The Impact of Mediation in Business Decisions - Research Proposal Example

Lecturer: Module: Due The Impact of Mediation in Business Decisions Overview Disputes in business abound all around the world just like in other areas of life, ranging from inter-business disputes to those occurring within an organization. Examples of such disputes among businesses include cases of broken contracts, sale of defective products to each other and intellectual property issues. Disputes may arise among employees, or labor union disputes against the company due to issues such as retrenchment, promotions, rewards, pay rise among a host of other problems. In these cases, conflict resolution is sought to settle the problems. There are several channels followed by different companies in making compromises in decision making including litigation, negotiation, mediation and arbitration. It is clear that more and more businesses are finding litigation a less popular option, and are seeking to adopt other channels. While mediation is quite efficient in making sound business decisions, few businesses make the decision to take it. It is thus imperative that considerable wealth of information needs to be generated on mediation, based on case studies. This will involve studying the mediation decision in terms of evidential reasoning, risk analysis, knowledge of what the decision entails and finally the impact of the decision on the business. Did mediation solve the problem or deadlock in decision making to the company’s satisfaction? This research will analyze mediation in all these areas with a bid to conclude on whether the decision to undertake it is satisfying in comparison to other methods. Thus, this research is particularly synchronous with Manchester Business School’s focus on addressing the issues affecting business leaders across the world. Under MBS, this research falls in the division for Decision analysis, support and risk management. Specifically, it will harmoniously integrate within the Decision and Cognitive Sciences Research Centre (DCS), where the decision to undertake mediation by businesses will be studied in terms of evidential reasoning, risk analysis, and impacts. LITERATURE REVIEW Business disputes are usually settled through several ways which can be broadly categorized into two; litigation and alternative dispute resolution. Litigation involves visiting law courts to have the dispute settled by a judge while alternative methods include negotiation, arbitration, mediation and arbitration. There is compelling evidence that the decision to take alternative dispute resolution methods over litigation is a wise one especially in terms of two very important things; time and cost savings (Paul 1). Other benefits include the fact that both parties conscript the services of neutral expertise (National Arbitration Forum 4). Alternative dispute resolutions also bring about flexibility which is absent in litigation. This is through innovation and ingenuity in the processes involved in a fashion that a court may not undertake (5). Amicability, confidentiality and party representation are also other benefits over litigation (6). One of the main setbacks to these methods of resolution is the compromise involved, which may be counteractive. The other disadvantage is that the lack of public scrutiny (Spangler, 2003). To disambiguate among the various strategies used in alternative dispute resolution is important since several business leaders are largely ignorant on the different concepts. First, mediation differs from arbitration in terms of the fact that arbitration is an adjudicative process that involves hiring an adjudicator to hear out the dispute and make a decision that is usually enforceable in court. In mediation however, the mediator does not make a decision for the parties, while another difference is that mediation is a voluntary process with nonbinding agreements (Shakman et al, 2001). Among the methods involved in alternative dispute resolution, it has been found that most businesses decide to use arbitration and negotiation over mediation, despite of much knowledge on what it is and its obvious advantages. Although most companies are aware of mediation as a way of developing a consensus, only a few have actually ever had the experience of undertaking it (Latreille 1). The biggest disadvantage to negotiation is the fact that it is hampered by a lack of knowledge of the underlying problem by the negotiators. Their failure to recognize the actual or root cause of the dispute results in futile efforts, which alongside hard-line positions with both parties focused on winning, may make it difficult to pursue. The disadvantage of deciding to undertake arbitration is that it can turn out to be as costly and time consuming as litigation, besides the fact that the decision arrived at by the arbitrator is final. As a result, lack of satisfaction by one of the parties may not address the differences between the two parties, hence unresolved negative perspectives still persist (The Negotiation Experts, 2009). Mediation is a resolution system in which a trained professional guides the conflicting parties to arrive at an amicable resolution. Ample opportunities are given to each party to present its position, leading to review of options and mutual needs hence finally bringing about a resolution that is responsive to both parties and one which can be abided to by both parties (Leung 1-01). Through involving a mediator, the dynamics of the discussions are altered as the mediator encourages communication, handles differences in perception and party interests, provides an assessment of alternatives to the settlement, encourages flexibility and softening of stance, helps the parties focus on the future, and suggests amicable and creative resolution that satisfies all parties (1-03). The mediator’s role in the process is to facilitate communication between the parties in a dispute and keep them focused on the important issues as opposed to side shows. The mediator does not make the decisions, instead leading the parties to make the solution themselves. Sometimes the mediator may come up with ideas and suggestions regarding the dispute but these cannot be imposed on the parties. The result of a mediation process is a resolution that is acceptable (to a large extent) to both sides. A good mediator balances impartiality with empathy to both sides and also persuades the parties from taking hard line positions (Honeyman & Yawanarajah, 2003). It is clear that mediation is the best decision making avenue that a business can adopt to arrive at a common ground. It is a powerful tool that can be adapted by businesses of all sizes and operational complexity since it is quite flexible. It is a means of dispute resolution that focuses a great deal on problem solving besides just liability, which has the effect of maintaining future relationships between the businesses. It handles both emotional and financial elements of a dispute hence it can also be important in dealing with potential future disputes between the two parties (Leung 14-151). Some of the other advantages specific to mediation as opposed to other strategies for alternative dispute resolution and litigation include the fact that it gives both parties considerable control of the proceedings since the final agreement can only be arrived at with their consent; the mediator is only a facilitator, a position that cannot be taken by judges or arbitrators. Mediation addresses the emotional obstacle to proceedings since both parties have a chance to be heard, besides the extra advantage of tackling hostility and suspicion. It is also the most time saving and cost cutting form of dispute resolution when started early since there is no time wastage in pointless investigations and inquiry (Bates & Edwards 1-2). Mediation is also accompanied by some disadvantages. According to Leung mediation does not set precedents, guidelines or standards that will govern the behavior of parties in case of a future dispute (15-01). Mediation is also found wanting in disagreements where fundamental differences in values and principles occur, for instance in matters involving nuclear power (15-04). Besides this, there are also cases where a party employs mediation as a way of delaying a certain issue from being agreed upon or court proceedings for that matter (15-05). Leung summarizes cases that cannot be handled through mediation as those in which there is public interest involved, where the interpretation is purely legal, where parties may use mediation in bad faith, a serious power imbalance and when matters of value cannot be compromised (15-09). Besides this disadvantage, there is also the issue of lingering questions about a possible lack of amicable solution that would lead to resorting to litigation. In such a case, one or both parties may feel that mediation may open up their case to the opponent, hence refrain from being open enough and ultimately hamper the efficiency of the process thereby slowing decision making. This is where a mediator is most important especially in assuring both parties and making them confident about the process (Shakman et al, 2007). In case a business has weighed its options and decided that mediation is the best way to arrive at an agreement regarding a particular issue, the first consideration is the state of the issue in terms of whether other measures have been exhausted. Leung recognizes that the timing of mediation is of particular importance to arriving at an agreement. The first scenario is pretrial mediation, where formal lawsuits have not been started, or before arbitration has been pursued. Pre-suit mediation is accompanied by several pros and cons. The advantages include avoiding incurring of legal fees and also the fact that there is no pressure from court deadlines and pending cases, hence flexibility. The main disadvantage is the lack of discovery of your opponent’s position and strength against you that would have been obtained after institution of lawsuits and court hearings. In some cases judicial dismissal of the case and direction to settlement may provide the best tone and setting for mediation. The other scenario for mediation is pre-verdict in a court of law or by and arbitrator according to Leung (2011). The actual mediation first begins with approaching the opponents in the disagreement and then selecting a mediator. The agreement to undertake mediation may be the consequence of a pre-existing formal understanding between the parties usually dictating that in case of a stalemate; negotiation, then mediation followed by arbitration and lastly litigation is the route that will be followed. Where this is not the case, it is a realization that mediation is the best cause of action that leads people to it. The things to consider in selection of a mediator include impartiality, experience in dispute resolution, commitment, social skills, whether a lawyer or not, philosophy, retired or practicing judges and finally their reputation. This is then followed by drafting of a mediation agreement which contains all the terms that will guide the process. (Shakman et al, 2007). After an analysis of what mediation is, the advantages and disadvantages and how it is carried out, the next logical step is to examine its prospects in the future as a favored method of decision making in business when the disagreements are intense. As of the moment, mediation is a component clause of several contracts for example in airport projects (Leung 16-01). In a place like Hong Kong, the judiciary has already taken steps to mainstream mediation by requiring that all legal representatives have a duty in aiding the courts to assist disputing parties to resolve through mediation (16-02. To instill the use of mediation within a business for better decision making in times of heated disagreements, expedient education of practicing legal representative, the judiciary, law students and the public in general needs to be undertaken (16-05). RESEARCH DESIGN AND METHODOLOGY Research Design: The focus of this study is to determine the impact of mediation in business decision making processes through determining the attitude of businesses that have experienced use of mediation in a past time and those which have not. Attitudinal statements will be used to gauge whether businesses consider their decision to undertake mediation as being wise or ill-advised, and whether they would make a similar decision in the future. The same statements will be used to determine whether a lack of knowledge and/or experience in use of mediation has a bearing on the perception of mediation by businesses. It is expected that a business that has previously gone through mediation and found it satisfying will be ready to do the same in case of a future disagreement while one that found mediation to be a bad experience will resort to either negotiation, arbitration or litigation. Giving favorable answers for attitudinal questions would be indicative of satisfaction with the mediation in decision making process, and thus in extension willingness to practice mediation in the future. Similarly, unfavorable answers would indicate dissatisfaction with mediation and thus shunning the decision to adopt it. The research design will basically involve random sampling of companies with previous experience in mediation and letting them answer attitudinal questions. In a 5-point likert scale, their answers will be weighted depending on strength of their answers as: Strongly agree=5, Agree=4, Not sure=3, Disagree=2, and strongly disagree=1. A correlation based on the attitudinal questions will then be done, followed by regression analysis using a probit model. The data analysis will include calculation of means, correlation analysis and regression analysis In the case of random samples which include businesses that may or may have not used mediation, the regression analysis is expected to indicate that mediation is favored by certain categories of businesses as opposed to others. Larger businesses are more likely to have existed longer and used mediation more times as compared to smaller ones. Reasoning behind this is also due to the fact that smaller firms would have existed for shorter periods hence a possibility of not having been involved in a dispute necessitating resolution. Literature also indicates that larger firms are more likely to view mediation as good means in arriving at an amicable solution in comparison to smaller businesses, while the smaller businesses may conclude that mediation is suited for larger ones. Larger firms are also less likely to view mediation as being expensive in comparison to smaller ones (Latreille et al. 10; Leung 2011). For businesses that have heard of mediation but have not made the decision to undertake it, the most significant observation would be a relatively strong agreement that mediation is good as a last resort in business disputes resolution. This is assumed to be largely due to a misperception that is overcome by experience (14). It is however expected that firms that have gone through the experience of mediation will in general terms agree with A and B, and disagree with C, D, and E. that is; mediation is a good tool for dispute resolution, mediation results in satisfaction for both parties, mediation is not only suitable for use as a last resort for developing agreements, mediation is not only best suited for large businesses, and mediation is not an expensive vehicle in decision making. The expected difference according to size of business may be with regard the strength of agreement or disagreement, but they are not expected to be significant (Latreille et al 11). The expected results after collection of data and analysis are that the decision to undertake mediation in decision making goes a long way in changing the mediation perception. It is expected that the studied businesses will significantly agree with favorable attitudinal statements while significantly disagreeing with unfavorable statements with regards to use mediation in decision making. This will be indicative of a situation where the decision to take up mediation is based on evidential reasoning accompanied by experience of the risks and benefits involved, hence a knowledge driven decision to adopt mediation in future cases of business decision making. METHODOLOGY First, a random selection of businesses spread from the following sectors and descriptions (2 for each category, one with experience of mediation and the other without, to make a total of 8) will be performed: Microenterprises Small businesses Medium businesses Large The categorization will be based on the following criteria; microenterprises are companies with 1-9 employees, small businesses employ 10-49 individuals, medium businesses employ 50-249 and lastly large businesses employ above 249 individuals. The companies will be requested to rate their experience of use of mediation to aid in decision making using a 5-point likert scale adopted from Johnson (Johnson 2, 5). The same scale will be used for companies that have not used mediation before. The scale will be based attitudinal statements according to previous mediation experience as follows: Mediation is a good tool for decision making (A) Mediation results in satisfaction for both parties (B) Mediation is only suitable for use as a last resort for decision making (C) Mediation is only best suited for large businesses (D) Mediation is an expensive decision making strategy (E) A distribution table will then be drawn basing on the strength of agreement to the attitudinal statements above as shown below: Table 1: Attitudes to Mediation A B C D E Strongly agree (5) Agree (4) Not sure (3) Disagree (2) Strongly disagree (1) Mean (mediation experience) Mean (no mediation experience) Correlations from data collected will then be established as shown below: Table 2: correlation Analysis of Attitude variables A B C D E A B C D E It is expected that the positive statements (A and B) about the use of mediation in decision making process will all be positively and significantly correlated, which will be similar to the negative statements (C, D and E); that is, mediation being a good tool for decision making in case of disputes will be positively correlated to mediation providing satisfaction to the parties in dispute, while its suitability only as a last resort will positively correlated to its suitability only for large businesses and its expensiveness. These data sets will then be used to generate a table to be used in a probit model as shown below: Table 3: Means of variables Variable Description Means Mediation experience No mediation experience Microenterprise 1-9 employees Small Business 10-49 Medium Business 50-249 Large Business Above 249 A probit model for regression analysis adopted from Latreille’s, Buscha’s and Conte’s (Latreille et al 12) work will then be used to establish whether there are associations between the size of the company and the attitude towards mediation as shown below: Table 4: Probit Estimates A B C D E Microenterprises (1) Microenterprises (2) Small business (1) Small business (2) Medium (1) Medium (2) Large (1) Large (2) CONCLUSION Mediation in decision making can prove to be a worthy path to follow especially in cases where solid stalemates arise. Many organizations the world over have opted for mediation at the expense of other forms of settling issues e.g. litigation. With the above stated methodology, analysis of the results will be carried out depending on the individual category under study. As earlier stated the business categories are microenterprises, small businesses, medium businesses and large ones. In each category random sampling technique will be used. Questionnaires and interviews will be the major source of information since this research is mostly qualitative. These methods are best suited since through them one is able to receive direct feedback on the use and efficiency of mediation as a tool to arriving at crucial decisions. The research will aim at indentifying the impact of mediation in business decisions. Some of the possible conclusions are that the larger the organization the more likely is the need to use mediation due to the complex nature of decision making process. Another is that mediation has a relatively higher impact in business decisions than many other forms like litigation. Future research to be conducted on the subject should fundamentally focus on how best to overcome the few shortcomings of mediation as briefly stated earlier. Works Cited Bates, John B. & Edwards, Bruce A., Mediation: The Pursuit of Compromise - Mediation in Business Disputes. (1994) 1-2, accessed 9 September, 2011. http://findarticles.com/p/articles/mim1272/isn2586v122/ai14995088/ Honeyman, Christopher & Yawanaraja, Nita. Mediation, Beyond Intractability. (2003), accessed 9 September, 2011 http://www.beyondintractability.org/essay/mediation/ Johnston, T. Knowledge and Use of Mediation in SMEs, Acas Research Paper, 2008, No. 02/08, 2, 5. Latreile, Paul, L., Buscha Franz & Conte Anna, SME Attitudes Towards Workplace Mediation: The Role of Experience. Westminster Business School (2010) 1, 10-14. Leung, Raymond H. M. “What makes a good mediator?” Journal on Mediation. (1). Hong Kong Mediation Centre. August 2011. Print. Maiese Michael, Negotiation. Beyond Intractability. (2003), accessed 9 September, 2011 http://www.beyondintractability.org/essay/negotiation/ National Arbitration Forum, Business-to-Business Mediation/Arbitration vs. Litigation. (2005) 4-6, accessed 9 September, 2011 http://www.adrforum.com/users/naf/resources/GeneralCommercialWP.pdf Paul, William G., Arbitration vs. Litigation in Energy Cases, Presentation at the First Annual Energy Litigation Program. (November, 2002) 1, accessed 9 September, 2011 http://www.adrforum.com/articles/pdfs/Paul-pdf.pdf Shakman, Michael L., et al, Mediation of Business Disputes. Alternative Dispute Resolution (Ill. Inst. For CLE, (2001), accessed 9 September, 2011 http://www.millershakman.com/press2.html Spangler Brad., Alternative Dispute Resolution (ADR). (2003), accessed 9 September, 2011 http://www.beyondintractability.org/essay/adr/ The Negotiation Experts, The Negotiation Problem. (2009), accessed 9 September, 2011 http://www.negotiations.com/case/negotiation-problem/ Leung, Raymond H. M. Hong Kong Mediation Handbook. Thomson Reuters, Sweet & Maxwell, Hong Kong. 2009. Print. Read More