STRstttTEGY
RESOLVING SMALL BUSINESS DISPUTES

THROUGH MEDIATION

Mare Lampe
Seth R. Ellis

University of San Diego

ABSTRACT

A revoiiuion ts takmg place in the way Americans resolve their disputer. The so-called
alternative methods of dispute resiiiunoti such as meiiiarioa ami arbitrarioa are iiicreasingiy
becoming a primary choice for sea(trig corifitct. A groiving number of large American
compames /iave begun ro enibrace mediation as an attertiative to iiugouon. The article
describes rhe mediation process in the small bnsiness cotttext. The advantages and
disadvantages of mediation versits the j udiciaf process are ctotsidered. Recommendations
concernmg the appropriate circumsrances in iviu'ch small bitsiness should use mediiition to
resolve cotiflict are provided. Also reported are rhe results of a survey of small business
erecutives that meastired their attitudes toivard atediatiiin aad other forms of dispure
resoiuti oo. The resuirs sttggest tiiat most executives preferred mediation to oiher forms of
dispute resolution. They beheve mediation to be a cost-effective aud efficient method of
resolving conflicts with customers, etupioyees, arid siippiiers.

INTRODUCTION

A revolution is taking place in the way American businesses resolve their disputes. Thc
so-called "alternative" methods of dispute resolution arc increasingly becoming a primary
choice for settling conllict. Often alternative dispute resolution (ADR) removes the case
entirely from the traditional coun-based system for resolving disputes. Some courts have even

incorporated ADR as a voluntary or mandatory part of their procedure. These changes are
forthcommg because of weaknesses in the judicial system; Supreme Court Chief Justice
William Rehnquist. a strong supporter o( mediation and ADR generally, believes that the
judicial system "particularly ill-serves... sinall businessmen who have contract disputes"
(Rehnquist, 1989, p. 3).

Although there are circumstances where the court system is the superior method,

mediation is particularly well-suited for thc needs and problems of small business. Matz has
characterized mediation as providing "a llcxiblc, informal and relatively quick party-
empowering way to get disputes out of the traditional Judicial or administrative systems"
(Matz, 1987, p. 4). The mediation process offers special advantages for the resolution

ol'nternal

workplace disputes between an employer and employee (Conti, 1985), or to settle
conflicts among shareholders of a closely held corporation (Soloman and Soloman, 1987).
Meanwhile, litigation is usually criticized on the grounds of expense, time, uncertainty, and

1unpleasantness (Soloman and Soloman, 1987). Cost conscious corporate executives and in-



house counsel hclievc that litigaiion. "whatever thc outcome, often proves counterprnductivc

to business objectives" (McCoy. I992. p. 22).

In Ibis paper wc describe thc primary fortus ol allernative dispute iusolution, with a

focus on mediation in thc context of'hc small hus&ness environment. Next, wc prcscnt &hc
results i&I':i survey investigating &hc attitudes ol'mall business cxccu&ivcs with rcspcct to
dispute resolution. Then wc explore in some depth thc advant:titus illlil disa&lvantages

ol'cdiatimt.

I inally, wc describe those instances where. litigation may actually hc prclbrablc to

mediation.

ALTERNATIVE METHODS OF DISPUTE RESOLUTION

Several dilfercnt mechanisms for dispute resolution arc ci&nsidcrc&l to he I'nrtns
of'DR.

Thc basic methods are mediation and arbitration with variations aml hybrid» ol'hese
approaches. Mediation dilfcrs I'rom both the judicial Process and arhitratii&n hccausc ol'ts
inl'ormali&y and non-,'ulversarial nature. In mediation thc parti«s must vi&luntarily and

coopcrativcly resolve thc case with thc assistance ol' neutral thi&&l-party. Arhitrutii&n is an
;ulvcisarial process that resembles litigation hut is less I'ormal, and thcrcl'orc gcncrally
ci&nsidered to bc less costly and I'aster than litigation. In arbitration the parties tii a dispute

ill&all&pi to inllucncc thc arbitrat(&r to rulc in their I'avor through a structured prcscntation
of'vidence.Arbitration may he voluntary or mandatory, binding or nim-himling.

A popular hybrid ADR technique is &he mini&rial: a I'ormal process that includes a

limited discovery period I'ollowcd hy a structured hut abbrev&a&cd prcscn&ation i&I the, case.

Typically the case is prcscnted to a panel, including rcprcscn&ativcs I'or c;u:h Iuirty with

tluthof&ty to sl:&&le thi: et&six t&ltil t& ltcutlul third-party advisor who c(&nducts illa proccc(lll&g. Tile

advisor may act as an arbitrator hy rendering a non-biding opinir&n i&n thc case, and as a

mediator hy assisting thc parties to negotiate u act&lament.

Et&el& i&tcthod ol'ADR has i&s own sct ol'dvantagr:s and disailvantagcs in coinpariso&1
to thc court system and each other. A thorough discuss&on and comparison i&l'all the dispute

rcsolutiim pro&:cases is hcyoml thc scope of this article. Our locus hc&c i» im mcditttion.

THE MEDIATION PROCESS

Meiliation is, in csscnce, a I'acilitated negotiation. The parties to a tlispute mcct with

an impartial third party, acceptable to all disputants, who docs not have dccisiimmaking power

regarding their conllict. Thc mediator assists th«parties in voluntarily retu:hing their own

mutually acceptable seulcment ol'hc issues in d&sputc. Currently &h«re arc m& licensing
rcquiimncnts I'or mediators who have various backgrounds such as psyclu&logy, business and

luw. Iiulividuals and companies ol'fering mediation and other ADR services have prolifcratcd

in rcccnt years and may hc located through the Vello&v Pi&gas under "mediation scrviccs." The
largest and ol(lcsi provider of such services is the non-prolit American Arbitration Association
foundc&l in 1926, Other markc& leaders include the for-prolit companies Judicial Arhitru&ion

and Mediation Scrvicc aml Judicatc (Pollock, 1993). When sclcc&ing a mcdiuti&r one should

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consider an individual's training, experience, relevant spccialtzations and neutrality. Services

are gcncrally billed at an hourly rate with an additional 11at I'ee charged by some providers.

Direct negotiation between disputants (or their auorncys) can of('er some of the

potential advantages of mediation. However, when such negotiations are unsuccess('ul they

tend to increase hostihty bctwcen the parties and may increase the time required to resolve thc

dispute. McCoy (1992) bclicves that negotiation commonly leads to the adoption ol'gaming

techniques that work against an accommodative solution" (p. 22). Legal cases arc commonly

seulcd through negotiation prtor to trial, sometimes on the courthouse steps, and often af'ter

needless tune and expense (McCoy, 1992). Alternatively, an experienced mediator helps the

disputing parties channel their anger and emotions constructively through a proven process to

arrive at an immediate solution.

Unhkc thc lixed procedures in a civil or criminal coutx case, mediation proccsscs vary

depending upon the service provider. There is no accepted model or special method for

mediating a business dispute. The seven stage mediation process described by Folberg and

Taylor (1986) provides a good generic model that cncompasscs most mediation formats:

l. Introduction — creating trust and structure,
2. Fuel finding and isolation ol'ssues,
3. Creation of'options and alteinativcs,
4. Negotiation and decision making,
5. Clarification and wrtting a plan,
6. Legal review and processing, and
7. Implementation, rcvicw and revision.

In a typical mediation, thc mediator sets thc tone by explaining the process and ground

rules that will apply The parties are given an oppnrtunity to express their own perspective on

the I'acts, infortrtation is shared and pertinent issues identil'icd. Mediation provides the parties

with a forum to discuss the sources and issues of their conflict face to I'acc. Mediation also
provides a unique opportumty to express feelings and anger to thc other party. A skilled

mediator assures that such exchanges will ultimately have a constructive impact on ihe

resolution of the dispute. The mediation process is designed to move thc disputing parties to
an understanding of each other's perspective. It is also designed to surface thc underlying
sources of conllict as well as any hidden agendas.

Following the discussion ol'hc facts and issues, the parties, with active assistance from
the. mediator, explore aliernative solutions and negotiate a resolution to their conllict. Thc aim

is to construct a creative, "win-wm" resolution. If an agrccment is reached, it becomes a wriuen

plan. In business related disputes this plan will usually become a contract, signed by both

parties, and legally enforceable. Thcrcfore it may be advisable I'or a businessperson to have the

agreemcnt reviewed by counsel.

Normally, thc (mal agreement is the primary goal of mediation. This accord typically
solves the present dispute by providing that the parties take certain actions in the future (for

cxamplc, one party must pay a sum of'oney to thc other party by a certain date). Other goals

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ol mediation are to rcducc the ncgativc cllccts ol conllict and improve thc ability of thc panies
to communicate and negotiate (pa&ticularly with each other) in the future (Folbcrg;md Taylor.
1986).

Mediation works well I'or many reasons. It is a simple, ea&y to grasp process. Thc
process leads to respect and understanding between thc parties. Mediators are role-&nodcls with
positive attitudes toward conllict and collaboration. Collaboration encourages creative problem
solving by the disputants (Davis, 1989).The mediation process allows parties to express their
feelings including the opportunity to "ventilate" strong emotions. Research in humun
psychology and animal behavior reveals a need for reconciliation (Davis, 198&)). an&I mediation
offers a me:minglul way lor thc conliicting parties to meet this need. I.inally, mediation gives
disputants considerable control over the rcsolu&ion of'heir own dispute (Lampc, 1992).

PERCEPTIONS AND USE OF MEDIATION BY SMALL BUSINI'.SS

Previous research comparing mediation and judicial proces.; on such I'acto&s as c&&st,
spccd, and thc satisf'action level ol'involved parties is limited, especially I'or business cases.
In I'act, we werc unable to locate any rcscarch done specil&cally I'or small business. The
National Assoc&ation ol'anuf'acturers (NAM) cstimatcs a sh&ui& growth in business
expenditures I'or legal services from $ 19.8 billion in 1982 to $57 billion in 19&32 (Riegcl, 1993).
An increasing number of large American companies have begun to embrace mediation while
small businesses gcncrally have not (Lovenhcim, 1989). More thun 600 large co&ix&rations have
entered an agreement through the Center for Public Resources in Ncw York, a nonprol&t linn
that pro&notes altcmative dispute resolution, to first try ADR in disputes with other companies
that have signed thc pledge (Jacobs, 1992). Even law fir&ns have turned to mediation to resolve
partnership disputes (Harlan, 1988).

Method

A study was pcrfor&ncd to detenninc thc perceptions, auitudes and opinions ol'small
business owners toward mediation as a method ol'ispute resolution. Two thousand small
business owners in a southwestern metropolitan area were randomly sclcctc&l I'or a mail survey.
Thc response rate of usable returns was about 9% (175 responses). Although this is a rclutivcly
low response, tests of dif'ferences between early rcspondcnts versus late respondents werc not
signil&cantly different, cvidcncc that there was not non-response bias. Also. recent marketing
research literature (e.g., Dillon, Madden and Firtle, 1994 ) suggests that rcsponsc rates I'or mail
surveys without incentives or without a particular interest on the part of the respondent may
easily drop to the range ol'ive to tcn pcrcen&. Of course, thc obvious explanation is due to the
trc&nendous volume of'nsolicited direct mail that thc typical individual or business now
rccc&vcs.

In this research 69% of the rcsponscs were from busincsscs with ten or I'ewer
employees, 25% were from businesses with elcvcn to lifty cmployeern 5% were from
busincsscs with fifty-one to one hundred employees, and 1% were from firms with I 0 I to 300
employees. Almost 60% of the responses originated in the service sector, 12% from

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construction, 10% from retail distribution, 5% from wholcsalc distribution, with the remaining
13% from manuf'acturing and other industries

The Kinds of Dis utes Ex erienced b Small Business Owner~

Most of thc respondents (76%) have been involved in disputes during the last five
years. Almost 8% have experienced six to ten disputes, and 7% reported being involved in ten
or morc disputes dunng the last five years. Table I reports thc kinds ol'isputes experienced
by those small business owners who reponed being involved in at least onc dispute during the
last live years. Mediation users followed the general response pattern I'or the mitire sample with
two notable exceptions. they reported more personnel disputes (25.9% compared to 14,5%,
respectively) and almost four times as many disputes with other prol'cssionals (25.9%
compared to 7 5% rcspcctivcly). An immediate cxplanatirm I'r this is not I'orthcoming except
thai it may bc an artifact ol'he relatively small sample of mediation users (n=27).

Attitudes Toward Mediation b Small Business Owners

Most ol'he respondents (83%) knew that mediation existed as an alternative to
litigation and other adversarial approaches to dispute resolution. However, only 20% of'he
respondents involved in disputes actually utilized mediation ms a means ol'esolving it. A
similar number ol'espondents (18%) rcportcd using arbitration while three times as many
(61%) reported using court procccdings as a method ol'dispute resolution

Table 1

Types rif Disputes During the Lrtst Five Yeut s

Involved in Mediation
Disputes Uscl's

Client Disputes 43.4% 48.1%

Personnel Disputes 14 5% 25.9%

Supplier Disputes 13 3% 14.8%

Disputes with Other Professionals 7.5% 25.9%

Disputes with Competitors 2.9% 3 7%

Note. Respondents could report multiple dispute types.

Based on their experiences resolving disputes, respondents werc asked to provide their
general attitude toward inediation, arbitration and court proceedings, on a five-point Likert
scale. A 5 on the scale represented a highly positive attitude. anti a I on the scale represented
a highly negative attitude. Table 2 indicates the gcncral attitudes towards these three forms

ol'9



dispute resolution as a function of thc number of disputes thnt have been expcricnccd in the
last five years.

Table 2

Attitude» Ton ord Dispute Resolutitnt By Ntttnlrer of Pnst Disptttes

Number ol'ast Disputes

Dispute

Resolution 10 or
Method Overall 0 1-5 6-10 Morc

Mediation

M 3.h'.5'.6" 3.4 4.3
n 6(( 45 5 7

Arbitration

M 3.5'.7 3.4 3.0 4.3
11 69 II 47 5 6

Court Proccedtngs
M o4'o o5 31 30
n 104 t) 76 10 t3

Note. Attitude judgments werc made on 5-point scale (I = highly negative. 5 = highly
positive).

'-tests ol'combinations ol'he, overall means concluded signil'icantly di( 1'erent means at
p = .05.
'ignilicamly different means using the 1)nnferroni test at p = .0'i.

As we scc in Table 2, overall, mediation was viewed as thc most positive method with
a mean score of'dh comparctl to a mean of'.5 I'or arbitration and a mean ol 2.4 I'r court
proceedings. Intcrcstingly, those fcw respondents who have not been involved in disputes in
thc last five years had a signil'icantly morc positive attitude than those who had been in I'rom
onc to I'ive disputes (mean value of 4.5 compared with 3.6). Onc explanation I'or this may be
that there is n popular conception that mediation is a panacea I'r dispute rcsolutton, hut this
perception may he altcrcd when the reality ol''acing a dispute with any method of'tsputc
resolution occurs.

Also ol'nterest in Table 2 is the marked but not statistically signil'icant positive
increase in thc auitudes towards both mcdtation and arbitration by those who had been
involved in tcn or morc disputes. The small number ol'espontlents in thcsc suhgroups
prcventctl the observed means I'rom being statistically significant (at the p = .05 level), hut thc
evidence suggests that attitudes hccomc morc positive as experience with thcsc two methods
incteases. A similar trend was not seen to hc thc case for court proceedings.

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Mediation was also viewed as a cost cf'fective method by the gteatest pcrccntagc of
respondents. Of those involved in disputes, 93% believe mediation is cost el'factive, while 79%
believe arbitration is cost effective. In contrast, only 14% believe that the use of thc courts is
a cost effective dispute resolution technique.

Seventy-six percent ol the survey respondents indicated that they believe that
mediation saves time and money, and 50% ol'll the respondents indicated an interest in
learning inore about mediation as a resolution technique.

Attitudes Towards Mediation B Users of'Mediation Services

Those small business owners who had actually used mediation as a method of'dispute
resolution were overwhelmingly in favor of it over arbitration or the judicial process. More
than 95% of those who have used mediation cited it as a cost effective technique, while only
12.5% of this group cited thc use ol'hc court system as a cost clyective technique. The mean
auitude toward mediation was 4.2 (on a scale of I to 5, where 5 is thc most positive rating).
This was higher than the rating given to both arbitration and th«usc of'court proceedings (mean
values of 3.8 and 2.6, respectively).

ASSESSING MEDIATION FOR SMALL BUSINESS
DISPUTE RESOI.UTION

In comparison to judicial process. mediation generally oft'ers many advantages
although it does harbor a few disadvantages as well. Thc positive perception ol'ediation held
by small business executives surveyed (particularly those who had used the process), relative
to the adversarial methods of dispute resolution. is warranted in most situations. The lollowing
discussion elaborates on thc benefits and drawbacks ot'sing mediation rather than judicial
pl'occss.

Advanta eso(Mediation

Much of the best data currently available with respect to mediation in comparison to
judicial process comes from leading studies in thc liclds ol'divorce, child custody. and small
claims court disputes. As we mentioned earlier, there is a dearth ol'tudies concerning thc use
of mediation in small business disputes. However, divorce and child custody cases arc
notoriously among the most dil'ficult to solve because of the high level of emotion evoked in
such cases. We therefore believe these studies. in the sense that they may rcprcsent extreme
examples. have relevance because they provide conservative guidelines I'or other contexts
including small business. In addition, the small claims court research described below is
relevant to sinall business because small busincsscs were panics in many ol'hc cases rcllccted
in thc data for that research.

Savin Time and Mone . The most appealing advantages ol'ediation for small
business. compared to)udicial process, are its lower cost and greater speed in bringing about
conllict resolution. Pearson and Thocnnes (1985) completed two separate studies of divorce
cases. including contested child custody and visitation cases, and they found that successful

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mediation saved disputants time and money in comparison to judicial process. Thc Center I'or

Puhlic Rcsourccs tracked 406 companies that used alternatives to thc judicial process
(mediation, arbitration, ctc.) hctwecn 1990 and 1993.They found a savings of'orc than $ 150
million in legal I'ccs and expert-witness costs over litigation (Pollock, 1993). By diverting a
case to mediation earlier in thc d&sputc even grcatcr savings can he rcalixcd (Pea&son, 19g2).

The hcncl'its ol'ediation arc, of'course. thc grcatcst if &hc mediation is succcssl'ul.
Onc advantage OI'court proceedings is that there is always a I'inal resolution. Since thc parties
to a mediation must voluntarily consent to an agrccmcnt, not tdl nlcdiations &esult &n act&ling
thc dispute. Howcvcr, rcpu&ahlc mediation programs do rcport a high pcrccntagc ol'uccess
I or cxamplc, thc American Arbitration Association (AAA) lms a sc« lc&ncnt rate greater than
&I0% 1&iI'he« 'o&la&&cfc&al aml constructum irulustry mediation program (Ante& Iota& A& By&& alton
Associati&m. 1992), aml AAA's leading mediation program in I os Angeles has;& 9&)% success
rate for all types ol cases (Arhitration Times, 1993) . In 1993, this prog«;m scttlcxl 55 in)ury
clai&ns I'&o&n a &wo-hus accident in just 6g hours of'mediation with an csti&n;&ted nct savings of
$ 1X0,000 in Icgul costs (A&l&itr&t&on Times, 1993).

Additionally, some community dispute resolution ccntcrs (CDRC's) provide I'ree or
Iow taps& scrviccs and handle a vancty of'isputes including m;my cases involving small
husincss as a party. Ol'hc 742 cases that &vere mediated at onc Inctropoli &an CI)RC during a
one year period ending in 1990, 555 (74%) rcsultcd in an ag&ccmcnt. Many of'he cases
resulted in an agrcc&ncnt cvcn prior to formal mediation (or adjudication) simply as thc result
ol'imc&vemionhyCDRC pcrsonncl (Lampc. 1991).McEwcn and Maiman (19g I) found that
almost 70% of cases divcrtcd to mediation from thc Maine small claims court rcsultcd in an
agreemcnt, Thc most successl'ul mcdiations in thc Maine study werc cases that involved
husiness plaintilys suing individual def'endants (94%). Pcarson an&1 'I'hocnnes (19g4) fourul that
ahout &&0% ol tl'&osc cxposcd to a&cd&a&&&on &n eh&id cost&wig d&sputcs p&'oduccd thc&f 0'lvn
t&grcetncnt during or al'tcr the mediation process, while only 60% of non-mediating parties
reached an agrecmcnt without a court hcanng A mediator ol'aw I'inn Ix&rtncrship disputes
reported that ol'hc ten dissolutions he mediated, only two wcm into litigation (Harlan, 19&&&&).
Rcsoluti&m ol'e&nploycc gricv mccs through media&i&m also has hecn vc&y succ«ssf'ul (Sigler,
19g7). It should hc nottxl th« t il' case hrought to mediation is not resolved through that
process thc unsuccess&'ul mediation will incrc &sc thc cost aml m;&y delay settlcmcnt of thc
nlt&ttc& (Solon&on turd Solonuu&, 19g7).

~M:»:» P: . Md: I p»d.: p&u . ppu»»y
privacy than docs thc judicial process. This can he important I'or a small husincss &rying to
guard its trade sccrcts or reputation. Since thc courts arc a puhlic lorum. privacy is limited.
During litigation valuahlc information ahout a husincss may hc given puhlic exposure. Thc
panics may hc vicwcd by thc puhlic in a distoncd light hccausc ol'publicity surrounding their
c&mBict (Solovc. 19gf&). Pa&&les to a mediation typically agrcc a& thc outset &o kccp inl'ormation
disclosed during thc process. and &he I'inal agrccmcnt, confidential. Notwithstanding, the
advantage of privacy such confidentiality may raise ethical issues whcrc thc puhlic would hc
served hy disclosure. An example could bc a case involving injury caused hy a defcctivc
product.

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Providin a Sense of Control. Mediation offers psychological advantages that can lead
to tangible benefits. These benefits are unlikely to accrue through judicial process. The
mediation process is easy to undersiand, and it provides disputants with a sense of
empowertnent and control. Because of the inherent simplicity of mediation, the need for a
lawyer is diminished. The parties arc normally voluntary participants in the process, they may
jointly select the mediator, they eral't a resolution, and they voluntarily agrcc to I'ollow that
resolution. Mediation is a cooperative process that requires the parties to work together to find
a resolution. There is virtually unlimited flexibility in finding a mutually «grceablc solution.

Research demonstrates that satisfaction with both thc process and the outcome are
higher with mediation than the judicial process. Fri&m data gathcrcd in two separate studies on
custody and divorce mediation cases, Pearson and Thocnnes concluded "that individuals who
mediate arc cxtrcmely pleased with the process whether or not they reach an agreement."
(Pearson and Thoennes 1985, p. 463). In contrast, their research rcvcalcd fewer favorable
evaluations of thc legal system. For small claims court cases McEwen and Maiman (1981)also
I'ound somewhat grcatcr satisf'action with the overall expcrtcncc and I'airness of'utcome
among parties whose conflict was mediated as opposed to ad)udicatcd. The increased
enthusiasm for mediation by the small business cxccutives in our sample who had used
mediation also supports these I'indings.

Salva 'in Ke Stakeholder Relationshi s As wc previously discussed, inherent to
mediation are the attributes of empowcnnent and control, simplicity, required cooperation. and
flexibility. These characteristics may result in scvcral tangible benet'its I'or parties who mediate
their conflict.

Mediation provides a strong opportun»y to salvage an on ning relationship between
dtsputing parties. Research by Pcarson and Thoennes (1985) on divorce and custody cases
indicates that whtni mediation is succcssl'ul it is more likely to result in a better (or less
strained) relationship between ex-spouses than the judicial process. McEwcn and Maiman
(1981) I'ound that parties with a continuing relationship had a particularly high satisfaction rate
(80%) with mediation. According to Sander (1985), mediation is very cf'fcctive at resolving
cases involvin long-term relationships that will continue in the I'uturc. Because ol'ts non-
advcrsarial nature, mediation of employee-mnployer disputes contributes to thc overall health
ol a business organization (Conti, 1985). Shareholders in a close cotporation can use it to
mitigate tensions, rebuild relationships. and sol'ten future disputes (Solomon and Solomon.
1987).

In our study, 43% ol'hc disputes expenenced by the sample group in the last I'ive
years were with clients or customers. The next most I'requcnt categortes were personnel
disputes (14.5%)and supplier disputes (13%), A smull business's relationship with a valuable
customer, employcc, or supplier is morc likely to be salvaged when mediation is used to
resolve a dispute. At the least, animosity can bc decreased through mediation, so the other
party will be less likely to make negative statements that could hurt the business's reputation.

Fulfillin the A recmcnt. Research indicates that it is less likely that a party will
renege on a mediation agreement than Ihil to comply with a court judgtnent (McEwen and
Maiman, 1981, Pcarson. 1982). Mediation also provides a grcatcr opportunity to fashion

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crcativc solutinns and meet special needs than does court proceedings. In civil couri
proceedings the usual remedy is money da&t&ages lo hc paid hy a specil'ic daic. This I'caturc

ol''Icxihilityis an additional reason I'or thc greater likelihood of'o&npliance, with a mediation

agrecmcnt than a cnurt Judg&neat (McFwcn and Maiman, l981).

Advanta cs of Judicial Process

Althou h we hclicvc that mediation is gcncrally superior to the. judicial process, thcrc
a&c circumstances where litigation may hc prcl'errcd. As previously discussed, thc certainty that
a resolution will he rcachcd is onc ol'he most important advent:&gcs ol'hc court sysicm.
Sevl.l"II olh&'I''et&soils lo Usc judicial process rather than mediation a&c discussed hchiw.

Lar c Monctar Awards. Since mediation normally &equi&es eo&1&pn&11&lsc il Is &lot
likely to result in onc party rccciving a maximum award. When a plaintil'I'has a strong case the
court is likely to award a grcatcr amount than thc amount that would hc a&rived at through
mediated settlemcnt. McEwcn &md Maiman (19f(1) I'ound that in nca&ly half'hc cases
adjudicated Iiy the Maine small claims court the plaintiff was awarded all, or nearly all of thc
el&&i&11, wllilc this occurred in only l7% of'he mediated cases. However, legal and procedural
costs Ilol'Ii&idly deere;&s&'lie 1&ct &111&oui&t icccivcd in a canc that has been litigated.
Compensation f'rom an agrccmcm mcdiatcd carly in thc dispute may compme I'avorahly to thc
nct amount rcccivcd I'rom a coun award, even with a large vc&d&ct.

Ex osurc in thc Public Record aml Press Thc court: ystcm also provides an
oppo&xunity for puhlicity amf puhlic exposure that is lypically not avnilahlc through mediation.
II'his cxposurc is dcsirahlc then the dispute should he taken lo court.

The Possihilil of'A leal and Makin New Law Funhermorc, a mediated agreement
is final us well as legally himling. It cunnol hc successfully appealed. cxccpt in very unusual
circumstances. (Normally parties lo a mediation would not have a reruson i&i appeal an
agrecn&ent they voluntarily cntcrcd into.) Also, mediation i» not a vchiclc to make or change
law. This can only hc done ll»ough a cou&t case that is appealed.

Rccommcndations I'or I unhcr Rcscarch. Th&s aiticlc prcscnts thc hest data currcmly
availahlc with rcspcct to media&in&i tllld si&1&ill husincss. Additional empirical rcscurch should

specifically address thc imps:is of'if'I'crcnt methods of'ispute resolution on am&ill husincss.
ln pa&xicult&r, studies can he designed to compare small hus&ness d&sputcs that werc mcdiatcd
with th&xsc arhitratcd or adjudicated with rcspcct to factors such as cost, speed, outcome,
salisfaclion, impact on thc relationship, and compliance. I)ccausc ol'ihc potcnlially devastating
nfl'cct a lawsuit may have on a new venture or small husiness, such specialized research would

provide invaluahlc inl'ormatir&n.

Another arcs for future research is thc relative lack ol'enctrat&on achtcvcd hy
mediation as an altcrnativc n& court procccdings. Althnugh g3% of'he respondents knew of
mediation, only 20% had actuully utilized it. The motivating links hctween awareness and use
warrant exploration.

&94



SUMMARY AND CONCLUSION

Small business executives arc increasingly becommg I'amiliar with mediation as an
alternat&ve to the judicial process I'or resolving disputes. Thcsc cxccutivcs, and others who have
used mediat&on, tend to have a high Icvcl of'atisf'action with this method oi'coul)ict resolution.
Wc have prov&ded information regarding thc advantages and disadvantages of'cd&at&on, and
when it is best utilized by a small business.

Managers can hc proactive and practice prcvcntivc law by drafting contracts w&th a
clause requinng the parties to I'irst submit any dispute to mediation. Should a controversy arise
w&th an employee, supplier. customer. or any other pany, the ohligat&on to anempt to settle the
dispute, through mediation will prc-ex&st and not require a new agrecmcnt at that juncture.

When mediation is undertaken it is generally most beneficial soon af'ter the dispute
has ansen. Whtmc a controversy involves a complex matter. or a substantial amount of money,
a business person should first seek the advice of an attorney. We do recommend, however, that
the attorney be suppo&tive ol'mcd&ation and have expenence with the process. Law schools are
increasing their emphasis on ADR and the number o(attorneys knowledgeable about mediation
is growing.

We recommend that business school classes in management and law cover ADR w&th
an emphasis on negotiation skills and the mediation concept. As I'uturc cntrcprcneurs and
managers, students should be aware of thc pros and cons ol'ctliation and other modes of
cont'lie& rcsolutton. When faced with incvi&able disputes ihcy w&ll be hetter prepared u&
clfectivcly manage sulu&&ons.

Weckstein f1988) concludes that the search lor truth in a dispuic is aided by process
values such as party participation, saiisf'act&on, human d&gnity and protect&on of important
relationships. As wc discussed in this aixiclc, mediation is a unique opt&on because it embodies
thcsc values and through therm provides many advantages to small business.

ln a 1985 speech foimcr Supreme Court Ch&el'ust&ce Court Warren Burger quoted
a distinguished lawyer, Abraham Lincoln, in urging American's to refrain from court
adjudication: "D&scourage litigation. Persuade your neighbors to comprom&se whenever you
can. Po&nt out to them how the nominal w&nner is often a real loser in fees. expenses and waste
of tune. As a peacemaker the lawyer has a superior opponunity of heing a good man... Never
stir up litigation. A worse man can scarcely bc I'ound than onc who docs this" (Burger, l985,
p. 4).

95



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