New Hampshire Bar Journal
2005 Summer, 38.
How a Mediator Enhances the Negotiation Process
New Hampshire Bar Journal Volume 46, No. 2, Pg. 38 Summer 2005 How a Mediator Enhances the Negotiation Process Bar Journal Author - Attorney Peter Y. Wolfe
How often have you heard attorneys say, "We don't need a mediator; we can negotiate this dispute ourselves?" The perception that attorneys can resolve their clients' disputes without the assistance of a mediator is only partially correct. Research has shown that attorneys frequently are unsuccessful in negotiating a settlement even where a range of settlement possibilities exists.(fn1) In other instances, research indicates that while a settlement is reached, the outcomes are far from optimal for one or both parties.(fn2) These studies indicate that introducing a mediator into the negotiation process enhances the likelihood of resolution and increases the value of what is distributed to each of the parties.(fn3)
What does a mediator add that enhances the negotiation process? Barriers exist that prevent resolution or inhibit the distribution of value to the negotiating parties. These barriers are strategic, cognitive, and structural in nature.(fn4) Strategic barriers are those that inhibit the exchange of information between the parties needed to find an optimal resolution. They exist because parties fear that if they are completely honest they will be exploited. Parties use tactics aimed at achieving their individual objectives without regard to the other side's outcome. These negotiation traits inhibit the informational exchanges necessary to exploit the differences in resources, interests, relative valuations, forecasts, and time and risk preferences necessary for resolution of the dispute.
In addition to strategic barriers, how parties perceive their situation creates another layer of obstacles. These barriers are cognitive and relate to how individuals process information. They distort how parties view their situations, causing a departure from the rational economic model of party decision-making. This model assumes parties choose outcomes that make economic sense. However, research demonstrates that there are deviations from this model and that parties fail to reach an agreement even when objectively viewed, the proposed resolution makes economic sense.
The last barrier relates to the structure of the negotiation process. When parties use attorneys as agents to conduct the process, conflicts may emerge between what is best for the agent and what is best for the party. These differences in certain circumstances can stall or prevent resolution. Also, negotiations conducted by attorneys as agents fail to take into consideration the importance of the party participation. Studies have documented the importance of parties feeling that they were heard and understood by the other side. When this occurs, parties will listen to what is said by the opposing side and move from their original positions, something that rarely occurs when attorneys negotiate for their clients.
This article focuses on why mediation improves the efficiency of the negotiation process and helps overcome these process obstacles. It addresses the strategic and cognitive barriers that directly affect parties' negotiations and discusses how the introduction of a third-party mediator overcomes these impediments. It also discusses the structure of the process and how to allow for party participation. Besides these efficiency issues, there are other reasons why parties should mediate their disputes. They relate to the individual growth that is possible with mediation when parties are empowered to make decisions and learn to see themselves and opposing parties with a new and altered perspective. These topics are beyond the scope of this article but are other important reasons to use mediation.
STRATEGIC BARRIERS TO NEGOTIATION
Typically, parties negotiating legal disputes try to achieve a predetermined goal or objective, generally at the expense of the other party. They see the dispute as a zero-sum situation where one side's gain means there is less available to the other side. To maximize a client's outcome, a negotiator may employ many techniques, including the use of hardball tactics, use of misdirection, or use of positional bargaining. Because parties know that this is how the process is conducted, they withhold information to gain an advantage over the other side. They try to deceive or mislead the other side regarding their true intentions, priorities, or objectives either because they are afraid of being exploited if they are open and candid, or they hope to manipulate the situation by creating uncertainty or confusion about their ultimate goals. This results in a lack of reliable information available to either side, making it almost impossible to find a resolution that maximizes each party's respective gains or minimizes their loses.
Negotiation typically involves both distributive issues (who gets how much) and efficiency issues (how to make what is distributed larger). There is an inherent tension between these two issues.(fn5) In order to make what is distributed larger (creation of value) parties must be open and candid with each other about their underlying objectives, interests, and needs so that a variety of options can be analyzed and compared. However, when it comes to the distributive aspects of bargaining, full disclosure by one party that is not reciprocated by the other, will place the fully disclosing party at a significant disadvantage. Unreciprocated disclosure allows the opposing negotiator to exploit the disclosing party's openness by using the information to obtain a larger piece of what is distributed.
An example of how this may look would be a negotiation between plaintiff's counsel and defendant's counsel regarding the settlement of an automobile accident. The plaintiff suffered $10,000 in special damages with some residual low back pain. The plaintiff is very upset about how she was initially treated by the insurance adjuster who implied that her injuries were not serious. Later she went to an attorney who told her that her case was worth $50,000. The plaintiff wants this lawsuit to go away and definitely does not want to go to trial. She would be willing to settle for $25,000 if the insurance adjuster apologized to her. The defendant's attorney on the other hand values the case at $25,000 but is worried because the plaintiff will make a very sympathetic witness. In addition, the driver of the car, the defendant, will make a poor witness because he feels responsible and believes the plaintiff should be adequately compensated even though the insurance company contests liability.
In this situation it is difficult for either party to know the underlying preferences of the other party as each will tend to bluff, puff, or lie about his or her underlying interests and preferences, and each will withhold information either to avoid being exploited or to exploit the other side. Plaintiff's attorney will not disclose that the plaintiff does not want to go to trial and would settle for less if there were an apology, but instead will suggest that the case is worth over $50,000 and that they will go to trial to obtain what the plaintiff is entitled to. On the other hand, the defendant's attorney will not disclose that the defendant will be helpful to the plaintiff at trial or that the plaintiff will make a good, sympathetic witness. In this situation, there is a lack of reliable information being shared by the parties, preventing them from maximizing the outcome for each party. The result is a process that may result in impasse or inefficient distribution of the negotiated items. To understand their relative positions and/or to enlarge what is distributed - to create value - requires an openness that many parties are unwilling to reciprocate because of the fear of being exploited or because they feel that they must "win."
These results can occur even when there are potential gains for each side from a negotiated settlement. In the current example, a possible overlap exists between what the plaintiff wants and what the insurance company will pay. But it is unlikely that the plaintiff's attorney will propose any settlement incorporating an apology; nor is this possibility something that the defendant's attorney would be aware of.
The desire to win can also create impasse even when the only issue is the distribution of the excess overlap between the parties. An example is a situation where the defendant is willing to pay $95,000 to settle a personal injury case and the plaintiff's bottom line is $75,000.00. If each side learns this information, the negotiation then involves how to distribute the $20,000 excess. Will there be an agreement? An agreement probably will be reached, but not necessarily at this time. Each side will use positional tactics fighting over who will receive the larger portion of the surplus. The tension between the distribution of the $20,000 and the value of resolving the case may result in no deal until the eve of trial, when the increased transaction costs force a settlement.
How a Mediator Helps to Overcome Strategic Barriers
How does a mediator overcome these strategic barriers? First, the mediator acts as a buffer between the parties, moderating or eliminating many of the hardball tactics used. The mediator accomplishes this by translating the information...