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Keep a diary

The outcomes of past disputes, wins or losses (or the ones in the middle), are inadequate indicators of conflict management’s performance. Proper performance measurement requires that decisions, grounds thereof and achieved results be tracked in a systematic manner. In the absence of such data, only softer indications of performance are available.

This blog post and four subsequent posts intend to shed some light on the question:

  • How should my corporation address corporate conflict management?

First, however, a few words on measuring performance in the context of corporate conflict management.

Every corporation possesses information on its past and present conflicts. That information serves as a basis for answering e.g. many of the questions suggested in my previous blog post. But will the same information serve as a basis for assessing the performance of a corporation’s corporate conflict management practices and measures?

Let’s consider the three sub-concepts of corporate conflict management: avoidance, conflict management and case management (defined here in more detail).

Under avoidance, the ultimate purpose is to avoid future conflicts. So, if the available information shows that the number of conflicts is shrinking, is that observation then an indication of success as regards to one’s measures under avoidance?

Well, it can be, but is not necessarily so. To verify that kind of conclusion, one would have to establish a correlation between the decrease and the taken measures. Further, one would have to eliminate other possible interfering variables from the equation.

Under conflict management and case management the aim is to get rid of a conflict or case with as little damage as possible. If the available information shows that a corporation has e.g. won seven of the most recent court cases and only lost two, is that an indication of at least moderate success of the corporation’s efforts under conflict management and case management?

Hard to tell. A negative outcome in the form of court judgement or arbitral award may indicate a problem in one’s conflict management practices (or case management practices). After all, conflict management should probably have guided the defeated party away from the battle earlier, right? But that’s not the only possible conclusion for a negative outcome. One may e.g. have had a perfectly good reason to test a conflict item in court for future purposes.

Positive outcomes aren’t reliable indicators of conflict management performance or case management performance either. A win in a case is often a debatable one if all the costs and lost resources are taken into account. A corporation with better conflict management or case management practices might have avoided the court proceeding or arbitration altogether – saving the corporation 1,000+ hours of employee time wasted in the conflict and dedicating that time to the employees’ core activities instead. One may also simply have been the luckier of the two parties handling conflict management or case management poorly.

Thus, proper performance measurement (enabling valid conclusions) requires that corporations track decisions, grounds thereof and achieved results in a systematic manner. If a corporation has done this, it can draw valid performance conclusions from the available information.

In the absence of ‘hard data’, valid conclusions are off the radar, but certain events during conflict or case handling may offer indications of one’s conflict or case management performance.

If I had to show an audience only one slide depicting professional dispute resolution, I would choose the following:
Merit-cost dilemma

Merit refers to the assessed quality of one’s case. The picture describes the merit curves (A and B) of two corporations who are parties in a litigation or arbitration. Due to the high number of relevant variables, merit assessment rarely indicates a clear win or loss, but instead a percentile expectation of either coping well or not so well. To simplify a bit, at the start of the proceeding, both parties think they are going to win. On average, however, only one party ends up winning.

In commercial disputes, the merit curve is almost always a declining one (as drawn in the picture) – for both parties. Both parties learn throughout the proceeding and some learnings lower the merit curve. In the real world, the curve, of course, is not a straight line. It usually changes every time one learns something new along the process. Negative findings lower the curve and positive findings lift it. One may or may not observe the change in merit once it happens but changes in expectations inevitably occur during proceedings.

The curve can be more or less flat if everyone involved works diligently. The curve can even be upward, but then the opponent’s team misses something a party has considered a weakness of its case. In general, however, the curve is a declining one and that is what every corporation should be prepared for when pondering entry into a formal dispute resolution proceeding.

The merit curve is an indicator of corporate conflict management’s performance. A flat merit curve indicates conflict management success. A declining merit curve indicates that one could have probably done better. But why should one care about a declining merit curve?

Because of costs. The further you proceed with your court case or arbitration, the more you generate costs. Again, in the real world, the curve is not linear. Whenever a party incurs a cost, the curve will move up.

The problem with costs is that they factually diminish conflict parties’ alternatives. At the early stages of a conflict when costs are low, a corporation can get out with relative ease if the merit assessment changes.

As the proceedings advance and costs get higher, the same corporation easily ends up being stuck with the situation. If the merit curve has declined (as it usually does), the corporation may now be prepared to settle the case with terms earlier found unacceptable. The costs on both sides, however, form a considerable barrier for settlement as the opponent is not likely to accept the cost of the other party’s learning experience. Thus, the corporation with the not so successful merit assessment is left with the options of either backing down from an earlier position and assuming the additional costs (or at least the major part of the costs) on both sides of the table – or alternatively – continuing the struggle with diminished odds.

The obvious conclusion of the above is that if you cannot avoid a court proceeding or arbitration altogether, you want to be the one with the least declining (preferably flat) merit curve.

Let’s say, however, that you are party B with the drastically declining merit curve. How are you going to make sure that you will do a better job next time? In other words, how are you going to make sure that your corporation’s most valuable resources are not wasted (in a rather stupid manner)?

By finding out what went wrong, right? If your corporation has tracked the decisions, grounds thereof and results achieved, you can do that. If your corporation has not done that, finding out can be difficult and burdensome – and sometimes even impossible.

How does one track the measures of corporate conflict management? By keeping a conflict diary of decisions, justifications and events. So, the next time your merit curve drops, you have better chances of finding out why. How did we miss this?

Measuring enables learning and learning enables improvement.

One of the main enemies of corporate conflict management is the belief that conflicts are always unique. From the management perspective, conflicts are not unique – they are all the same.

Suggested questions to consider:

  • How are we currently tracking our corporate conflict management’s measures and results?
  • How could/should we track our corporate conflict management’s measures and results to enable us to learn?
  • What parameters should we choose as indicators of success?

In my forthcoming posts, I will move on to consider the four key elements one needs to grasp in order to address corporate conflict management wisely – Risk, Reward, Resource and Response. I will start with Risk.

Contact

Harri Jussila

Founder, Attorney at law, EMBA

+358 50 577 4088

harri.jussila@iquja.com

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Huopalahdentie 24
00350 Helsinki
Tel. +358 50 577 4088

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Iquja’s office is located at Menuetto Business Center in Munkkivuori, Helsinki (20 minutes from the Helsinki Airport [HEL/EFHK]).

Business ID, VAT code

2801483-4 / FI28014834

E-Invoicing address

EDI-Code: 003728014834

Operator ID: 003721291126