CHAPTER NINE

The Dynamics of
Disputes and Third-
4th Canadian Edition
Party Help

Kevin Tasa
Schulich School of Business
York University

© 2020 McGraw-Hill Limited 9.1

 Learning Objectives
After reading this chapter you should be able to:

LO1: Recognize dispute situations.

LO2: List the different approaches available for
handling a dispute.
LO3: Distinguish between arbitration and mediation.
LO4: Summarize the approaches that managers can
take in dealing with disputes between subordinates
or peers.

© 2020 McGraw-Hill Limited 9.2

 Disputes
Disputes defined
 When one person or party makes a claim or demand on
another person or party, and that claim is rejected
 BATNAs are usually linked in a dispute situation
Ways to resolve a dispute include
 Work out a solution by themselves
 Use an outside party
 Impose a solution based on power
 Dropping the claim

© 2020 McGraw-Hill Limited 9.3

 Interests, Rights, and Power
Parties in conflict use one of three frames
 Interests: people talk about their “positions” but often what
is at stake is their underlying interests
 Rights: people may be concerned about who is “right” – that
is, who has legitimacy, who is correct, and what is fair
 Power: people may wish to resolve a conflict on the basis of
who is stronger

© 2020 McGraw-Hill Limited 9.4

 Which approach Should You Use?
Four criteria for analysis
 Transaction costs
 Satisfaction with outcomes
 Effect on the relationship
 Likelihood of Recurrence

© 2020 McGraw-Hill Limited 9.5

 Third-party help (1)
A third party is someone who isn’t directly involved in
the dispute or negotiation, but who can help in
resolving it
 Two most common types are arbitration and mediation

Warning signs that a third-party might be appropriate:

 The emotional level between the parties is high
 Communication between the parties is poor or has
completely broken down, or the parties appear to be talking
“past” each other
 Behaviour is negative (such as name calling)

© 2020 McGraw-Hill Limited 9.6

 Third-party help (2)
Warning signs (cont.):
 The parties strongly disagree about what information is
necessary, available, or required
 Differences in interests appear to be irreconcilable
 Negotiations have broken down and there is an impasse

© 2020 McGraw-Hill Limited 9.7

 Arbitration
An arbitrator is a third-party who takes control of
shaping and determining an outcome
 Traditional arbitration
 Each side presents their case and the arbitrator makes a final
decision
 Final offer arbitration
 The arbitrator must choose one of the proposals put forth by a
disputant
 Tends to produce less extreme positions when cases are being
presented

© 2020 McGraw-Hill Limited 9.8

 Major Advantages
The negotiation or dispute ends with a final solution
The solution is usually binding, meaning that parties
usually cannot choose whether to follow solution or
not
The solution is often seen as credible because
arbitrators tend to be perceived as wise, fair, and
impartial
The costs of prolonging the dispute are avoided

© 2020 McGraw-Hill Limited 9.9

 Major Disadvantages
By putting control over the outcome in another
person’s hands, each party takes a risk that the solution
is one that they can live with
Parties may not like the outcome and issues may
remain outstanding
In comparison to mediation, there is less commitment
to an arbitrator decision. When parties feel less
committed to a decision, they will be less likely to
implement it or be more resentful and so the resolution
may not be permanent

© 2020 McGraw-Hill Limited 9.10

 Mediation
A mediator is a third-party who works towards helping
disputing parties create a solution themselves by
facilitating communication and dispute resolution
techniques amongst the parties
A mediator’s opening statement includes…
 An explanation of the mediator’s role
 An explanation of the parties role (to work with the
mediator to develop an acceptable settlement)
 Some expectations about process, such as whether or not
the parties will remain in the same room and
 Some expectations about ground rules, including things like
interruptions and whether the settlement is binding.

© 2020 McGraw-Hill Limited 9.11

 Success factors…
Mediation is more often successful under the following
circumstances
 The level of conflict is moderate and not excessively high
 The positions of the parties are understood by both parties
 Both parties are motivated to settle
 The issues do not involve a basic conflict of values, and
 The level of power is relatively equal between the parties or the
power differential is appreciated by both parties.

© 2020 McGraw-Hill Limited 9.12

 Hybrid Approaches
Med-Arb
 First, the parties attempt traditional mediation.
 If unsuccessful, the mediator will act as an arbitrator and
make a binding decision on the parties after the parties have
made their final submissions
Arb-Med
 The arbitrator holds a hearing, but does not disclose their
findings/decision
 The parties then attempt mediation
 If unsuccessful, the arbitrator will disclose the binding
outcome

© 2020 McGraw-Hill Limited 9.13

 Summary and Key Points
 If possible, begin using an interest-based approach,
 Remember that in disputes the BATNAs of the parties are
usually linked. This is much less common in other negotiation
situations
 There is a time and a place for using either a rights-based or
power-based approach. However, we suggest that you
carefully consider the possible costs, in a broad sense, before
proceeding
 When deciding whether or not to involve a third-party,
consider how their role is likely to affect the process and the
outcome

© 2020 McGraw-Hill Limited 9.14