Friday, February 29, 2008

Mediation Quality Task Force (Mediator Analytical Techniques)

I have posted on the American Bar Association's Section of Dispute Resolution Task Force on Improving Mediation Quality report and its first two findings, Mediation Preparation, here, and Case-by-Case Customization, here. In this post, I will review and comment upon the report's third finding, the Mediator's "Analytical" Techniques. The task force found a substantial difference between the willingness of mediation users to have mediators apply various "evaluative" mediation techniques and the mediators' own willingness to do so. This is probably the most interesting finding of the task force and, for the development of mediation as a coherent practice and methodology, also the most perplexing.

Mediation users (in this task force report, users are counsel who represent parties before mediation rather than the parties themselves) approve of the use by mediators of both facilitative and evaluative mediation analytical techniques. Users believe by substantial majorities that it is important for mediators to use such facilitative techniques as the mediator's asking pointed questions that raise important issues, providing an analysis of the case that identifies important strengths and weaknesses and suggesting ways to settle the conflict. Mediators also agree that these techniques are valuable.

Where users and mediators differ are the appropriateness of using such evaluative mediation techniques as the mediator's offering an independent assessment of a party's case, such as by providing the mediator's own valuation of the case or a prediction of the likely court results, or applying pressure for a party to accept a proposed settlement. Users also believe that these evaluative techniques are useful, albeit by smaller majorities than with respect to facilitative techniques, while mediators are much more hesitant to find these evaluative techniques useful and by a substantial majority do not believe they are appropriate in any and all mediations.

At first blush, this is a highly perplexing result for mediation, since there seems to be a basic difference in understanding the appropriate rules of engagement between mediation users and mediators. Perhaps it is better for mediators to be more rather than less hesitant to venture forth with evaluative inputs, and the fluidity of mediation may prevent it from ever developing a common set of groundrules. However, the report goes on to identify factors that users find important in determining their own receptivity to evaluative inputs from the mediator, and it is in this list of factors that the report finds its greatest contribution.

Users seem to be voting for a situational approach to mediation, and are willing to have the mediator be increasingly evaluative, depending upon the following factors:

whether assessment is explicitly requested;
extent of mediator’s knowledge and expertise;
degree of confidence mediator expresses in assessment;
degree of pressure mediator exerts to accept assessment;
whether assessment is given in joint session or caucus;
how early or late in process assessment is given;
whether assessment is given before apparent impasse or only after impasse;
nature of issues (e.g., legal, financial, emotional);
whether all counsel seem competent; and
whether mediator seems impartial.

These results highlight an important process question that should be addressed before the mediation: the mediator should discuss with counsel not only the mediator's style and willingness to engage in both facilitative and evaluative mediation, but also counsels' preferences as to whether to participate in an evaluative mediation and under what conditions. This may seem to be overkill and may even put the mediator in the position of having to defend the actual application of his or her mediation techniques, compared to what was discussed in the pre-mediation conference. But the watchword for all mediations is collaboration, and if the mediator and counsel agree not only on the usefulness of evaluative inputs from the mediator but also the conditions for their use, for example only in caucus and after an impasse has been reached, then the mediator will likely be more confident in applying these evaluative inputs and counsel will be more receptive when they are made.


Thursday, February 28, 2008

Mediation Quality Task Force (Case-by-Case Customization)

I have posted on the American Bar Association's Section of Dispute Resolution Task Force on Improving Mediation Quality report and its first finding, Mediation Preparation, here. In this post, I will review and comment upon the report's second finding, Case-by-Case Customization. Surprisingly, the report seems to assume that mediation customization is easier said than (I have found) done.

This portion of the report starts with a plea for mediator flexibility and customization of the mediation to the particulars of the conflict.

"Customization is the element of preparation that involves planning a mediation process tailored to the needs of the parties and the dispute. According to focus group participants, the timing of the mediation, exchange of information before the session, and whether to have opening statements, are all elements that can be customized to each dispute. One participant in our first interview group complained that mediators too often handle their cases with a “cookie cutter” approach. Many others voiced essentially the same sentiment, and praised flexibility as a quality desirable in mediators."

The report goes on to mention the question as to whether to have counsel make opening statements as the most important element of a mediation that may be customized to a conflict, by either having opening statements where it is thought that each side needs to communicate to the other side the strength of the case or its necessary objectives, or by omitting opening statements where they could be too inflammatory and counterproductive.

I believe that opening statements are almost always useful, and I have omitted them only when the parties have confirmed to me that they have had substantial prior settlement negotiations; in such a case, the parties usually want to try to pick up where they have left off, reviewing what progress had been made or not made and why, on the theory that an opening statement will only rehash old ground.

Perhaps the most important customization issue, as far as I am concerned and which the report does not discuss, is the extent to which caucuses are to be used. As an ideal, I believe caucuses should be minimized if the parties are comfortable discussing their interests and objectives openly, and are able to listen to the other side carefully. If a mediator is able to limit caucuses solely to the private consideration of options and valuation of proposals, promoting careful consideration before a suggested deal is proposed or responded to, the mediation can take on an active rhythm that creates its own momentum, and caucuses can become productive. If everything is to be done in caucus and the mediator becomes a shuttle diplomat, the mediation becomes a torpid affair and the parties loses whatever effectiveness they might have had to engage and reconcile with each other.


Sunday, February 24, 2008

Mediation Quality Task Force (Mediation Preparation)

The American Bar Association's Section of Dispute Resolution Task Force on Improving Mediation Quality has issued its final report, and you can download a copy here. I summarize in this post the report's findings and will discuss these findings over the course of the next few posts, beginning in this post with mediator and user preparation for mediation. Every mediator and mediation user should read this report. Here's why.

The Report focused on four main issues that are important and contributed to mediation quality (the report focused on mediation in civil cases involving large commercial or other disputes in which parties are represented by counsel):

1. Preparation for mediation by the mediator, parties, and counsel
2. Case-by-case customization of the mediation process
3. “Analytical” assistance from the mediator
4. “Persistence” by the mediator

The report found that mediators and mediation users (by which it means counsel) believe preparation for mediation is an important criterion of success. Recommended preparation includes review by the mediator of existing documents and briefing regarding the claim, production by users of a mediation statement (designed in collaboration among the users and the mediator) for the mediator to review prior to the mediation, and holding pre-mediation telephone or in-person conferences to discuss issues and concerns that might be anticipated to arise in the mediation. These conferences can be separate meetings between the mediator and each party, or joint meetings.

An interesting conclusion in the report concerns whether mediation users should provide input with respect to process issues concerning the mediation in pre-mediation conferences.

"Perhaps the most interesting finding about the preparation phase was that sophisticated repeat mediation users wanted to have substantive input into the mediation process itself. Traditionally, the mediation process is controlled by the mediator and the outcome is controlled by the parties. We found, however, that in pre-mediation discussions, many users wanted to advise the mediator about process issues such as whether opening statements would be useful in a particular case, or about which issues in the case would best be handled in joint sessions and which in caucuses."

I have found that a mediator can "set the tone" for a constructive mediation in the pre-mediation conference, and to do this it is very useful for a mediator to invite suggestions from counsel regarding process. An inquiry into process is much more likely to lead to agreement among the parties and the mediator than any preliminary inquiry into substance, so a process inquiry can both help the mediator anticipate how to proceed as well as to garner party goodwill to proceed cooperatively. Process questions are more likely to represent low-hanging fruit than substantive questions, from the mediator's standpoint, and counsel truly appreciate the opportunity to help shape the process (as opposed to their experience in most courtrooms). Process inquiry is a good way to start off on the right foot.

The other interesting focus of the report was the question of the importance of the mediator's subject matter knowledge.

"To a very substantial degree, users endorsed the importance of subject matter knowledge, and in complex areas, subject matter expertise may be preferred. Those who value subject matter knowledge may be influenced in reaching their viewpoint by the understanding that a mediator may provide parties and counsel with opinions, analyses, or evaluations about certain aspects of the case or suggestions or proposals about how to settle—and that those with subject matter knowledge would be better suited to these tasks. Even in cases where users do not want the mediator to provide analytical assistance or to offer opinions, it is still often useful for mediators to have enough subject matter knowledge to understand the details and implications of the dispute, without requiring explanations from the participants during mediation sessions. This does not, however, take precedence over process expertise, which is essential for high quality mediation."

Subject matter knowledge is both a blessing and a curse for the mediator. It can be a blessing if the mediator uses his or her knowledge of the law and general practice in the subject matter field of the conflict to ask better and more probing questions, and to generate more insightful and realistic options. It can be a curse if the mediator starts to take a position on the merits of the conflict, sacrificing neutrality and losing effectiveness by doing so. The more I think I know in a mediation about the merits of a conflict, the less acutely I listen. As I always say to the parties in my introduction, I as a mediator decide nothing. I find no facts and I pronounce no law. Primarily, I say this to remind myself.


Wednesday, February 20, 2008

When Mediation Works

If you are interested in finding out how to improve the practice of mediation, one way of going about that task is to consider what types of conflict does mediation resolve well. If there are categories of disputes that lend themselves well to resolution by mediation and other categories that don't, then perhaps one can figure out what it is about mediation that fits well with one category or not with the other. If you understand how a tool is designed for some jobs but not others, then perhaps you can proceed to improve the tool.

Thinking about this some, it occurs to me that a mediator's effectiveness depends upon the absence of an outside authority. Essentially, a mediator is most effective when everything a mediator needs to help resolve a dispute is right there in the room...the mediator and the parties. If the mediator has to make an appeal to an external rule or authority to resolve the dispute, especially where the mediator can make no special claim of competence in applying that rule or authority, the mediator is probably working in a field outside mediation's best application.

Take, for example, disputes in the workplace. Human resource administrators are increasingly using mediation to resolve intra-employee disputes. Before considering whether mediation can be useful in a particular dispute, the employer should determine whether the nature of the dispute requires the employer to exercise its authority. If there is a legal question involved, for example, then the employer's legal department will need to get involved, assert the employer's authority and apply the appropriate legal rule. There is no benefit to be obtained by resorting to a mediator in this type of situation. This would also be the case in situations where there are important questions of broadly-applicable company policy that should not be implemented in an ad hoc manner, one mediation at a time.

However, it is not practicable to resolve many disputes that arise in the workplace by making continuous appeals to an employer's authority. These disputes may be referred to as social/political issues, in the sense that there are many questions of social recognition and power allocation among employees in the workplace that do not arise to a level of concern that affects the firm's economic results or general employee satisfaction. In these situations, if the employer stepped into each dispute, the employer would be trying to resolve what are essentially private matters where its authority is not necessarily dispositive; overuse of authority can tend to weaken it, and questions of consistency of treatment might erode the employer's claim that it is exercising its authority in an impartial matter. These private matters can only really be resolved once the parties agree that they have been resolved; hence, enter the mediator.

On the other hand, consider the workplace situation of disputes between partners of law firms. The principal disputes between law partners tend to revolve around compensation, conflicts (whether a partner can take on a new client where this representation may conflict with another firm representation) and allocation of associates (quantity and quality) to partner matters. Here, the law firm's preeminent authoritative rule agreed to by all partners in advance is to increase profitability. Every intra-partner dispute is understood by all partners to be properly decided by reference to whether any particular result will further the firm's objective of enhancing profits. Each firm will develop its own metric to determine how it should go about compensating rainmakers vs. the worker-bee partners, which new clients to take on, how to best allocate associate help to various kind of matters, and other questions that may create partner disputes. A mediator would not be helpful in this situation since no mediator can be adept at discerning or applying the balancing of interests that constitutes the particular firm's profit-enhancing modus operandi (which the firm may need to change on the fly as it responds to changing events). A managing partner or firm committee will decide these matters, as best they can, and all partners agree in advance that these are not private matters, but rather matters that relate to the profitability of all partners in the firm.

I sense that mediators often think mediation is potentially applicable to all kinds of disputes. But if a mediator senses that the proper method of settling a dispute is by resorting to the application of some rule or authority, with respect to which the mediator has no special competence, and not solely by obtaining the parties mutual consent, that mediator is probably involved in a dispute that should not be resolved by mediation.


Friday, February 8, 2008

Gains, Losses and Reference Points

I think no academic research has more relevance to mediation than Prospect Theory. If a mediator is sensitve to the principal tenets of Prospect Theory, there is a far greater chance that the mediator can convert party intransigence into movement towards settlement.

Falling under the general rubric of Behavioral Economics and developed by Nobel Prize winning psychologists and economists such as Daniel Kahneman, Amos Tversky and Richard Thaler, Prospect Theory examines what really concerns and motivates people who make real life decisions under conditions of risk or uncertainty...such as whether to settle a conflict. Prospect Theory's single most important surprise to me, as a mediator, is that parties are not really concerned with the actual end result of any decision. To a greater extent, parties care about the subjective value that they perceive that result to have, and this subjective value is determined by whether the end result is perceived to be a gain or loss.

Here's the rub....the same end result can be perceived to be a gain or a loss, depending upon the party's reference point.

At the risk of oversimplication, Prospect Theory holds, with relevance to mediation, that when people evaluate risky prospects, value is not assessed in the abstract based upon some end result but rather in terms of whether there has been a gain or loss relative to some reference point, and losses loom larger than corresponding gains such that there is risk seeking in trying to avoid losses and risk aversion in trying to achieve gains.

Risk aversion with respect to gains and risk seeking with respect to losses can be illustrated by the following problems posed to two different groups of subjects.

Problem 1. You are given $1,000. You are now asked to choose between A: 50% chance of winning $1,000 (and 50% chance of winning nothing), or B: a certain win of $500. 86% of the subjects chose B, the certain gain of $500 over the 50% chance to win $1,000, although the probablistic value of each choice is the same, an end result of $1,500.

Problem 2. You are given $2,000. You are now asked to choose between C: 50% chance of losing $1,000 (and 50% chance of losing nothing), or D: a certain loss of $500. 69% of the subjects chose C, the 50% chance to lose nothing over the certain loss of $500, although the probabilistic value of each choice is the same, an end result of $1,500.

So, the end results A, B, C and D each had equivalent end results (probabilistic value of ending with $1,500), but their respective perceived values are different, depending upon whether a loss or gain is entertained. Of course, whether a loss or gain is entertained depends upon the subject's reference point.

This example from Prospect Theory is relevant to mediators on many levels. First, a mediator has to be sensitive in the settlement of a conflict to exchanges of value between parties; the value being lost is more dear than the value being gained, even where the parties agree that the end result is appropriate. A corollary to this concept is that in any offer and counteroffer scenario, the party increasing an offer to pay the other party (and thereby incur an out of pocket loss), views that loss as being more valuable, a greater concession, than a decision by the other party to reduce its ask by a comparable amount (and thereby forgo a comparable gain). In effect, a $100 climb uphill is harder than a $100 slide downhill.

On a deeper level, though, I believe that many parties in conflict cling to their ex ante expectations prior to conflict, which is a different reference point than they find themselves in settlement ex post the conflict, so that even gains when measured from the reference point of conflict are in fact viewed by parties as losses when measured from the reference point of expectation held prior to conflict.

Especially when parties are negotiating a settlement in the shadow of litigation, a plaintiff's best alternative to a negotiated settlement (BATNA) is measured by the probabilistic return the plaintiff expects from litigation. In litigation, the plaintiff is seeking to be restored to its position ex ante the conflict, or to be placed in the position the plaintiff would have been in had the defendant performed, by being awarded damages equal to the benefit of the plaintiff's bargain. Any settlement offer made ex post the conflict, when measured from the ex ante reference point of what the party expects the court will award (which may be an unrealistically high value), is a loss, even though that offer is a gain when viewed from the reference point of the settlement conference room.

In such a situation, a mediator can try to bring a party back to the reference point of the settlement discussion, a reference point that is ex post the conflict, by engaging in reality testing and going over all of the risks and transaction costs of litigation, and by contrasting this with the quick and certain gain offered through settlement. But in so doing, the mediator will have to be patient, knowing that the party must make the Janus-faced decision of perceiving the gain, rather than perceiving the loss.


Monday, February 4, 2008

Splitting the Difference

Every mediation is different. Different parties, different conflict, different methods and strategies that can be employed by the mediator. I tend to try to tailor my approach to the particular situation of the conflict. Sometimes, I wonder if there isn't a mediation strategy that is one size fits all (I would settle for one size fits most)?

Thinking about it some, I think that there probably is.

I was thinking about the Ultimatum Game, and its implication for mediation. In the Ultimatum Game, there are two players; the first player proposes a split of a sum of money to be shared by the two players, and the second player's only move is to accept or reject the first player's proposal. If accepted, the players split the money accordingly. If not accepted, the players receive nothing. In this sense, the proposal is a take it or leave it ultimatum. There is no further move.

Typically, the least self-interested proposal to be made by the first player is a 50-50 split, which surely would be perceived by the second player as fair and therefore accepted. The first player may strategically try to improve upon this proposal for itself somewhat, trying to profit from the first-mover advantage, but the question is, by how much?

If the first player proposes a 99-1 split, the first player may believe that the second player would prefer to receive a token 1 than nothing at all, even though that results in the second player watching the first player walk off with 99. The first player would be smart to rein in this strategic temptation, in order to make sure that the first player won't be too insulted to accept a result in which the first player walks off with too much more than the second player (even though this is still a result that is better, moneywise, for the second player to accept than reject).

Often, in this type of situation, a proposal by the first player that marries respect for the second player to the first player's self-interest will carry the day; a 60-40 split proposed by the first player is likely to be viewed as acceptable by the second player. If the first party respects the second party, it is more likely that a fair proposal to split the difference will be made, which of course increases the likelihood that a deal will be made. Likewise, if the second party respects the first party, it is more likely that the second party will allow the first party to get more, but only just a little more, than the second party might think would be justified in an ideal world.

The implication for the mediator is that if the mediator can get the parties to recognize each other as deserving of their respect, then the mediator can then, but only then, proceed to the question of how to split the difference. Parties in conflict often do not have, or have temporarily lost, their respect for the other party. If the mediator tries to get the parties to split the difference that separates them before this respect is (re)established, it is less likely that a fair proposal will be made, or seen to have been made.

Parties in commercial disputes often say that "it is all about the money;" the dispute may only be about the money, but the settlement is about respect.