Most business people understand the value of using mediation to resolve conflicts, but did you know that professional mediators can help you reach an agreement during the dealmaking phase? Stephen Goldberg, professor emeritus at Northwestern School of Law, describes how you can hire a mediator to aid both parties in creating value at the negotiating table.
Mediators are typically only called in to help resolve disputes. When can they be useful in dealmaking negotiations?
Stephen Goldberg: Mediation is commonplace in dispute resolution because the alternatives to mediation—go to court, continue to engage in a power struggle, or live with things the way they are—often are not very good. Against those alternatives, mediation is widely used.
In dealmaking negotiations, mediation is much less commonly used, but it can be used when it’s impossible to walk away from the table. For example, if a police union can’t reach agreement with the city it serves, a strike or a lockout may be prohibited by its collective bargaining agreement. So they hire a mediator, and mediation is often used in that kind of situation.
Mediation can also be used in dealmaking when negotiators have the ability to walk away but have strong reasons not to do so. Take the case of a long-term relationship that has been mutually advantageous. The parties agree on all the terms of a new contract except for one. It would be crazy to end the relationship based on one or two terms, so mediation may be useful.
What skills and processes do mediators bring to help parties get better deals than they would on their own?
SG: A good mediator is a good negotiator and vice versa. But when you hire a mediator, the mediator brings several advantages to the negotiation.
First, mediators are nearly always hired jointly through agencies at the national or local level. And the mediator will almost always be neutral. Because the mediator does not have a stake in the fight, negotiators are likely to trust the mediator more than the party across the table. Because a mediator promises each party confidentiality, parties become more willing to confide in the mediator, and the mediator then has access to more sensitive information, which can be used to create deals.
Ahead of time, the mediator will encourage both sides to share lots of information, including why they want to reach an agreement, what they really care about, and what they consider less important. Armed with this information, the mediator will be able to see if there’s a deal to be made and, if so, to guide negotiators in that direction. Often, if parties have been struggling for a long time to reach a deal, the mediator will come in with a clear head and see what parties can’t see anymore.
If there are five issues on the table, for example, you’re unlikely to tell your counterpart how you prioritize them. If you did, the other side might refuse to give in on the issue most important to you unless you give a lot in return. Now imagine if you tell a mediator in private what you really value. Then the mediator can explore possibilities with the other side without disclosing what’s important to you: “Have you thought about paying more to start the deal more promptly?” Negotiators can also test out proposals on their mediator before delivering them to the other party. There are many ways the mediator can help fashion the deal without prejudicing one side or the other.
Finally, research on reactive devaluation finds that negotiators sometimes reject perfectly good offers simply because they come from a counterpart whom they do not trust. When a trusted mediator makes the same proposal, they’re more likely to accept it. Some people fear giving the mediator that much authority, but if you can’t get a deal on your own, what’s the risk? If the other side comes back with an offer that isn’t as good as you want, you can say no. The only thing you risk when you hire a mediator is time and money. Is it worth it? That depends on how important the deal is to you.
Do mediators ever work as negotiation advisers to one side or the other?
SG: Sometimes if negotiators are facing a tough negotiation, they may engage a mediator who was not previously involved to serve as an adviser on tactics. That can pose problems for the mediator, depending on the context. For example, a mediator who advises management in a labor negotiation would have trouble ever getting a job as a neutral mediator again. But if you advise a mattress manufacturer in negotiations with a competitor, that’s not going to keep you from getting work in the entertainment business, for example. A company might also hire a mediator to help internal departments— sales, marketing, legal, etc.—get on the same page before a big external negotiation.
What are some reasons you have had to hire a mediator, and how did the negotiation pan out?