The benefits to mediation over litigation are substantial: it’s ultimately less expensive than proceeding to trial; it saves time; and it avoids the hidden costs of litigation, which often include reduced productivity and, likely, profitability. Moreover, it is usually a court ordered requirement prior to proceeding to trial. Mediation avoids the vagaries of a judge or jury, leaving the conclusion to the parties themselves. Also, oftentimes the solutions to the conflict are outside those that a court may be able to determine or enforce, with judges and juries rarely have the training necessary to craft an innovative resolution.
Many mediators have the creativity and resourcefulness to assist in the process. That’s why so many are so successful and have gained deserved high reputations. During a recent conversation with a very reputable mediator, I asked how he was able to charge what I thought at that time was an exorbitant fee just to walk in the door. He matter-of-factly explained that he provided great value. The matters he was contracted for usually involved very large sums of money, and the resulting legal fees were going to be extremely high as well if the parties went to trial. It was clearly in their best interests to mediate prior to the litigation process going to court.
However, the vast majority of mediators are attorneys or retired judges, most of whom do not have extensive business backgrounds. At the same time, counsel for the parties may not have the business acumen to resolve the matter outside of the traditional legal parameters with which they are familiar. Apart from being highly proficient in arguing the merits of their client’s position, coming up with a result that ultimately resolves the conflict may escape them completely. That’s also assuming the lines of communication have not broken down between opposing parties and their attorneys. Resolution is often outside the legally available remedies.
The opposing parties may likely bring their business advisors to the mediation, but all too often it is the clients and their counsel alone who attend the mediation. Even when the clients are business people themselves, they are so emotionally involved and potentially at odds with the other side that their judgment may become clouded.
When mediations fail, it is often not for lack of a desire to settle, but the lack of an innovative approach to resolving the conflict. When a mediation does fail, the costs continue to mount, both for the failed mediation itself and the then continuing costs of pursuing the litigation when the parties had within their grasp a true opportunity to end the dispute.
Enter the business consultant. He or she should be engaged as an independent advisor by the mediator and agreed to by both parties. While counsel and the mediator discuss the merits of each of the parties’ positions and begin negotiations, the neutral consultant can be devising a viable and sometimes inventive approach to settlement.
But you need to chose the business consultant wisely. Many potential consultants are Certified Public Accountants (CPAs), many of whom only possess only an accounting perspective, have a historical perspective of accounting. Many have never having had to make any real-time accounting and financial decisions. Likewise, the CPA’s who are tax-oriented have little practical business experience.
On the other hand, the consultants who would provide the greatest potential benefit and chance of success in mediation have knowledge from a CPA’s perspective bolstered by practical knowledge gained working in business, preferably from a C-position level (CEO, COO, and CFO). It is those individuals, when allowed to be innovative on their own, who can advance the mediation process by delivering real-world answers to complex situations in ways not considered by the parties or their counsels.
Mediation’s advantages heavily outweigh any potential disadvantages. Add in the stress, time spent and the personal toll taken on the parties, and it is pretty clear when mediation is a viable solution. It should be considered as a serious option and taken as soon as practical. Every possible avenue should be considered, including having a neutral consultant agreed upon as part of the mediation process or individually hired to participate in the planning and the mediation process, in order to bring a fresh and experienced perspective to the resolution.
Kip Rabin is a management consultant with DRT Global, match-making businesses with investors. He is a mediation consultant and a forensic accountant. Visit DRT GLOBAL for more information.
Kip Rabin, Guest Author, DRT Global