Determining Dispute Resolution Costs

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A dispute evolves when a person or entity makes a demand on another who denies it. In their book, Getting Disputes Resolved Ury, Brett and Goldberg (see below), use the analogy of a miner in a coal mine who finds his boots missing when he returns from his shift. The miner makes a demand to his shift boss for replacement boots. The shift boss denies his request, citing mine regulations, so the miner convinces a few friends to walk out on the shift with him. Then because they are all members of a union it calls a general strike.

The mine superintendent later admitted that he had replaced stolen boots before and loaned boots during the interim before they could be replaced. It was his belief that such action would have avoided the strike. Can you identify which result was dictated by power? By rights? By interests?

The miner made a rights based demand to the company which the shift boss denied citing company regulations - a rights based response. The miner then instigated a strike - the power option. The superintendent would have provided for replacement boots which most likely would have satisfied the underlying interest and avoided the strike. Which response was the most satisfying and least expensive in your view?

Interests, rights and power are the basic elements in any dispute. In order to resolve a dispute the parties must focus on one or more of these. They can determine who is more powerful and thus try to coerce a response, or they can determine who is right through reference to relevant guideposts or reconcile their underlying interests - the why you want it that triggers the demand.

Reconciling Interests

Interests are the things you care about or want - needs, desires, fears, concerns, opes. They are usually intangible and underlie the tangible items people ask for like a new pair of boots. Picture a husband and wife are trying to decide on which new car to buy. They appear to be arguing over cost, but really the wife's wants fuel efficiency and a basic mode of transportation, while the husband is more concerned with impressing his friends and novelty. Those are their interests. You have to search for them.

Negotiations can also center on who is right which occurs when people hire lawyers who rely on statutes and case law to determine whose case has greater merit. Yet other negotiations focus on who is more powerful usually through threats and counterthreats. Sometimes negotiations contain a little of each. It is important to be able to distinguish which rejoinders are based on which in order to formulate an effective response.

Sometimes disputants can only successfully start to reconcile interests after each has had an opportunity to give vent to their emotions. It is the rare dispute that does not generate emotions. Expressing them can be beneficial in achieving resolution. For example, if someone is feeling aggrieved, and, the blamer has the opportunity to vent his or her frustration, anger, or hostility to the blamee, and the blamee acknowledges the legitimacy of the blamer's feelings or goes further and apologizes,then those feelings are likely to diminish. Freed of the burden of unexpressed emotions the blamer can then begin the process of negotiation in a more resourceful way.

Determining Who is Right

Resolutions based on some independent standard with perceived legitimacy or fairness are rights based outcomes. The rights can be formalized by law or contract, or can be socially accepted standards of behavior such as seniority, equality, or reciprocity. Rights are not often clear, usually there are different - and sometimes opposing- standards that seem to apply. Relying on rights - where the outcome determines who gets what usually requires that a third party, e.g. a judge, make the call. This can be useful in cases such as Brown vs. the Board of Education of Topeka, 347 U.S. 483 (1954), which laid the groundwork for the elimination of discrimination based on race in the U.S. The same result - that an African American child could then attend a previously all white school - could likely have been achieved through interest based negotiation, but the impact would not have been as great. So when it is important to establish a legal precedent, a rights based resolution is the better alternative.

Determining Who is More Powerful

Disputes can also be resolved by one party, the coercer, forcing the coerced to do something the coercee would ordinary not do. Usually to get this to happen the coercer imposes unacceptable costs on the coercee or threatens to do so. Acts of power usually take the form of aggressive attacks, physical or verbal, or sabotage, or withholding benefits that would normally stem from the relationship.

Often this turns on who is less dependent, does the company need the miners work more or less than the miners need their pay? How dependent one is revolves around how satisfactory the alternatives are for satisfying one's interests. The better the alternative, the less dependent. If the company can easily replace the striking miners, as President Reagan did the air traffic controllers, then the company is less dependent and more powerful. If there are many such jobs available so that the striking miners can easily find other employment, then they are less dependent and more powerful.

Power plays can take the form of insults, ridicule, or physical attacks, and, of course, war. Determining decisively who is more powerful more often occurs only after a destructive and costly power contest. Even if there are objective measures such as access to greater resources, a bigger war chest, or willingness to take bigger risks, combatants will rarely see it in the same light because the combatants have different perceptions of their own and the other's power.

Which Approach is Best?

Resolutions based on interests or rights or power all produce different benefits and costs. It is useful to focus on four conditions in comparing them:

Transaction costs - the time, money, and emotional energy expended in disputing, the resources consumed, wasted or destroyed; the opportunity costs lost. In the mine example the most obvious costs of the strike were economic. Management payroll and operating costs still had to be paid even though no income was derived from mining. The striking workers lost wages. There could have also been opportunity costs that were lost due to the strike such as new contracts. In families the costs often include time lost in arguing and threats that caused frustration, frayed nerves and tension headaches. Opportunity costs often consist of missed chances to do useful or needed tasks or to engage in more enjoyable activities.

Satisfaction with Outcomes is another way to evaluate different dispute resolution approaches. The miner could have been satisfied with the outcome of the strike, even though he didn't get new boots, because he was able to vent his frustration and take revenge. Satisfaction depends on how completely the resolution satisfies the interests that caused a disputant to make or reject the original claim. Whether the disputant views the resolution as fair can also impact satisfaction. So that even if the resolution does not completely satisfy a disputant's interests, s/he can take satisfaction that it is fair.

Satisfaction is contingent on not only the perceived fairness of the result, but also on the perceived fairness of the resolution method. In turn perceptions about the fairness of the result turn on how much opportunity the disputant had to participate; how much control the disputant had in accepting or rejecting the agreement; and whether the disputant perceives that third party, if there was one, acted fairly.

Effect on Relationship - how the resolution effects the disputants long term relationship is another determinant. How the dispute was resolved can affect the disputants ability to work together in the future. Constant quarrels and threats of retaliation can undermine cooperation.

Recurrence - whether or not the resolution process produced a durable result is the final way in which resolutions are evaluated. This can take the form of a failure of the agreement and a resultant flair up of the dispute. Or more subtly, when the resolution fails to prevent the same dispute from occurring between one of the disputants and someone else, such as a disputant agrees not to bully one person but then continues to bully others.

Connection Between the Conditions

The four conditions are interrelated. Unhappiness with an outcome can lead to more stress in the relationship, which the reappearance of disagreements which increases transaction costs. Since these costs increase and decrease in tandem they are referred to in sum as the costs of disputing. When a resolution procedure is referred to as high cost or low cost, it means not just the transaction costs but also the strain on the relationship, unhappiness with the outcome and continued quarreling. Sometimes reducing one cost translates into increasing another.

Interests versus Rights or Power

An interest based resolution can more effectively settle a dispute then a rights or power based resolution. Often the real issue is not the one under dispute but rather the concerns that led to the dispute. Focusing on who is right or more powerful does nothing to allay those concerns. An interest based methodology can uncover hidden problems and also help the disputants to prioritize which needs and concerns are of greater or lesser priority. This allows for tradeoffs of issues of lesser concern for issues of greater concerns allowing both disputants to gain. Joint gains can then be realized when disputants focus on and tradeoff interests.

Focusing on who is right or more powerful leaves at least one loser who usually wants revenge or a just result and refuses to give up. This increases transaction costs and causes a more adversarial future relationship. Higher levels of mutual satisfaction tend to be realized through the reconciliation of interests. If the disputants are happy with the outcome, their relationship benefits and the dispute is less likely to recur. Reconciling interests does take time, however this cost fades in comparison to the transaction costs of such rights and power contests as trials, hostile corporate takeovers and wars.

Rights versus Power

Determinations of who is right or more powerful can strain a relationship, although the application of a perceived fair standard is easier to swallow than being forced to give in. Power resolutions usually cost more in resources consumed and opportunities lost than rights resolution, e.g. strikes cost more than arbitration and violence costs more than litigation. The higher transaction costs of power contests flow not only from the effort expended and resources consumed, but also from the destruction of the other side's resources. In fact, destroying the enemy may be the whole point. This can lead to new injuries, new disputes as well as anger, distrust, resentment and desires for revenge.

Putting It Into Practice

While interest based resolutions are often preferable because they have lower costs, greater satisfaction, less strain and less recurrence, they are not always to resolution method of choice. Sometimes interest based methods can't be used unless rights or power based approaches are initially used to bring a reluctant party to the negotiation table. For example, it was clear that the Serbs would not negotiate under the then current conditions of that war. They were winning, they would only lose if they started negotiating. Something had to happen to change their perception. Eventually it did. Clinton sent in troops and the war alternative ceased to be the most attractive. The Serbs eventually agreed to negotiate. Or, your 3 year old is drawing on the wall having a great time. In order to get her to stop something has to happen to make drawing on the wall a less attractive activity.

In other disputes the parties fail to reach resolution on the basis of interests because the perceptions of who is right or more powerful are so at odds that they can't establish a bargaining range. A rights process may be needed to establish the rights boundary in which a negotiated resolution can be found. Divorce mediations often get stuck when the parties are unaware of court mandated formulas for child support or alimony. Once they aware of the minimum requirements they can often proceed to resolving the issue. Sometimes nonbinding arbitration or evaluative mediation is needed to clarify their rights or the merits of their arguments, before they can proceed to resolution.

Uncertainty about the relative power of each can make resolution difficult. Labor relations practitioners know that a highly conflicted management labor management relationship can often calm down after a lengthy strike. The strike reduces the uncertainties about each side's power that had previously made them unwilling to concede. And, the long term benefits may justify the high costs in the end.

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