Managing Disputes in Times of Economic Turmoil
With the stock market spirallling down and the British economy heading into recession, we now have to face the reality that with money tight there will be more conflict between customers and suppliers, employers and employees and directors and managers. With more conflict comes more litigation.
Generally when the economy is going great there are fewer disputes and with less financial pressure from the economy as a whole they can be resolved in a more benign environment. When business is going really well, and there are other ways to make money, companies don't think as much about enforcing strict contract terms. It doesn't make as much sense financially to pursue legal issues as it does to pursue other business issues.
In times of high employment and financial solvency companies tend to ‘live with’ poor performing employees or manage around conflict with departments. But when the going gets tough and every employee has to make a direct contribution and there’s no time to tolerate interdepartmental squabbling conflicts tend to escalate and have to be resolved, often resulting in employee disputes going all the way to Employment Tribunal.
Evidence from the Lord Chancellor's Department is that the number of winding up and bankruptcy petitions being issued is increasing. A Legal Week poll of more than 100 partners in May found that litigation was cited as the most in-demand practice area, highlighted by 54% of respondents.
As the recession bites, companies will need to review credit terms on a regular basis to spot failing companies and will need to respond very quickly if they are to recover their debt. Firms have to think more carefully about retaining staff if their order-book dries up and how to handle any potential layoffs in the least damaging way.
A Costly Solution
In litigation even if you are a winning party you may bear some or all of the costs of the case. And then there’s the management time wasted and reputational damage which can sometimes follow. Litigation strains relationships, especially when the combatants are formerly close associates. People caught in the middle have their loyalties sorely tested, and often respond by avoiding both sides. Nights spent worrying about the litigation are also a cost. Litigation's initial "rush" can be invigorating. It soon wears off, replaced by slogging through document after document, tiresome demands from the opposition, and unwelcome lawyer bills.
Why Mediation is the Right Solution in a Tough Economic Climate
- Mediation represents a positive solution in these economic times because of the high success rate. The latest data I have from the National Mediation Helpline report a success rate of 66% for the 787 mediations conducted. My own experience of conducting mediations is that the success rate can be higher. An approach that achieves a mutually agreed settlement has to be much better than to take a matter to Court, when it is often said the only winners are the lawyers.
- Mediation is a solution which will save legal cost and enable both parties to move on with a settlement that they can both live with. In particular in employment disputes it is much better to have a solution which may enable the employment relationship to be preserved in some form.
- In the current climate the introduction of mediation policies within disciplinary procedures and grievance policies is a very sensible and cost effective approach. And within your terms with suppliers try to include mediation clauses and seek to promote the benefits of mediation.
- Litigation is too expensive to be the first reaction to any crisis. Having a mentality of keeping emotions in check will serve far better. Look to the alternatives to Court. Litigation should be considered only once the alternatives are ruled out. Once you have started a litigation it is quite difficult to stop.
- Keep talking even when times are tough. Focus on benefits. An employee who is suing a former firm is much more likely to have a benefit in keeping some form of relationship with a that employer. If you can avoid the dispute becoming acrimonious despite the temptation both the employer and the former employee will benefit.
- When you do mediate, prepare effectively and please do not treat the mediation like a Court case. Ultimately the skills of negotiating within mediation are different to those of winning a Court case so remember to use those differing skills.
If you are facing disputes resulting from the current financial crisis contact Justin Patten for an initial assessment of whether your conflict could be resolved more quickly and cost effectively through mediation. Call Justin on 0844 800 3249 or email Justin here.
Mediation instead of Court for Commercial Disputes
Mediation in Action