Conflict Resolution

Httpwwwflickrcomphotosburps2955578As a business owner you will encounter conflicts; particularly with your fellow business partners.   As in any relationship, it helps to deal with these conflicts rationally.  Easier said than done, I know.

My favorite blog about blogging (Problogger by Darren Rowse)  has a post about "10 steps to conflict resolution."   Darren recommends:

    1.  Set a time and place for discussion;
    2.  Define the problem or issue of disagreement;
    3.  How do you each contribute to the problem?
    4.  List past attempts to resolve the issue that were not successful;
    5.  Brainstorm. List all possible solutions;
    6.  Discuss and evaluate these possible solutions;
    7.  Agree on one solution to try;
    8.  Agree on how each individual will work toward this solution;
    9.  Set up another meeting.  Discuss your progress;
    10.  Reward each other as you each contribute toward the solution;

All good advice when it comes to conflicts with your business partners.  I would like to add one piece of advice:  Contemplate the cost of the conflict.  What are you giving up by focusing your energy on winning the conflict?  How much would you gain by resolving the conflict as soon as possible? You will be surprised how much energy and money can be wasted on inefficient conflict resolution.

In the legal arena it also helps tremendously if you agree on a method of conflict resolution BEFORE any conflict arises.   Rather than bringing the conflict to court which can be extremely costly and time consuming, you may want to agree to mediation or arbitration of any future conflicts.

Mediation is a process in which a mediator helps the parties to reach a solution to their conflict.  The mediator does not have the power to decide the conflict. Think couples therapist without the couch.

Arbitration is a process where an arbitrator comes to a final decision (an award) that is binding on the parties.  Think judges without the court house, bureaucracy and robes.

The agreement to arbitrate or mediate could be in your partnership agreement, shareholder agreement, operating agreement or any other agreement that deals with the relationship between you and the other business owners.

Example of a Mediation Provision

If a dispute arises out of or relates to this contract or the breach thereof and if the dispute cannot be settled through negotiation, the parties agree first to try in good faith to settle the dispute by mediation administered by the American Arbitration Association under its Commercial Mediation Procedures before resorting to arbitration, litigation, or some other dispute resolution procedure.

Example of an Arbitration Provision

Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

The above provisions are just examples and you could agree to more details of your dispute resolution.  For example, you could agree on the number of arbitrators to be appointed, how they are to be appointed and by whom, and where the arbitration is to take place.   You do not have to use the American Arbitration Association; however, many businesses do, since they have offices all over the country and are (in their own words)  "the world’s leading provider of conflict management and dispute resolution services." 

For further information consult this very helpful guide to arbitration and mediation published by the American Arbitration Association:  A Guide to Mediation and Arbitration For Business People.

Finally, for the legal eagles, you can find New York law dealing with arbitration in Sections 7501 through 7514 of the New York Civil Practice Law and Rules.

****Legal Information in not Legal Advice****

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About Imke Ratschko

Imke Ratschko is a New York Attorney helping small businesses, business owners and entrepreneurs with all things "Small Business Law," such as litigation, contracts, business owner disputes, shareholder and operating agreements, sale or purchase of a business, investors, and starting a business. You can reach her at 212.253.1027.

One comment

  1. Two Great Small Business Legal Blogs

    I want to recommend two small business legal blogs (New York Small Business Law and Traci Ellis’ Blog), and hope you’ll check them out (and subscribe to their feeds): (more below the fold)