Resolve disputes before they get out of control

If you have been in business for more than a few hours, most likely you have had some issue that potentially could have led to a dispute. We are all humans with our own unique experiences. Our thoughts, feelings and intentions cannot be fully expressed, let alone always accepted by others.

The good news is that the vast majority of business disputes will get resolved before litigation or trial. The bad news is that even though a dispute might not go to trial, for some disputes, many hours, dollars and stress over contentious court proceedings may still be spent to resolve the problem.

A good rule of thumb to follow is that if a dispute is likely to be settled eventually, it makes sense to settle it earlier rather than later. This is especially true in business-to-business disputes in order to attempt to preserve the business relationship.

What are the issues?

For the typical insurance agency there are several common areas where disputes or misunderstandings can occur. Some of the most common are:

• Producer contract issue — account ownership, compensation, non-compete and trade secret issues, etc.

• Business partnership issues — compensation, ownership buy-out terms, etc.

• Disputes with outside parties — other agencies, insurance companies, vendors or clients, and;

• Employee issues.

Despite the best intentions of the parties some issues cannot be resolved with a few conversations. Both sides might view their respective position as being reasonable and their business practices as ethical. Even the law will recognize that reasonable minds can differ on issues.

As the attempt to resolve the dispute continues, it is important not to let each party’s position crystallize. Once one side becomes entrenched in its beliefs and position, then it will become that much more difficult to resolve, unless the other side concedes.

How to resolve disputes

The first step to resolve a dispute is to handle it yourself. There will be a few exceptions to this rule. However, a good open dialogue can go a long way in mitigating a misunderstanding or aligning two differing positions.

Keep in mind that with any regular business communication, when attempting to resolve a dispute it is important to not say or write down anything that you would not want repeated in front of a judge and jury. Be direct, fair and open. Listen and ask open-ended questions to understand the other party’s position.

If the issues are not resolved with a few attempts to handle it directly, then the next step might be to attempt to bring the parties together through mediation. Mediation is a good choice when parties are cooperative and they want to preserve the relationship. It is also helpful if there is a need to design a creative solution that the court system cannot develop.

Mediators are neutral third parties who set ground rules for the discussion. They will listen to the party’s position, ask questions to clarify positions or enhance understanding. The purpose of mediation is for the parties to air their differences, not to the mediator, but rather to each other.

Typically this takes place in a conference room where the mediator sets out the ground rules. Both parties are given uninterrupted time to have their say. The mediator then will usually separate the parties in different rooms in what is known as the caucus.

After learning the positions of the parties, with their respective strengths and weaknesses, the mediator will communicate with the parties separately in an effort to try and hammer out a resolution to the conflict. And here’s the good news: mediations are successful at resolving business disputes up to 90 percent of the time.

It should be understood that mediators don’t independently make the decision as to how the conflict should be resolved. Rather the mediator facilitates communication between the parties and gives them the tools to craft their own agreements.

Because mediation is informal, non-adversarial and keeps disputants talking directly, it is surprisingly effective. In fact, experts say that mediation is successful 80 percent of the time. In the United States, studies show high satisfaction rates on both sides, and that mediated settlements are far less likely to be protested or later attacked than litigated ones.

If mediation does not resolve the issue, then there might be the need to go to arbitration or litigation. With few exceptions, litigation takes too long, costs too much, and often leaves even the winners feeling like victims.

A chief disadvantage to using the court system is that the parties lose all control in the outcome. Basically a judge or jury is asked to make the decision. The nature of the courthouse is that the court system makes both a winner and a loser. Every loser loses and many winners likewise lose, because of expense, time and attention away from the business.

We have not even touched on what legal fees can be to litigate a case, which can be quite high. Often the loser has to pay the legal fees of the winner, besides a fine. Remember, even if your party wins, you don’t get paid for all of your lost time and headaches for going through the process.

Moral — avoid lawsuits whenever possible and if you get involved in one, work toward mediation.