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Negotiation Strategies Journal Professor James Bailey, Ph.D.egy Ave Tucker Professor of Leadership Robert Paul Ellentuck May 2, 2011 COPYRIGHT © 2011 ALL RIGHTS RESERVED ROBERT PAUL ELLENTUCK THE COPYRIGHT HOLDER EXPRESSLY PROHIBITS ANY AND ALL COPYING, FAXING, SCANNING, XEROXING, REPRODUCING, TRANSMISSION, DISSEMINATION, FORWARDING, PRINTING, SUBMISSION (EITHER ELECTRONICALLY OR OF A SCANNED OR OTHERWISE REPRODUCED COPY, OR OF THE ORIGINAL COPYRIGHTED MATERIAL, A COPY OF THE COPYRIGHTED MATERIAL, OR OF A PORTION OF THE ORIGINAL OR COPIED COPYRIGHTED MATERIAL), OR ANY AND ALL OTHER ACTIONS: ELECTRONIC OR OTHERWISE, OF ANY PORTION OF THIS COPYRIGHTED MATERIAL OR THE ENTIRE COPYRIGHTED MATERIAL, WHICH MAY IN ANY WAY VIOLATE THE RIGHTS OF THE COPYRIGHT HOLDER. 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THIS COPYRIGHT IS IN NO WAY INTENDED TO INFRINGE ON THE RIGHTS OF ANY OTHER PARTY. 1 | P a g e TABLE OF CONTENTS MODULE I – NORMS OF COOPERATION AND CONFLICT....................................3 Textbook Reading...........................................................................................................3 Lecture Content...............................................................................................................4 Thomas-Kilmann Conflict Mode Inventory Exercise.....................................................5 Pemberton’s Dilemma Exercise......................................................................................5 MODULE II – COMPETITIVE NEGOTIATION SKILLS.............................................6 Textbook Reading...........................................................................................................6 Lecture Content...............................................................................................................6 Peach Computers vs. Campus Computer Stores Exercise..............................................7 Capital Mortgage case.....................................................................................................7 Salt Harbor case ..............................................................................................................8 Pacific Oil case................................................................................................................8 Final Offer film...............................................................................................................9 MODULE III – COLLABORATIVE NEGOTIATION SKILLS.....................................9 Textbook Reading...........................................................................................................9 Lecture Content.............................................................................................................10 Sally Swanson v. Lyric Opera case...............................................................................10 MODULE IV – MEDIATION SKILLS..........................................................................10 Textbook Reading.........................................................................................................10 Lecture Content.............................................................................................................12 2 | P a g e MODULE I – NORMS OF COOPERATION AND CONFLICT Textbook Reading The most interesting take away that Ihad from thefirst section of reading was the section“Even at Megastores, Hagglers Find No Price Is Set in Stone”. While the reading references that haggling has become more commonplace in the economicdownturn, a topic that has recently been covered in the New York Times business section, it reinforces what I have long believed that all prices can be negotiated. While our residency in India made clear a society where negotiation is an everyday occurrence, I have always wondered why people did not negotiate more economic transactionsinthe U.S. I do disagree with the articles suggestionthat theeconomic downturn is responsible for company’s willingness tonegotiate. I’ve had successnegotiatingfor wellover twodecades. While I don’t mean that McDonald’s is going to negotiate the price of a hamburger, and Giant will not negotiate the price of Cheerios, people are always surprised that Nordstrom willnegotiate the price of anitem. Not everyitem, everyday, and definitely not on the first daythe new merchandise arrives in the store. They will negotiate the price of a suit half way through the season,withthe recession makingthem far more likely to say yes, and producing deeper price drop. The neighborhood liquor store is equally willing to negotiate. If you are willing to buy a case of wine to put in the cellar, instead of a bottle or two, you just need to mention that you’ll be in New Hampshire next month (where there is no tax) and could buy it there. If they have enough in stock, they usually are willing to meet the New Hampshire price. To be willing to negotiate you must be willing to be rejected, and walk away. Otherwise, you will lack the power that will allow you to succeed in the negotiation. When you see an item that is unique and that you have to have, and you lose that ability to walk out your negotiating strength is gone. A skillful negotiator will make clear either directly orindirectlythat theycan buyit somewhere elsefor less. The key,asin all negotiation ofthistype,iswillingness to walk away. If you must haveone specific item, whether a suit,car, or houseyoulose the power you haveinthe negotiation. When people say they hadto havea particular car when they went to the dealer, I cringe at the thought of how much they must have overpaid by walking in the door with that attitude. (The image of the amoral, car selling, cousin comes to mind). Once the salesperson realizes you are going to buy a car and must have the red convertible, and will not walk out you lose power in the negotiating relationship. People should practice this type of negotiating, for any item, by walkingout when a demandisnot met. Thentheywilllearn that the seller will chase after them. I came home from India with the belief in negotiating prices turned into the motto that “everything isnegotiable”. We visited a gift shop outside Agra that had a sign prominently posted, “All Prices Fixed – No Negotiation”. Audra said to methat she liked a scarf, but that it seemed a little expensive. I told her to offer less, and sheresponded that we couldn’t negotiate. I reminded her that we were MBA students, and that she could negotiate with anyone, anywhere, for anything. I stressed to her that it cost nothing to negotiate, and if she couldn’t get her price she would have another 10 or 20 chances to try to buy the same item before we got on the plane home. They ended up chasing after her out tothe bus,loweringthe price further tomake a sale. I’m putting an addition on my house, and I love hearing the contractors, especially the appliance people and the kitchen (cabinet and counters) sales people say “our prices are fixed”.Or, “I can’t give you a quote untilI go back tothe office andthe engineers review my drawings”. I just sit back and think, “No they are not” and “yesyou can”. In the first situation they are trying to get the buyer to come back to the showroom to see a higher price item, since after saying their prices are fixed they add, but we are running a special back at the showroom on ____ (an item that you don’t want, but suddenly will). In the second case, they want you in their office when they give you the quote – they will also have a 3 | P a g e handy, no negotiation contract to sign. They wish to gain strength by removing you from the negotiating comfort of your home, and placing you in an environment where it iseasier toget youtosayyes tomuchmore thanyouoriginally planned. My point about continually negotiating, which I feel is the real take away from the reading is that all negotiating is learned. For people that have never negotiated a car price or a house price, the need the skill by practicing for the timethey need tohave a real negotiation at their job. Practicing willhelptoingrainthelessons fromthetextbookandthe entire course. Lecture Content I was asked in a job interview recently what my style and approach to negotiations was, using examples from my current job (or last job). While I was warned that consultants would askquestions about that involved examples from my career experience, I was stumped. The reason for thisis Ihad never evaluatednegotiationsinthe mannerthat was discussed in class today. Instead, I have always said, negotiations are all different. Not that each negotiation does not involve any common elements. Instead, negotiations vary so greatly based upon the motivations of each party negotiating. Whether negotiating with development partners for an Eight Hundred Million Dollar real estate transaction, or negotiating with team members over their roles and performance in a project, if you don’t know what is drivinga party’sposition,then negotiating with them is destined to be extremely difficult ifnot impossible. The Root Cause of the conflict in each of these situations will differ greatly, therefore the bargaining process will be so different, and the result will be unique as a result. Though resources, as we discussed, whether they be money or time, are what are driving each situation. In one situation, when negotiating with development partners, the root cause of the conflict with the architect was that they only cared about designing a world class project, their first in the US, and they could care less what it cost my firm. Their sole motivation was winning acclaim for the project. They were critical to the project, as we had won it with their reputation, but every tactic taken in negotiation was unsuccessful. They knew we couldn’t “fire” them, and we were unable to get them in line through the negotiation process. Repeated efforts to resolve the conflict were unsuccessful. I finally realized the root of the problem, and went on to solve it by sidestepping further negotiation, and bringing in another architect whowas responsiblefor thedetailsthatwould makethe project cost effective. On the same project negotiating with the contractorwas simply a matter of locking (figuratively) their representatives and my team in a room until they lowered their price to a point that was profitable. Their motivation was simply more revenues, and we couldn’t pay more than a maximum amount per square foot. Resources and moneywere extremely scarce. There was no subtly to thenegotiation, they weren’t going to walk away from such a large project, and we needed them though if they were unreasonable they knew we could replace them. There was nothing pleasant about the negotiation; if they had “won” another dollar per square foot it would have meant $5,000,000 for their firm, though we couldn’t afford to give an inch. This could have been 2%-4% of the return on the project. This is truly my least favorite type of negotiation, when it figurativelyinvolves fightingover thelast dollar. SeeSalt Harbor for theevolution of mynegotiating approach. When negotiating with team members over work, assignments, and responsibilities, we repeatedly buttedheads until I understood what was driving their behavior. This would have gone on until graduation, except I learned that the sole motivator behind being in the program was obtaining the degree, pay grade increase, and pay raise. While the fact that this was their sole motivation amazed me, but armed with that knowledge I was able to resolve the negotiations, which had become unpleasant conflicts, quickly and easily so that the remainder of our 4 | P a g e interactions were no longer marked by conflict. In a sense I viewed this as scarcity of resources, though time was a resource that was limited in terms ofthe amount theywere willing to commit tothe program. Thomas-Kilmann Conflict Mode Inventory Exercise The Thomas-Kilmann Inventory provided me with a fascinating insight into my personality, and made me aware of aspects of my personalitythat I waseither unaware or had neveracknowledged. My highest number wasincompeting,but a close second wascollaborating. This makes sense in that I approach work or business related tasks (you can substitute school), with an attitude of getting things done at all costs. With little tolerance for anyone who is unwilling to do their share. This has long since left me making quick decisions, on important matters, and the willingness to getting things done at all costs. On the other hand I do not feel that subordinates or colleagues are unwilling to admit ignorance or uncertainty. I am more than willing to devote a great deal of time to team mates, whether subordinates or equals, in order to patientlyworkthroughmattersthatmust be done. On the collaborative side, I want to work with team mates and gain from their knowledge when they show they have a contribution to make, and have real commitment. I find having team mates who help me to learn, and who have insights due to their different perspectives to be incredibly valuable I very much dislike the team behavior of long unnecessary meetings to discuss the handling of the simplest matters. Constant team meetings and team calls are a tremendous waste of time, and I frequently find myself working on another project during long, unnecessary conference calls. I just want to get the work done;talkingistaking upwork time. The reason that I have the competing conflict style is simple, or at least seems so to me. I was raised to work as hard as possible on everythingthat I did.Work or school,there isnodifference. Thisdoesn’tmean that Iwill bethe best,alwaysor ever, or have thehighest grade. The goal is to work as hard as possible. If you have the opportunity to do something,then you need to give it the greatest effort possible. I’ve never said to an employer, “but I was planning to go to the mountains with my fiancé this weekend.” Not keeping my commitment to the work, would never occur to me. Has this always served me well? I guess we could track down my ex-fiancé and ask her, but I think the answer is obvious. Work colleagues don’t always appreciate that I expect them to work as hard as I do, school colleagues are the same, and while personal relationships may have suffered I don’t know ifI couldor wouldwanttochange myapproach tolife. I certainly would never want to be the one who doesn’t live up to their commitments, making excuses. Adjusting my approach so that I was possibly less confrontational or direct might improve work and personal relationships. I would not want to do that at the expense of what I view asachieving success. Pemberton’s Dilemma Exercise The Pemberton’s Dilemma Exercise revealed to me an unwillingness to read the signs presented by my opponent, and a focus on what would give methehighest returnifit worked as opposedtowhat would be the most successfulstrategyifI trusted my competitor. Once I saw the obvious signs that my competitor wasdemonstrating, we were both able to maximize our yield. Though on every round I hesitated,not trustingmy opponent to make themovethat brought mutual benefit. Pemberton’s Dilemma is similar to the Negotiator’s Dilemma which appears in the literature. The literature states that if the negotiator starts to share information and trust the other party outcomes can be reached similar to win-win situations. One party might be willing to give 5 | P a g e something that the other party truly desires and vice versa. This is however not something that is possible in all negotiations, e.g. when selling a car, but definitelywhenit comes tomore long termrelationshipsand projectsthat needs tobe completed within budget and ontime. MODULE II – COMPETITIVE NEGOTIATION SKILLS Textbook Reading The section on Not-So-Rational-Decisions unfortunately reminds me of my first job. I worked for a developer who successfully developed land for everything from golf course communities to condominium towers. He essentially had it down to a formula, and it was a very valuable learning experience toworkthere. Unfortunately, he had a great desire to make a namefor himself by developing large mixed use urban-renewal type projects. He wanted a national reputation, and felt the only way to get there was this type of project. No one knows who subdivides a housing development; he wanted to be the next James Rouse. I had the experience of watching him make the decision to change, and his biases were framed in termsof reward and reputation for his firm. He never framed thisdecisioninterms ofthemassive amount of riskthat he wasgoingtotakeon. While his primary business involved a great deal of risk, it was risk he understood. The new project was risk that he did not have any experience with.He assembled ateam that wasverywillingtoundertakethislevelof risk,but he didnot understand the difference. I watched as the first project deteriorated, and he chose to escalate the amount of investment and risk he faced. In order to save the project he was encouraged to, and decided to risk greater sums of money in the project. When he asked me to sit in on a conference call with the team running the project, I was asked for my opinion afterwords. Lacking the vast refinement and tactthat I now possess (or that we will assume I now possess). I told him that the deal was dead. The partners that he had been negotiating with for over a year, while he hemorrhaged money and firm resources, nolonger had the will or commitment to carry through onthe transaction. Everyone present argued with me over my opinion. They said I had no basis for such a statement, but Idid. I had watched my employers growing over confidence, and listened to story over story of the partners desire to “change” the deal. It was like the Pac Oil case discussed next week. Each issuewouldhave to be decided at theirheadquarters, and once everythingwas decided “new,critical” issues popped up. In reality,they wanted to delay. They didn’t want to say no, for fear of being sued, so they kept restructuring the transaction and my employer framed the his decisions based on his experiencewith earlier transactions. He and his team felt that since the firm had been so successful at onetypeof endeavor that it had tocarry over. They were over confident to the point of stupidity. When he finally fired his team, after the deal collapsed, and I got to oversee the litigation. This is the worst part of the business, but what made it worse were the large amounts of money that had been spent of the project without the normal protections. My employer had abandoned every rule that he had, sought greater risk,and then escalated the commitment,while displayinggrowing overconfidence. I had never been able tounderstandhis decisionsand motivationsuntil reading throughthese sectionsofthe book. Lecture Content The lecture on negotiations and motives raises what are in my opinion very interesting points from a business or businessman’s perspective. 6 | P a g e I thought that the discussion of the dilemma of honesty was a very good example of this. I don’t know why I would ever want to fully disclose my positions or values to someone I am doing businesswith. I assume that if I fully and completelytrusted someone, thenit wouldn’t be an issue though I doubt my dog wants to know anythingexcept what she is getting for dinner. Other than her, sharing more information with partners would make me vulnerable. I make a point of finding out the greatest possible amount of information about both business partners and opponents in negotiations, why should I just tell them information about me? The less they know about me, the less vulnerable that I am. We live in a world where partners sue each other every day. Most people, if they realize that the deal has gone truly badly for them, think immediately “sue”. I wouldn’t want apartner toknow more thantheyneeded to know tocomplete a transaction. The way the prisoner’s dilemma played out, I trusted Josh. Though I have no great grounds for doing so. I would be a great deal less trusting ifthe game wasa contract worth millionsofdollars, andIwas not good friendswithmy“opponent”. Peach Computers vs. Campus Computer Stores Exercise This exercise was a very challenging one to negotiate. I am used to knowing a great deal more about the people I negotiate with. In fact, I liketoknow everythingthat islegally obtainable. Amir and I both ended up over focused on the points we thought were important. I was focused on selling as many computers as possible, for as high an amount over the minimum stated amount, while pushing for payment in the quickest possible period (14 days from contract signing). Theway Ilooked at thiswas that anycashinfusionthat didn’t allow payrollto bemet would meantheend ofPeach. Interestingly, I have never had the dilemma of winners curse. When buying a home, a piece of land, investment property, or a car, I definitely know what it is worth when I start. Evenif someone said, I would have sold it for less; Idon’t think that I would care. When I negotiate, my opponent needs to have regrets at the end. I work very hard to know what the item is worth. If I can’t pay less than that, I don’t buy it. No item is so unique that another option does not exist. When I feel that I need something, whether a stereo or a house, I leave the money (figuratively or literally) at home. If you are will to buy it on the spot, you don’t have time to think about it in your comfort zone. That is why they why every contractor and subcontractor I have recently met with, while happy to come to my home to examine the property and discuss the project, wants me to come by their office or showroom to discuss pricing. They want you off balance when buying, and out of your comfort zone. Having the trigger point, resistance point, settlement range, settlement point and initial offer has given structure to the methods that I have used in numerous negotiations. Capital Mortgage case Capital Mortgage was a very interesting case, firstof allwhywasn’t Winder present? He is the one that ran thebusiness. I know thisis an obviouspoint, pointed out inclass,but iftheywere seriousabout sellingwhywasn’t the person whowas essentiallytheir main asset present? In addition, why were the sellers so willing to blurt out prices in the initial meeting, when the buyers really had no idea how to even value such a business. Frankly I think that CMI grossly overpaid. When I looked at the financials thecompany appears to have little value. When the sellers desperation (unless thiswas a highlysophisticated negotiating tactic) became obvious I wouldhavethought more along the lines ofdropping the amount oftheoffer,not increasing it. When CMS started calling Randall and Dolan at theirhotel, I would have cut the offer, not increased it. It is interesting how infrequently buyers are willing to drop the initial offer, which everyone expects you to negotiate up from. When I buy a real estate asset, I typically include 7 | P a g e standard provisions regarding inspections, which I then use to drop my offer before closing. The analogy I am making poorly is CMI’s principals demonstrated that in my opinion their firm was in some way “damaged” (an inaccurate word), just as ifa house has some “damage” (a bad roof), I drop the offer eventhough Iintend totear downthehousethe dayafter closing. All that CMI needed was an employment agreement with Winder. Any payment purchasing CMS should have been a token amount to convince Winder tosignwithCMI. Salt Harbor case Salt harbor was an interesting case as I felt that we were provided with a good amount of information, especially the purchase price of the lot, andCarla divulged agood deal ofinformationininitial,friendly, discussion. I tried very hard not to make the initial offer, not wanting to provide a figure from which negotiations would progress, but as time was limited I ended up giving an initial offer of $65,000. Carla was rather surprised, saying she had paid $100,000 and could sell for $175,000, and a house would block my view, just like a coffee shopwould. I stressed I really wanted to preserve the neighborhood, and had no great objection to a friendly neighbor. I also stressed that she might be able to sell for$175,000 though I could write a check today for $65,000. I also pointed out that I knew the market; $175,000 was a broker puffingup thelisting price, andthat ifshe wanted tolist it, andpay commissions,I would buy it and it wouldn’t be for $175,000. I placed great emphasis on buyingit todayfor cash,or havingit sit onthe market for months,withtheprice dropping. After some protracted give and take, she finally agreed to $100,000. She wanted me to pay her $10,000acquisition costs, but I stressed they were her sunk costs and irrelevant to me. If she wanted to sell it to someone else, they wouldn’t eat her sunk costs, and I would put the $10,000 toward litigation, frivolous or otherwise,and noonewouldbuythe lot whenthere wasa cloudonthetitle. It would have been valuable to know, but Carla did not divulge more about her firm’s financial condition. A fact that I would always want toknow in anegotiation. Pacific Oil case What I thought was extremely interesting about Pacific Oilwas how muchit reminded of my negotiatingstyle. Not the overall negotiation whichreally show alack oftrust.Instead, I frequently usethetacticthat an offer needs tobe takenback tomy“investors”,who don’t exist if I need to delay a decision. Not only is this is a great delaying tactic, the real value is that it allows me to time to think over the deal alone, without pressure from the seller/investors. I must admit I use the same tactic when buying a suit or any other high end item, “I can’t commit without talking to my wife”. When pressured to buy a granite counter recently, I responded “I am not authorized to buy things, I am just an employee, the boss buys stuff and she is not here.” Then I can sit quietly, think over the offer, and run the numbers again on my own schedule. When I make the counter offer I doit onmyterritory,never on theirs. If a deal is bad, and I don’t want to commit though I want to wait to say no, then negotiating one issue at a time always works rather well. This works as well with a development agreement as with the PVC contract. Though having a negotiator who is overly committed to the deal always places your opponent in a uniquely weak position. If they can’t walk away then you can use eachtechnique demonstrated in the case to suck all that you can out of your opponent. More appropriately, the opponent who has no resistance or target point can be manipulated by time in your favor. They don’t know what theywant, so you cankeep askingfor more. 8 | P a g e I can’t imagine why anyone would allow their contract to be negotiated in bits and pieces. Agree to everything at one time, or you need to moveon. Final Offer film It was remarkable to watch White as he negotiated with GM, the UAW in the U.S., and his individual union boss’s. I particularly found it interesting how GM kept the UAW in the dark until the last minute, and White keeps his union bosses in the dark until the last minute. Each party had their own diverging agenda. The union boss who seemed to be more concerned with whether he would have to return to the line if the union lost, White, who wanted to beat GM and prevent American work rules from coming to Canada, and Smith who went around White to contact the individual union heads. How long would White have kept the workers out fora .30 cents an hour raise? And his clash with the US union, which he needed to fund a strike, saying they are interfering with his ability to negotiate. I loved all the pettiness, of the various parties, who seemed less focused on their own agenda than the companies andworkers best interests. When GM makes their initial offer, it is lower than White expected. That is what I would do, if making the first offer. Put the opponent off balance with how low it is, and the starting point for moving up is also lower. I liked White’s move when his strategy, the UAW in Canada, and his union chiefs are in complete shambles to threaten to stop negotiating. This works, amazingly and GM agrees to the basic Canadian demands, though they are stuck between 3% and 2.25% an hour raises. He really has to argue with his board over this, and they seem willing to strike for months to get that much more money. I tried to calculate how long they would have to work to makeup the amount lost for the additional 7.5 cents anhour, but eventually gave up. The entire strike, and the jobs of tens of thousands, were held hostage by the egos of the union and GM leadership. While every possible negotiating strategy is demonstrated, I wonder what would have happened if they had a more collaborative negotiating style. I doubt that enough trust was possible to accomplish this. MODULE III – COLLABORATIVE NEGOTIATION SKILLS Textbook Reading The reading on, and the entire topic of, collaborative negotiation is very interesting to me. Having been involved in a very long business relationship which was collaborative from day one when it was announced that we would be partners, and the fact that we were never operating in a manner that could be considered collaborative. We started with our relationship with an agreement to purchase the sellers property, but since it was we were working toward achieving both parties’ goals, we decided that an appraiser would decide the value of the property. We then offered to find and pay for the appraiser. Of course, this offer was taken in the collaborative nature in which it was made, so that we could find the fair price without unnecessary bargaining over the exact amount. We proceeded to hire an appraiser who had worked for us for years, and gave specific instructions for valuing (the value) of the property. 9 | P a g e Our partner desired great input in the final design of the project, as it was an important part of their mission to bring quality design to their community. Of course we agreed, offered our architects to put together a “style manual” for the project at our cost, which detailed every element of the design, while of course allowing our partners to make changes at any time. We then instructed our architects to put together a 500 page manual that no one would ever read, and which was so vague as to have no meaning. Most importantly, the architect was given final design input so that they could make a change during the construction process if they(we) wanted. I could go on about the development agreement that we volunteered to write, along with the many other elements of the project, but my point is that unless you can gain that 100% trust of your partner should you be willing to enter into a collaboratively negotiated arrangement. I realize that is the point of the text and the case, but how do you know that you can truly trust? Lecture Content Learning how a collaborative relationship can be apositive sum relationship and that the object is tocreate value for both parties is somewhat alien. Treating the other party as a partner (a true partner) is not a natural instinct. Meeting the necessary conditions for a collaborative negotiating relationship, the potential for mutual gain, high aspirations, and problem solving orientation are things that a negotiator must be taught. Once the keys to a win relationship are found, then the parties can focus on the shared goals, separate personalities from the problem that must be solved (I’m thinking about “Final Offer”, and its strong abrasive personalities),worktoward the solving of interests, not the positions parties focus on, and creativity to avoid preconceived solutions. Again, I wonder how American (or Canadian) labor relationships would appear over the last century if the interestswere the focus. Sally Swanson v. Lyric Opera case The dilemma of honesty prevents the parties from even identifying that this is, or should be, a collaborative negotiation. As the agent I said, I don’t want the Opera to know that she is “willing to do the opera for nothing” since she needs exposure. Then they will pay us nothing. The Opera was equally unwilling to indicate that they needed a singer to meet their goals. Together we could have worked very well, and profitably, in a collaborative arrangement, but we could not get beyond the “maybe” and tell our partner what we actually needed and had to offer. Instead we engaged in a traditional competitive negotiation which probably served the true interests of our clients the least. MODULE IV – MEDIATION SKILLS Textbook Reading I found the reading on mediation, and also ADR to be particularly interesting. As a lawyer who never practiced I now find myself advising business clients about court ordered mediation and the now prevalent ADR clauses. Not from alegal perspective, but from a business one. 10 | P a g e While both have great potential, I always advise clients to avoid them at all costs. Mediation has theability, at the very least, to cool down angry emotional parties who should never havegone to court. Unfortunately, I feel that courts use them to get cases off their dockets, if only for a short time, since most return after theclients have expended a great deal of money. I had a client who was ordered into mediation when a very heated dispute over the ownership of a company erupted, and both parties tried to force the other out. I watched as the very qualified mediator brought in psychological experts to counsel the parties and evaluate the origins of the dispute. I also watched the 6 figures spent on this experts wasted as the two combatants, ran back to court the second the mediation was completed. They could nothave cared less what the mediator said, or what the consultant said. Countless funds and time were expended on consultants and experts during the mediation which the parties ignored. I don’t like ADR, and would never sign a contract with such a clause (the obvious exception being the clause that everyone signs when they apply for a credit card, etc.). I’ve heard the head of industry groups that produce contracts with mandatory ADR clauses for their members, such as contractors associations, say that the customer never does well with ADR, but the contractor always requires ADR in the contract. I’ve rejected numerous contractors in the past month who were unwilling to drop mandatory ADR, regardless of their qualifications. They were good contractors, most were using form contracts, which they didn’t truly understand, and they were insistent on using the clause as opposed to drafting a contract which protected both parties’ interests. I was working with a client who had been litigating over the results of binding ADR for two years. Of course, Professor Moersen taught was teaching us at the same time that ADR was always binding, and it is, except when it isn’t. Most lawyers know how to resolve the problem of binding ADR if they want to, and I particularly enjoyed consulting with this client at the same time I was being taught ADR was binding. The client had been awarded an 8 figure settlement in ADR over a contract dispute. They would have probably been awarded far more with a jury, but they didn’t ask me when they signed the contract mandating binding arbitration. The losing party had been litigating over for the result for two years. The losing party had no legal grounds for their actions, but they really didn’t want to pay. My client asked me if there was any way that he could get paid, end the lawsuits, and he suggested a variety of meaningless actions his attorney had suggested. I said how much do you want to get paid?Obviously he had a great desire for this litigation to end, and more important to be paid. I suggested that he should litigate the losing party into paying, and he responded that all issues had been decided through the binding ADR (even though it wasn’t really binding on the otherparty, who was happy to continue litigating). I suggested that a good attorney might come up with another angle or two he could sue under. Bythe end of the week he was meeting with an associate of mine at Williams and Connolly, and more importantly a strategy to litigate was drawn up. By the time the new attorney had filed the fourth new lawsuit on my client’s behalf, an offer was received to make full payment with interest if the lawsuits were dropped. The prospect of defending an avalanche of new lawsuits, against a very good law firm, did not seem like a very good idea to the opposing party. 11 | P a g e My point, long and drawn out, is that there is always a way around binding ADR, and Mediation does resolve some disputes, avoiding litigation – especially if the mediator is qualified, though it can eat money and time for people who are determined to battle in court. Lecture Content My personal beliefs aside, the lecture makes clear the value that a competent mediator brings to a conflict, and how their skill can help the parties to resolve a conflict without escalating disputes. I wish I had seen the problems that existed in my first year team as one that could have been mediated in a traditional sense. My team mates, to some degree looked at me as the third-party in the following definition from class of mediation: “Intervention into a dispute or negotiation by an acceptable, impartial, neutral third-party who has no authoritative decision making power to assist parties reaching a mutually acceptable solution.” I never felt that myteam mates could work out the problem on their own, which is why after deciding that oil and water would never get along, it was best to get one of them to leave. Since I knew that one would never leave, due to her unique motivations for being in the program, I decided that the other team mate was the best candidate. In a sense, I may have acted more like a mediator than I realized, though not exactly like the type ofmediator that is envisioned in the lecture. Relying on my position of impartiality, I urged the team member that she would be better off in another part of the program, and while I had no power to make her go, used my impartial position to convince her that she would be happier. I successfully convinced her to go, and then worked to insure that the remainder of the team believed that we were a cohesive unit. Idid what was necessary to “save” what was left of the team so that it functioned. In a sense we reached a mutually acceptable solution when all of the strife that had existed evaporated. It may be a weakness or a strength, but rather than the conflict that existed when work wasn’t done right previously, I simply redid incorrect without saying a word. Unfortunately, I ended up redoing 90% of the work on team projects in order to avoid any conflict. Of course, the greatirony of this is that when we had our debrief before the second year began it was pointed out as my weakness that I did not confront my team mates and make them redo erroneouswork. While working to remove a team member might not bewhat is exactly considered the point in mediation,I think that the results in this case were extremely successful. Of course, mymeasure of success in this case is solely my own. My grades went up, and I did not have to field daily calls from various team members about the other team members. Unfortunately, my workload doubled as well as I ended up doing the full share of work that the departing team member had been doing, it was worth it to restore “happiness” or “serenity” to our team. At least my mediation restored my serenity. Our year together ended and the success of the mediation was clear in the sense that we survived the year, and my team mates consider me a friend. Obviously, I understand thatmediation is not intended or designed for one person to use to benefit themself, though my entire team, including the former team member, benefited from my actions. (I wonder if this raises a conflict of interest question from Ethics. I will probably never know). 12 | P a g e
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