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Mediation as an Affirmative Business Strategy

Reprinted from: “Hawaii Pacific Architecture”, January 1995 Copyright © 1996 THE ROSENTHAL GROUP All Rights Reserved

ADR Techniques have long been a recognized method of controlling litigation costs and resolving business disputes in certain select industries. Today, however, the spiraling legal fees and overwhelming congestion in the civil courts have forced a serious evaluation of conflict management throughout the fabric of American business.

Business entities of all types and sizes are experiencing a major shift to ADR techniques for their initial attempt at conflict resolution with clients, employees and other businesses. Some industries are experiencing this change due to the advent of court annexed programs in which the judge has an option of ordering their disputes to prelitigation ADR; some are experiencing this change as a result of newly imposed statutory requirements for prelitigation ADR in their industries; and, some are electing to follow Justice Sandra Day O’Connor’s admonition that “The courts should be the last resort for the resolution of disputes, not the first”. They are realizing that often more is at stake than the mere resolution of the dispute at hand (reputations, confidentiality, and ongoing relationships to mention a few). It is particularly within this last group of businesses that mediation has found such unwavering support. When it becomes clear that interest based mediation (and its consensual process variations) can deal with issues that are beyond the ability of the Judicial system to address, these businesses adopt mediation as an affirmative business strategy (especially where they are in an industry that aggregates conflict in the normal course of business).


ADR techniques are divided into two classifications: adjudicatory and consensual. The adjudicatory processes look backward to the time of the dispute, deal with what happened, what the consequences of the parties’ actions appeared to be, what the law was at the time, and, what conclusion is indicated by past reasoned decisions. Consensual processes, on the other hand, look to the future to see what the parties can agree to do to put the dispute behind them. Arbitration and litigation are both adjudicatory processes in which a third party is given the authority to decide the outcome of the dispute.

Mediation is a consensual process in which the parties, with the assistance of a neutral mediator, attempt to resolve their dispute without focusing on what is fair’ (an equitable resolution), or who is right and who is wrong based on the factual information’ (both legal concepts). The parties, instead, focus on what they are willing to do to put the dispute behind them. In the mediation conference, the parties tend to concentrate on their highest priorities and move towards compromise on those issues that are of a lower priority. The mediator’s role is to create and maintain an atmosphere of open communication while facilitating their negotiations. Mediation is generally quicker, simpler, and more economical than litigation or arbitration and it is confidential. It is also a process in which control of the outcome is retained by the parties. The mediator does not have the authority to make an award, impose a resolution of the dispute or even require the parties to continue mediating if they do not wish to do so.


Mediation is a very stylistic profession. It allows, and virtually demands, that the mediator develop an approach to the process that fits his personality, background, subject matter knowledge and the needs of his clients. There is a broad spectrum in the way mediators apply their concept of facilitated negotiation. Should they form opinions on the issues at hand? Should they address only those problems that are initially identified by the parties to the dispute? The clearest, most incisive articulation of the scope of mediation styles available is presented by Leonard L. Riskin, Director of the Center for the Study of Dispute Resolution at the University of Missouri-Columbia. He proposed a system for classifying the stylistic approaches possible for a mediator. The chart below demonstrates Riskin’s approach to evaluation of the range of mediation styles. He says, “The evaluative mediator assumes that the participants want and need the mediator to provide some direction as to the appropriate grounds for settlement-based on law, industry practice or technology.” He also says, “The facilitative mediator assumes the parties are intelligent, able to work with their counterparts, and capable of understanding their situations better than either their lawyers or the mediator. So the parties may develop better solutions than any the mediator might create.” An understanding of the mediator’s potential orientation and style will allow the firm utilizing mediation as an affirmative business strategy to select the approach that is designed to produce the most desirable results for the firm’s strategy.


Real estate and its allied industries are a perfect example of fields in which the firms, large and small, aggregate conflict in the normal course of business. Real estate brokerage firms know that a percentage of their transactions are guaranteed to result in buyer-seller or broker-principal disputes. Builder-developers know that for every tract of homes sold, a percentage will result in builder-buyer disputes (often the disputes are warranty problems, which generally occur after the transfer of title). Lenders are well aware that they can expect a certain percentage of lender-borrow disputes from their portfolio. Finally, design and construction professionals know that they too, will experience the continuing occurrence of conflict with their clients and business relationships in normal course of business.

Each of these industry groups manifest their dispute risks in different ways. The broker, in dealing with his need for the type of reputation in the market that encourages new clients to seek out his services, has to deal with the findings of a survey done by the National Association of Realtors some years ago. NAR reported that each unhappy customer in a real estate transaction told an average of twenty friends and acquaintances about their bad experience before getting it out of their system. On the other hand, a happy customer did not tell anyone of their successful transaction unless they were specifically asked. A builder with buyer warranty demands is faced with a different scenario. If he agrees to accept responsibility for every real or imaginary warranty problem claimed by an unhappy buyer, not only will his profit be seriously impacted, but his behavior will exacerbate the problem, as the word gets around that he is an easy touch and will fix anything that the buyers complain about. On the other hand, if he tells everyone with a claim to get lost, his litigation costs will negatively impact his profitability and he will develop a reputation in the marketplace that will probably discourage buyers (especially first time buyers) from seriously considering his product. Each of these related fields has its own scenario of client conflict. This conflict typically results in similar business risks and the desire to achieve some or all of the following benefits: speed and economy of dispute resolution, confidentiality of results, control of the process and the outcome, and maintenance of a good reputation and good client relationships. Peter Robinson, Associate Director of the Institute for Dispute Resolution at Pepperdine Law School says, “These goals are more likely to be achieved in a consensual setting (mediation) than in an adjudicatory process (arbitration or litigation). Adopting mediation as an affirmative business strategy simply tells one’s clients, vendors and associates that you value the working relationship and will create mechanisms to address the usual array of conflicts in a reasonable manner.”


To initiate protections against congested court dockets and spiraling costs for both parties and the state, ADR can be mandated by judicial fiat, legislative (statutory) intervention or the insertion of a contractual provision in the documents governing the relationship. These activities are all in existence and their use will undoubtedly continue to expand. However, it would be better to initiate a conflict management strategy that would allow you to say to your clients, vendors and associates, “I care about our relationship and would like to attempt to resolve our dispute in a reasonable manner. As a matter of policy we have arranged for the services of a firm of professional mediators (you can select any available individual from the panel) so that we can attempt to put this dispute behind us, with the assistance of a trained third party neutral. You are not committing to anything except sitting down at the table to talk.” I submit that this is the wave of the future for American business. Your firm can unilaterally create its positive image in the market place and achieve both short term and long term benefits in their business relationships, through the adoption of mediation as an affirmative business strategy.


Richard J. Rosenthal

Richard J. Rosenthal, CRE,CRB,GRI is the CEO of THE ROSENTHAL GROUP (TRG). The firm, founded in 1975, specializes in Dispute Resolution Services, Technical Real Estate Education, and the provision of Litigation Consulting and Support Services to the Trial Bar, Business Community and Public Sector Entities. Rosenthal, an investment broker and… MORE >

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