When innovation meets convention in business contracts, the fur can sometimes fly. But it doesn’t have to be that way. Today we welcome David Watt, Senior Consultant at Mia, to discuss the concept of mediation as a form of Alternative Dispue Resolution.
There is a real buzz around the ICT sector at the moment regarding a renewed conversation on innovation – whether surrounding business models, technology, or collaboration, funding and digital business.
There is also a large economic sector that currently comprises more “traditional” business relationships and client/supplier agreements, such as outsourcing software, hardware, application support, cloud services, consulting etc. This traditional contracting model doesn’t always foster innovation.
At the intersection of these two paradigms is the need for organisations and individuals to effectively work together to achieve the value driven by innovation without losing the protection and operational logistics defined by the contract.
It is inevitable (and perhaps more so as the pace of innovation accelerates) that there will be differences of opinion about what to do when innovation knocks on the door. Especially if expectations, perceptions, desires and outcomes are not as all would prefer. These situations can lead to disputes that might be small at first but have the potential to escalate to something with significant consequences and cost for all parties.
At this point the parties dust off the contract and we know we are heading for a costly exercise.
But the overall costs are not just those associated with legal action. Costs also include distracting management from spending time on the fundamentals of their own organisation – especially if they lead to protracted periods of time away from core business.
Disputes can also be harmful in other ways, because they tend to destroy trust and goodwill. For a supplier, it can mean losing hard-won business and gaining bad publicity. For an end-user, it may lead to replacing an existing supplier or partner, a time-consuming and costly exercise – especially if significant investment has been made on building up the supplier’s ‘client knowledge’.
How to manage disputes
Who wants to go into a dispute with government? Who wants to raise a dispute with a large tier 1 vendor?
The growing trend in both Australia and overseas is the deployment of Alternative Dispute Resolution (ADR), particularly mediation. Mediation is a low cost, effective and timely method of resolving such disputes and maintaining and enhancing the goodwill between the parties involved – whether those parties be clients, suppliers, business partners, business owners, executives or shareholders.
In mediation, the parties in dispute come together to discuss their issues with the assistance of a trained and independent mediator. It is a process in which the parties are assisted to identify and explore options for the resolution of their dispute. The mediator will not hand down a decision; rather they will guide and help the parties reach their own agreement. The aim is to achieve the best possible outcome for all parties.
Different from negotiation, mediation seeks to understand the needs of each party and how to support those needs. Negotiation, on the other hand, seeks to deliver a position that is acceptable to each party.
Why mediation works
In the seminal book Getting to Yes (Fisher and Yury, The Penguin Group), the authors give an example of how understanding each side’s interests, as opposed to their negotiating position, can lead to the best possible outcome.
This is the example of two young children fighting over the last orange in the fruit bowl. The parent can’t decide whether to give the orange to the daughter, because she has been best behaved this week, or the son who missed out on the oranges last week. In the end, the parent compromises, cuts the orange in half and gives each child a half. Whereupon both children burst into tears.
If the parent had asked each child WHY they wanted the orange, they would have discovered that both children would have been fully satisfied if the peel had been given to the daughter (as she wanted to bake a cake) and the juice to the son (who wanted to drink it). This is a simple scenario, but it shows how discussing and understanding needs can lead to the optimal outcome.
While not all disputes will need mediation, there are significant benefits for organisations to be more active in exploring where and when mediation should be considered a higher-order option to resolve difficult situations. Even very complex disputes with high stakes.
Who knows, as well as creating a clear outcome, the process of mediation may build stronger business relationships between client and supplier, where both parties better understand each other.
This post first appeared on the Mia website.
About David Watt
David consults with clients on holistic government sales and marketing strategies, from initial approach through to contract negotiations. He also heads up Mia’s Dispute Resolution and Negotiation services to assist both government and suppliers successfully resolve difficult and complex commercial/delivery issues that can arise before or during the period of a contract. He is accredited under the National Mediator Accreditation System (NMAS), an industry-based scheme overseen by the Mediation Standards Board (MSB) of Australia.
Mia provides specialist advice on business and procurement practices in the public and private sectors, with a particular focus on helping companies generate business opportunities with government. Our comprehensive suite of consulting services includes developing strategic engagement strategies for both businesses and government, support for tendering, procurement and governance, dispute resolution and negotiation, project management, and quality management.