Turning Conflict into Commerce
How to Transform the Way Business Relationships Are Managed
July 9, 2016
By Noah Hanft
It’s a familiar refrain. Those of us who have been practicing law for a while have seen it many times. A successful company – maybe a start-up or perhaps a competitor – finds itself courted by a potential partner for a merger, acquisition or joint venture. And in those early heady days of courtship, both parties, naturally, focus on all the good stuff such as profits, press and growth, rather than what could go wrong. When a disagreement occurs, as so often happens, resolving it means painful, expensive litigation or, at the least, messy settlement negotiations. Often the fight gets ugly, cooler heads don’t prevail and the relationship ends.
But what if it didn’t have to be that way?
Parties in the throes of deal-making often don’t want to put a damper on negotiations by focusing on negative scenarios, but planning for at least the possibility, if not the inevitability, of some conflict can actually help preserve relationships, especially when the fail rate of joint ventures is estimated to be well over 50%. The negotiating parties need to 1) recognize that disputes will arise and 2) figure out the best ways to anticipate, mitigate and resolve them.
CPR recently honored its member Monsanto and its VP of Global Strategy, Scott Partridge, for doing just that – utilizing CPR processes to create an industry-wide dispute management system that recognizes that disputes will arise, puts a system in place to address them and creates a platform for companies to address issues going well beyond disputes and into opportunities for pro-competitive collaboration. The “Monsanto Model” of relationship-based conflict avoidance and dispute resolution processes shows how a thoughtful and realistic approach to business relationships can drive, rather than frustrate, commerce.
Monsanto’s innovative approach wasn’t solely a legal matter, but a holistic corporate one, supported by the most senior management, focusing on how best to get business done. In fact, the company’s charge to lead the development and implementation of these programs came straight from Monsanto’s Chairman and CEO.
So what can other CEOs and other business leaders do to integrate dispute resolution into their own business processes? Here are few tips:
1. Recognize the Reality of Business Conflict. Just like death, taxes and marital disagreements, business conflict is inevitable. This does not, however, mean that business must be disrupted. Far too many expensive, protracted and disruptive battles occur because companies are organized for litigation, not dispute management. If your organization can prioritize dispute anticipation and resolution you will have a competitive advantage. Once you’ve changed the company mind-set that assumes dispute resolution is something that “legal will deal with,” you’re half-way there.
2. Plan for Problems. The time to plan for dealing with inevitable disputes is before, not after, they occur. Whether a dispute be with your joint venture partner, supplier or your competitor, take it on in the planning or contract stage. Establish rules of the road, and have these conversations at the highest level possible, not just among the lawyers.
3. Break Down Silos and Impediments to a Solutions Orientation. As with risk management, dispute management requires a broad organizational effort. Get your lawyers, internally and externally, talking to each other and out of their actual or imaginary silos. Your litigators shouldn’t be called “litigators,” but disputes resolution counsel and your transactional lawyers also need to understand disputes. As for your outside law firms, make sure they understand you need a partner focused on your end game (not theirs) to help you attain solutions, not a hired gun whose mission is solely to win their case in litigation.
4. Don’t Reinvent the Wheel. Once you’ve made the commitment, know that you’re not alone. Seek out the resources that are available to assist you and learn from other like-minded individuals. The CPR Institute, for instance, recently launched its new Transactional Dispute Prevention & Solutions Committee, which brings together the attorneys who look to create successful agreements with those who are charged with dispatching problems once they occur. This group draws many in-house attorneys as well as law firms with a broad array of backgrounds and experiences but all with the same goal: to work together to prevent conflicts and preserve relationships.
Whatever your company’s business, true success is probably more likely to be measured by top or bottom line revenue growth or customer satisfaction than number of lawsuits won. The way to drive commerce and avoid the disruption of litigation is to think early and often about the likelihood of business conflict and how to predict it early, mitigate and resolve it. Indeed, when you build in the reality that ventures or deals will in all likelihood encounter disagreements, it is possible to turn conflict to commerce and long-term success is far more likely.