Mediation and dispute resolution has a high rate of success and satisfaction in general among would-be litigants. Approximately 90 % of negotiation cases are settled before making it to litigation. However, mediation”ghosts” result in the bulk of the failures of mediation. About 24% of negotiation cases fail due to settlement issues where the parties present did not have full authority for reaching and negotiating a settlement in the first place. Within the larger issue of Determining Settlement Authority within a negotiation, this article will unmask typical negotiation ghosts, who are they and how do they exert influence on the parties to a negotiation and will attempt to provide strategies for a negotiator in dealing with these situations.
Mediation “ghosts” are those parties, either individual, corporate or public entities, who, although they are not physically present at the mediation table, still exercise a significant influence on the parties who are actually present in the negotiation and have the potential to derail the proceedings. Insufficient authority to settle can present a huge problem for the negotiator and the process as a whole. The term “mediation ghosts” refers to a situation where an absent party’s presence is felt, and he or she rears himself or herself up, like an apparition, when it comes time to decide after much offer and counter offering, whether a session’s work will settle a dispute. This issue continues to be perplexing, whether it is categorized as limited authority to settle, hidden agendas, power imbalance or any other impediment created by missing people who exert influence from afar over those who are physically present at the mediation.
Spouses, experts in the subject of the dispute, representative s of insurance companies if insurance is involved, friends, or relatives with whom the disputant would like to consult before reaching settlement can be a hidden impediment if not brought to light or disclosed to the mediator . Usually disputants will not settle without the input of these persons. People differ in the extent to which they defer to their lawyers. Decision makers in business disputes may listen to advice of counsel, but then decide for themselves whether to accept or liquidate risk. By contrast, individuals with personal injury claims may rely more heavily on their lawyers for knowledge of the law and the value of the claim. The mediator should attempt to gauge which party will rely on counsel’s advice. These third parties should be treated the same as those with actual authority. A good mediator will find out in advance, not only who is going to participate, but also how the participants relate to each other on the corporate organization chart and some effort may be paid to what their agendas and interests may be. If anyone involved in the dispute is an incorporated company, then the person representing the company must attend, and should have the authority to settle the case on behalf of the company. Mediators and disputants should make every effort to have those third persons actually present in the mediation room.
There are several key reasons why settlement is not possible where there is a missing principal to a negotiation. First, the person who was not present would not have had the benefit of the negotiator’s efforts to move the parties towards agreement and to the arguments of the opposing side as well. For an absent party, not only is it impossible to empathize with the circumstances or moderate positions when opposing arguments are heard but the dynamics and momentum of the process of reaching agreement is impossible to communicate effectively to a party who is not present. Mediation “ghosts” miss out on the skill and wisdom brought by the mediator to move the parties along and remain fixed in their positions, dooming the negotiation at the end of the day.
In some circumstances it is difficult to determine who has the ultimate settlement authority in situations involving a business entity. For instance, the negotiating representative may have to consult with a Board of Directors or some other governing board before obtaining the authority to settle. In this case a mediator would be well advised to suggest that the disputant’s representative obtain preauthorization to settle in a particular range prior to the mediation. In cases where there is no option but to include a physically absent person, telephone or videoconferencing may be necessary in order for the mediation to proceed. Parties must have authority to settle the case or have ready telephone access to anyone whose approval is needed to settle. If a corporation, partnership or other organization is a claimant or a defendant, it should be represented by an individual who is authorized to make a decision on its behalf. Participation at a distance rarely works as well as being present in person. However, it is better than no participation at all. Telephone participation works best when the decision maker who is planning to participate by telephone will not only be available to confer with colleagues, but also to talk directly with the mediator. The mediator will want to know whether the telephone arrangements that have been made allow for this and will make arrangements to allow for time changes. Settlement is much more attainable if the ultimate decision-maker can evaluate his or her options and risk position based upon all the relevant information presented at the mediation. If the ultimate decision-maker cannot be physically present, the mediator should inquire into the possibility of preauthorization to settle.
Settlement authority is as complex as the size of an enterprise increases and the size and complexity of a case grows. In addition to attempting to learn who has what authority in a business enterprise, a mediator should inquire into how settlement decisions are reached in the organization. In some corporate cultures, the decision-making process may not be immediately apparent.
In public sector mediation in which at least one party is a government agency or other public entity, in some cases, settlement authority may be delegated to a member of the agency staff. Often, however, a governing board must approve decisions requiring financial payment. In these cases, the best that can be hoped for from agency staff is authority to make a meaningful or persuasive recommendation. When a settlement must go to a governing board for approval, a skilled mediator will inquire, in advance of the mediation, into the makeup of the board and whether the board is likely to accept a settlement recommendation from the person who will be representing the agency at the mediation. It might be necessary for a higher-ranking official to attend the mediation. A critical question which arises in these situations is whether the person has control of the absent group when making a recommendation. The mediator should gauge the relationship between the party representatives who plan to attend the mediation and the party’s at-a distance decision maker. This relationship could affect the prospects for settlement. For example, the relationship might signal that the party representatives could have difficulty “selling” a proposed settlement to the decision maker. This relationship also could affect the willingness of the opposing party to participate in the mediation.
In most cases, the higher the rank, the greater the authority When determining settlement authority in a large employment termination dispute in which the claim is in excess of six figures, it would not be unusual for several representatives of the employer to participate on its behalf in the mediation: a local manager who can “tell the story, the executive responsible for the termination decision, an officer from the human resources department, a higher-level line executive, and a lawyer from the legal department. The executives may have some settlement authority. But the agendas may vary, for example, the local manager may want a confidentiality provision to be included in any settlement agreement because of the settlement’s potential impact on other workers in the unit. The human resources officer may be concerned about policy issues, such as whether to change a “discharge for cause” entry on the personnel records to a resignation and the higher-level line executive may be most concerned with the company’s bottom line.
Pre-mediation inquiries are required by the mediator in cases involving insurance. Typically, insurance adjusters have a certain amount of settlement authority. Before a mediation it is extremely helpful for the mediator to find out whether the adjuster “on the file” (i.e., the adjuster who handled the claim) will attend the mediation, or whether the insurance company proposes to send someone to “cover for the day.” While both adjusters may have the same level of authority, the two may differ in their knowledge of the case and, thus, in their willingness to exercise discretion in using their authority.
In order to avoid the possibility of a derailment of the process of dispute resolution by mediation ghosts, a mediator will need to take steps to prepare for a successful mediation and to limit the influence of outside parties. This is why I will meet with the parties prior to the “joint session” to discuss whether any of these issues will impact the opportunity for settlement
In the end a successful mediation will be the result of a complete understanding of the issues and pre-mediation discussion by a skillful mediator. Dealing with mediation ghosts is all about drawing the boundaries around stakeholder groups that are chosen to be involved.