Law and Practice, a law school course book supplemented by many practical exercises and illustrations on video; the second edition was just published. He is the author of many other much-cited publications on arbitration and dispute resolution, and has twice won the CPR Institute's First Prize for Professional Articles (1987 and 2009)–most recently for "Arbitration: The 'New Litigation.'" In 2008, he was given the D'Alemberte/Raven Award, the ABA Dispute Resolution Section's highest honor, for contributions to the field.
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