Do We Need Process Of Dispute Settlement In Managing Today? Professor Chris Rowley

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1 Do We Need Process Of Dispute Settlement In Managing Today? Professor Chris Rowley Director, Centre for Research on Asian Management, City University. London, UK In may seem to many that in the context of the post-2006 global credit crunch and economic downturn and commensurate impacts on business and employment, that managers can more easily blithely assert their prerogative and take hard line take it or leave it positions in negotiations and dealing with staff. Hence, there is no need for ways to resolve disagreements and disputes as they will not occur. Furthermore, some people may believe that with enough time and goodwill, all disagreements and disputes can be settled and resolved. However, the above may not always be the case. If neither side can walk away, as is obviously often the case in the employment area with the high costs to both sides that would be incurred, the disagreement or dispute needs to be resolved. If informal and internal ways to settle disputes fail or there is stalemate or an impasse is reached, resort to forms of more formal processes, may be considered. Again, such processes can be internal or externally facilitated and range from ad hoc to more permanent systems and from voluntary to prescribed and compulsory, even as parts of procedural agreements. While some disputes can be handled by law or labour courts, others require assistance from intervention by a neutral, third party in processes such as conciliation, mediation and arbitration. The concept of dispute settlement and its processes can be seen as assisted continuation of negotiation and related to conflict - they are an intervention process and adjunct to collective bargaining (Rowley, 2002a; 2002b). From a unitary perspective dispute settlement may be viewed as irrelevant (Rowley, 2001a; 2001b). However, one inherent outcome of managing people from a pluralist (or radical) perspective, is conflict (Rowley, 2002c). Of course, there can be a range of conflict types, but here we are more concerned with the more formal and visible forms. Once this type of conflict, leading to a dispute, occurs, then some sort of settlement and resolution will be needed. There can be publicly supported and funded systems of dispute settlement. These supports vary between, and have a long history across, countries, with varied preference for, certain types and 1

2 levels of voluntary vis-à-vis compulsory elements over time and juncture (ie wartime) of each type. For example, in the UK there was an early 19 th century system of compulsory and binding arbitration. Then came the 1896 Conciliation Act allowing government appointed arbitration (voluntary, except during wartime) to settle disputes. From 1919 the Industrial Relations Court was used by government to refer disputes to if both sides agreed. Renamed the Industrial Advisory Board in 1971, this body was replaced by the Central Arbitration Committee (CAC) in The independent, albeit government funded, Advisory, Conciliation and Arbitration Service (ACAS) can appoint arbitrators or refer matters to the CAC. ACAS remains the UK s main provider of dispute settlement assistance of the types in its title. Similar ideas of state-encouraged dispute resolution systems can be found in other parts of the world. Intervention Types The main types of dispute settlement process can be seen on a spectrum, ranging from at one end conciliation, with mediation in the middle and arbitration at the other end. These can be seen in the figure. While each of these types involves neutral, mutually accepted third parties, who these are, what they do and the type and strength of intervention, discretion, and so on, all vary, as it shown in the figure. Figure: A Spectrum of Processes and Features in Dispute Resolution Features: Intervention Discretion Proactiveness Solutions Conciliation Mediation Arbitration LOW Strength HIGH Conciliation Conciliation is a process that involves independent, neutral third parties acting as interpreters and messengers in identifying the causes of differences and relative significance of issues and positions of both parties in order to help develop ideas and mutually acceptable solutions. Agreement to possible solutions remains the parties own, joint decisions as conciliators do not impose or recommend solutions. Conciliation may be provided by private or public facilities. In the UK the best-known provider is ACAS. Conciliation is provided by its full-time staff, almost all civil 2

3 servants. This UK system is voluntary and arises via the parties requests, procedural agreements or ACAS volunteering its services in disputes. Mediation Mediation is a process that involves an independent, neutral third party assisting parties to resolve differences and come to some agreement and end the dispute. Mediation is more proactive than conciliation as mediators may suggest their own ideas and proposals for a settlement. However, solutions are still non-binding on the parties. The parties may accept, reject or alter the ideas and proposals. In the UK, such mediators are drawn from an ACAS list, whose members are often academics. Arbitration Arbitration is the practice and method of settling disputes by referring them to an independent, neutral third party but now with both parties having agreed beforehand to abide by the decision for settlement. The arbitrator hears the arguments of both sides and decides on them. Arbitration is often criticized because of some tendencies it engenders and encourages. One of these is the flip-flop effect, with decisions being awarded alternately to one side then the other side each time a dispute is referred. This switching is irrespective of the merits of the particular case on a particular occasion and is an attempt to maintain the image of arbitrator neutrality and impartiality by being not seen as favouring only one side. Another tendency is to split the difference in decisions, encouraging more intransigence and extreme positions in offers and demands from both parties. Therefore, only the lowest offers and highest demands from each side tabled as both parties know that while these extremes will not be agreed, it will maximize the median and real result if the demands and offers are split. Thus, the parties real positions are not clearly known by either side. Possible solutions to these issues of splitting decisions was developed with the idea of so-called pendulum arbitration. This process only allows arbitrators to choose between final offers and demands in their entirety. An additional benefit is that this method encourages less extreme positions in final offers and demands as neither side can risk being seen as unreasonable and thus not attracting the arbitrators decision (ie the pendulum ) their way. A further by-product of this moderating influence is that in turn this can encourage voluntary dispute settlement as parties will be closer together in offers and demands before going to arbitration. 3

4 Yet, there are issues and problems with pendulum arbitration, not least that the decision implies that one side is totally right and the other side is totally wrong in a dispute in all offers and demands. Critically, the system does not allow for classic negotiating, with its trade-offs and compromises over issues between parties Indeed, there is rarely a simple choice between offers and demands, but complex packages with conflicting views and evaluations of data (Kennerly, 1994). In sum, The winner takes all concept underlying pendulum arbitration is incompatible with the principles of compromise and flexibility underlying the negotiation process (Salamon, 20000:485). We have distinguished and outlined the three main types of dispute resolution process. However, in practice the dividing line between dispute resolution processes is thin and easily blurs. For instance, the process of mediation may be similar to conciliation, or it may be more formal and similar to arbitration, except with no final binding award. Key Issues for Management There are several key, often conflicting, issues and considerations around the dispute settlement and its processes for management and business. These include the following. One the one hand: Conciliation and mediation, unlike arbitration, avoid giving third parties power to resolve disputes on what might be uncongenial terms. Resolution processes do force both sides to re-examine cases, which can make some movement, and hence settlement, possible. Independent third parties approach issues with fresh minds and can bring their own suggestions and proposals for resolutions if so required. Resolution processes have powerful public relations dimensions, being used to shift blame and responsibility for decisions and settlements onto others and outsiders, rather than being presented as failure by the parties themselves. However, on the other hand: The actual calling for dispute resolution can be seen as a sign of weakness and undermining the authority of the parties. Reliance on resolution methods can become addictive, chilling important processes such as negotiation, making earlier settlement less likely as parties simply wait to go to dispute resolution. 4

5 Third parties do not have to live with the consequences of their actions or decisions in the processes. Nevertheless, despite these issues, there are benefits in using dispute settlement process. After all, disagreements will need to be resolved as amicably and agreeably as possible in some fashion or future disputes will erupt. Given this, dispute resolution will remain important for management. References Kennerly, J.A. (1994) Arbitration: Cases in Industrial Relations, Pitman. Rowley, C (2001a) Alan Fox M. Witzel (ed.) Biographical Dictionary of Management, Thoemmes Press, pp Rowley, C (2001b) Hugh Clegg M. Witzel (ed.) Biographical Dictionary of Management, Thoemmes Press, pp Rowley, C (2002a) Conciliation in T. Redman and A. Wilkinson (eds.) The Informed Student Guide to HRM, London: Thomson Learning, p.39 Rowley, C (2002b) Mediation in T. Redman and A. Wilkinson (eds.) The Informed Student Guide to HRM, London: Thomson Learning, p.157 Rowley, C (2002c) Allan Flanders in M. Warner (ed.) The International Encyclopedia of Business and Management, London: Thomson Learning, p Salamon, M. (2000) Industrial Relations: Theory and Practice. Harlow: Pearson Education. 5