Business Conflict Blog

Syndicate content
Updated: 1 hour 26 min ago

“Procedural” Apology

Tue, 2016-07-05 19:58

Richard Nixon was responsible for many teaching moments.  One of my favorites is the advance in American appreciation of the difference between the passive voice (“Mistakes were made”) and the active voice (“I made mistakes”) that was offered by his press secretary, and echoed by other presidents.

A recent paper by an accomplished New York Law School student presents a similarly tantalizing distinction — the difference between saying “I’m sorry for what I did” and “I’m sorry for the trouble caused.”

Ayana Osada studied the long dispute between Suzuki and Volkswagen, and analyzed part of the problem through the lens of differing cultures and ensuing miscommunication.  Suzuki, as a leading figure in distinctly Japanese industry, was offending by VW’s failure to respond to Suzuki’s request for a “procedural apology.”  What that term means, and the ramifications of not knowing what it means, are parts of a fascinating tale.

Here is a section of Ms. Osada’s paper addressing the provocative topic.  In extracting this section, the footnote numbering has been disrupted and internal references within certain of the footnotes are no longer accurate.

(This excerpt appears with Ms. Osada’s permission.  She is spending the summer at the New York and Tokyo offices of Paul, Weiss, Rifkind, Wharton & Garrison.)

* * * *

Culture of Respect and Apology

Culture is an all-encompassing word; it is easy to blame cultural differences for a host of ADR related problems. However, in the context of ADR with Japanese parties, focus should be on respect and apology because together, they are the essence of dispute resolution in Japan. They explain why separating substance and procedure is helpful and why procedural apology can cure miscommunication and misunderstanding, which are common in cross-border ADR.

For example, when Suzuki demanded an apology from VW and none was forthcoming, it negatively affected their already failing relationship because Suzuki valued this incident far more than VW did. It was missed opportunity because they could have used procedural apology to repair or contain the damage. “We apologize for addressing you without due respect. It was a misunderstanding and miscommunication due to language differences. We are sincerely sorry.” This statement would have sufficed.

From Japanese party’s point of view, demanding an apology is an olive branch extended to the other party. Unfortunately, VW did not recognize it as such. Or perhaps, VW intentionally ignored Suzuki’s demand after doing analysis and calculation. From Japanese perspective, Suzuki was likely not asking VW to admit substantive guilt or liability; Suzuki was attempting to restore their working relationship procedurally.

As Professor Lee describes, this situation is an “example of how law or lawlessness is culturally constructed, and whether the question is not one of law, however defined, but of the local legal culture.”[1] In Japan, which is over 2,000 years old and is a civil law system unlike the United States, parties place as much emphasis on what is respectful and respectable procedurally as they do on what is legal and reasonable substantively.[2] How can parties engaging with Japanese parties in ADR separate substance and procedure to achieve success?

I am Sorry for the Trouble Caused

In Japanese, “gomeiwaku wo kakete moushiwake arimasen” is a well-used phrase between business partners, friends, families, and in virtually all other relationships. Directly translated, it means: I am sorry for the trouble caused.

The phrase is intentionally vague and lacks basic information such as who, what, whom, and why. This phrase may be issued in a press release by a corporation or a politician. It can be used in ADR regarding family disputes, real estate disputes, neighbor disputes, multi-million dollar commercial disputes, and any other disputes.

“Gomeiwaku” means trouble, problem, headache, additional work, wasted work, offense, disrespect, and anything else, which the injured party may resent. The phrase addresses the injured party’s need for apology because that is how the injured party feels. It is purposely vague because details do not matter as much as the fact that apology is given regardless of who did what to whom for what reason. Employees may say this phrase to apologize and bow deeply before television cameras on behalf of their company for producing a defective product. A politician may say this phrase to apologize to his constituents before resigning over a sex scandal. Legal consequences aside, it is perceived as show of respect.

The “trouble caused” can be a specific incident, injury to someone, or general mistrust of a company. Whatever it is, procedural apology expresses contrition and desire to take responsibility without admitting substantive guilt or liability. Here, substance and procedure have been separated with procedural apology. It has not solved the substantive issue such as recalling defective products and paying damages. However, it has begun to restore respect and trust between parties, which are necessary in any successful relationship.

Demanding Apology and Refusing to Apologize

To restore respect and trust between Suzuki and VW, how could procedural apology have benefited VW? Similarly, how could understanding why VW may not apologize have benefited Suzuki?

During their arbitration, both international and Japanese media reported that Osamu Suzuki, the 80-plus year old Chairman of Suzuki, was offended by VW because of the way Suzuki was treated; he felt that VW viewed Suzuki as inferior to VW.[3] In May 2011, when Mr. Suzuki accused VW of disrespecting Suzuki by calling it VW’s “associate” rather than partner in VW’s annual report, VW could have apologized to save Mr. Suzuki’s face but it did not.[4] On another occasion, VW representatives told Suzuki representatives: “If you become a development center, the VW Group will rely on Suzuki, and our fate will be shared[…] Although it is not that we don’t trust you, we don’t know what will happen in the future. The future may bring concerns that you will be controlled by another company.”[5] While VW may have made the statement with no intention of offending Suzuki, Suzuki was reportedly offended because it implied that Suzuki was incompetent, unreliable, and unpredictable.[6]

When there is miscommunication or misunderstanding, what can be done to remedy the problem? If Mr. Suzuki was offended, it may have been in VW’s long term interest to apologize: “Please forgive us, Mr. Suzuki, if we have offended you or your team. Communicating in English, which is our second or third language, can be challenging. If we misspoke, we are deeply sorry.”

Generally, can such procedural, conciliatory, and vague apology resolve substantive issues? Probably not. However, at least for Japanese parties, such apology would go a long way towards building a relationship. It is an indication that past and future miscommunication or misunderstanding may be unintentional because good faith effort was made to show respect.

On the other hand, European and American parties may believe that such procedural apology is not only confusing but also distracting and even insincere. If apology is procedural, substantive issues and “the real problems” are not being addressed. Apology for the sake of formality may confuse the situation and complicate the matter. This may be the thinking of an American corporation, who hesitates to issue an apology after apology is demanded by a Japanese corporation. Because apology means different things in different cultures, it may be undervalued to the detriment of both parties, who miss an opportunity to nip a problem in the bud.

Power of Apology

To varying degrees, apology is valued universally and has been accepted as effective tool in ADR in multiple countries. By 1986, “apology legislation,” which legalizes use of apology as legal remedy, had been introduced in 56 jurisdictions including the United States, United Kingdom, Australia, and Canada to settle a variety of conflicts, including business disputes, family disputes, sexual assault charges on college campuses, and international war crime tribunals.[7] However, fear that apology can be construed as admission of guilt or liability remains in the United States.[8]

It is this strategic thinking, based on which one abstains from apologizing, which offends Japanese parties even more because it indicates that strategy rather than respect is controlling. It is especially disrespectful, the offended Japanese party may conclude, that apology is not forthcoming. The American strategy of rational thinking and self-preservation can be described as “kakehiki” in Japanese. Although kakehiki is just as valuable and inevitable in business in Japan as it is in the United States, it is not necessarily honorable in Japanese psyche. Kakehiki endorses hedging bets and calculating what is most advantageous at the expense of more honorable values such as respect. In contrast, formal apology shows respect, honor, and courage.

Therefore, when problems arise in ADR and apology is demanded, withholding it can be devastating. Parties can end up with more problems than when they started the ADR. This is where procedural apology can be effective because it can cure potentially serious relationship problems quickly without addressing substantive issues so the parties can return to solving the substantive issues.

Crowded Society and Apology

Japan and the United States can be at the opposite ends of the spectrum regarding use of apology. Scholars including Professor Lee have studied “the U.S.­–Japan axis” and explain that Japanese cultural norms, which value respect, community, and harmony, cause them to apologize more readily, when “one’s actions have resulted in the significant injury of another[.]”[9] In contrast, the U.S. inclination is to refrain from apologizing or to deny responsibility in the very same situation.[10]

One relevant factor is geography; Japan is ten times more crowded than the United States. Most Japanese communities are highly populated, in which people must work and live together in harmony for survival. Japan’s population was 127.1 million in 2014 and its surface area was 377,962 square kilometers while the U.S. population was 318.9 million and its surface area was 9,831,510 square kilometers.[11] Comparing their “population density,” which is “people per square kilometer of land area,” the U.S. density was 34.9 while Japanese density was 348.7.[12] The United States is roughly 26 times the size of Japan but Japan’s population is nearly 40% of the U.S. population.[13] Japan is a country, in which the equivalent of almost 40% the U.S. population lives.[14] Yet Japan is “slightly smaller than California.”[15]

Living in a crowded country helps explain why Japanese people value harmony, respect, and keeping face, and why they appreciate apology as show of respect. Avoiding confrontation resolves disputes and conflicts efficiently in Japan because when everyone lives and works in close quarters, parties cannot escape from one another. Confrontation, escalation, and disorder, cannot be permitted in crowded communities because dissenters cannot simply move out west, where there is plenty of land and few people. In Japan, there is little unclaimed land and wilderness. In such crowded communities, independence, individuality, and respectful disagreement, which are valued in U.S. communities, are subordinated. In Japan, it is often easier, more efficient, and ultimately beneficial to everyone, to apologize. Strategizing and avoiding admission of guilt or liability would likely aggravate the matter. Therefore, lack of apology, when it is expected, is that much more devastating to Japanese parties.

Law and ADR that Reflect Host Culture

Law and ADR systems generally reflect each country’s “societal inclination or disinclination to apologize.”[16] In Japan, legal institutions have reinforced societal use of the apology and integrated it into the country’s justice system. To resolve conflicts quickly and to have finality, Japanese courts regularly demand apology from parties. Professor Lee explains: “The culture of Japan is such that all of society, including the bench and bar, expects and demands an apology from a party causing harm or injury to another.”[17]

In the United States, apology is not typically a part of civil or criminal court proceedings. Courts can ask parties to apologize. However, even in ADR, apology may not be mandatory because “the societal inclination not to apologize in the U.S. setting is matched (and perhaps shaped) by a legal culture that advises clients not to issue an apology for fear that it may be used against the apologizer as an admission of legal liability.”[18] Therefore, apology is not given high “legal priority” and “legal doctrine based on apology” is not as well developed in the United States.[19]

“You Should Know Better”: High Context v. Low Context

To convey that a person is better than his or her own misguided conduct, expression, “you should know better,” is used in the United States and in Japan. However, the Japanese version implies this notion: “You lack common sense that all of us in this community unquestionably share, which means that you are showing disrespect.” Assuming that everyone shares the same common sense is a mistake, which Japanese parties can make due to geographical and cultural conditioning.

The reason Suzuki was offended by VW may have been that Suzuki assumed that VW should know better. VW must know that it should not call Suzuki an associate because they are equal partners, Suzuki assumed. It may not occur to Suzuki that VW representatives simply misspoke or misused some words. Suzuki assumed that VW knew better and yet, VW called them an associate rather than partner. Therefore, Suzuki was offended. Similarly, Suzuki likely assumed that VW knew or should have known that VW must apologize; it is common sense. Yet VW refused to apologize. Therefore, Suzuki was further offended.

“Joshiki shirazu,” meaning “lacking common sense,” is an expression used to describe conduct that is frowned upon in Japan. In a small and crowded island country with long history of interdependent agricultural communities and limited immigrant population such as Japan, common sense enables collective survival.

In contrast, in a large country made up of immigrants with frontier spirit, where multiracial, multi-ethnic and multi-religion communities coexist, such as the United States, common sense and assumptions are not dependable. Instead, freedom, pluralism, and tolerance for those who disagree with us, are valued. Many Americans living in large cities such as New York City, especially, do not assume that our neighbors, coworkers, and business partners, share the same customs and common sense. People in diverse communities must keep an open mind to learn from each other; we learn by compromising and communicating. Therefore, people are not so easily offended if there is misunderstanding or miscommunication.

In Japan, however, people are conditioned to assume that everyone shares the collective common sense, rendering disregard for common sense particularly disrespectful. Refusing to apologize can be offensive to many Japanese parties, when it may be dismissed as harmless by many Americans, who are conditioned to expect that people from different cultures have different customs.

[1] Ilhyung Lee, Introducing Int’l Com. Arb. and Its Lawlessness, By Way of the Dissenting Opinion, 4(1) Contemp. Asia Arb. J. 19, 27 (May 31, 2011), http://ssrn.com/abstract=1867886.

[2] Introduction to Japan’s Legal System, Library of congress, http://www.loc.gov/law/help/legal-research-guide/japan.php (last visited May 22, 2016).

[3] Anna Mukai, Suzuki Starts Arb. with Volkswagen to Buy Back Shares, BLOOMBERGBUSINESS (NOV. 24, 2011), www.bloomberg.com/news/articles/2011-11-24/suzuki-starts-arbitration-with-volkswagen; Hans Greimel, How the VW-Suzuki Alliance Went Wrong, AUTOMOTIVE NEWS (Aug. 3, 2015), http://www.autonews.com/article/20150803/OEM/308039944/how-the-vw-suzuki-alliance-went-wrong.

[4] Mukai, supra note 11; Greimel, supra note 11.

[5] Mukai, supra note 11; Greimel, supra note 11.

[6] Mukai, supra note 11; Greimel, supra note 11.

[7] Robyn Carroll et. al., Apology Legis. and its Implications for Int’l Disp. Resol., 2015-9 UWA FACULTY OF LAW RESEARCH PAPER 115–117 (2015), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2677033.

[8] Id.

[9] The Law and Culture of the Apology, supra note 8 at 2.

[10] Id.

[11] World Dev. Indicators: Japan, The World Bank, http://databank.worldbank.org/data/reports.aspx?source=2&country=JPN&series=&period= (last visited May 22, 2016); World Dev. Indicators: United States, The World Bank, http://databank.worldbank.org/data/reports.aspx?source=2&country=USA&series=&period= (last visited May 22, 2016).

[12] World Dev. Indicators: Japan, supra note 19; World Dev. Indicators: United State., supra note 19.

[13] World Dev. Indicators: Japan, supra note 19; World Dev. Indicators: United State., supra note 19.

[14] World Dev. Indicators: Japan, supra note 19; World Dev. Indicators: United State., supra note 19.

[15] The World Factbook, Central Intelligence Agency, https://www.cia.gov/library/publications/the-world-factbook/fields/2023.html (last visited May 2, 2016).

[16] The Law and Culture of the Apology, supra note 8 at 2.

[17] Id.

[18] Id.

[19] Id.

[20] The Law and Culture of the Apology, supra note 8 at 10.

[21] Id.

[22] Id.

[23] Id.

[24] Id.

“Procedural” Apology

Tue, 2016-07-05 19:58

Richard Nixon was responsible for many teaching moments. One of my favorites is the advance in American appreciation of the difference between the passive voice (“Mistakes were made”) and the active voice (“I made mistakes”) that was offered by his press secretary, and echoed by other presidents.

A recent paper by an accomplished New York Law School student presents a similarly tantalizing distinction — the difference between saying “I’m sorry for what I did” and “I’m sorry for the trouble caused.”

Ayana Osada studied the long dispute between Suzuki and Volkswagen, and analyzed part of the problem through the lens of differing cultures and ensuing miscommunication. Suzuki, as a leading figure in distinctly Japanese industry, was offending by VW’s failure to respond to Suzuki’s request for a “procedural apology.” What that term means, and the ramifications of not knowing what it means, are parts of a fascinating tale.

Here is a section of Ms. Osada’s paper addressing the provocative topic. In extracting this section, the footnote numbering has been disrupted and internal references within certain of the footnotes are no longer accurate.

(This excerpt appears with Ms. Osada’s permission. She is spending the summer at the New York and Tokyo offices of Paul, Weiss, Rifkind, Wharton & Garrison.)

* * * *

Culture of Respect and Apology

Culture is an all-encompassing word; it is easy to blame cultural differences for a host of ADR related problems. However, in the context of ADR with Japanese parties, focus should be on respect and apology because together, they are the essence of dispute resolution in Japan. They explain why separating substance and procedure is helpful and why procedural apology can cure miscommunication and misunderstanding, which are common in cross-border ADR.

For example, when Suzuki demanded an apology from VW and none was forthcoming, it negatively affected their already failing relationship because Suzuki valued this incident far more than VW did. It was missed opportunity because they could have used procedural apology to repair or contain the damage. “We apologize for addressing you without due respect. It was a misunderstanding and miscommunication due to language differences. We are sincerely sorry.” This statement would have sufficed.

From Japanese party’s point of view, demanding an apology is an olive branch extended to the other party. Unfortunately, VW did not recognize it as such. Or perhaps, VW intentionally ignored Suzuki’s demand after doing analysis and calculation. From Japanese perspective, Suzuki was likely not asking VW to admit substantive guilt or liability; Suzuki was attempting to restore their working relationship procedurally.

As Professor Lee describes, this situation is an “example of how law or lawlessness is culturally constructed, and whether the question is not one of law, however defined, but of the local legal culture.”[1] In Japan, which is over 2,000 years old and is a civil law system unlike the United States, parties place as much emphasis on what is respectful and respectable procedurally as they do on what is legal and reasonable substantively.[2] How can parties engaging with Japanese parties in ADR separate substance and procedure to achieve success?

I am Sorry for the Trouble Caused

In Japanese, “gomeiwaku wo kakete moushiwake arimasen” is a well-used phrase between business partners, friends, families, and in virtually all other relationships. Directly translated, it means: I am sorry for the trouble caused.

The phrase is intentionally vague and lacks basic information such as who, what, whom, and why. This phrase may be issued in a press release by a corporation or a politician. It can be used in ADR regarding family disputes, real estate disputes, neighbor disputes, multi-million dollar commercial disputes, and any other disputes.

“Gomeiwaku” means trouble, problem, headache, additional work, wasted work, offense, disrespect, and anything else, which the injured party may resent. The phrase addresses the injured party’s need for apology because that is how the injured party feels. It is purposely vague because details do not matter as much as the fact that apology is given regardless of who did what to whom for what reason. Employees may say this phrase to apologize and bow deeply before television cameras on behalf of their company for producing a defective product. A politician may say this phrase to apologize to his constituents before resigning over a sex scandal. Legal consequences aside, it is perceived as show of respect.

The “trouble caused” can be a specific incident, injury to someone, or general mistrust of a company. Whatever it is, procedural apology expresses contrition and desire to take responsibility without admitting substantive guilt or liability. Here, substance and procedure have been separated with procedural apology. It has not solved the substantive issue such as recalling defective products and paying damages. However, it has begun to restore respect and trust between parties, which are necessary in any successful relationship.

Demanding Apology and Refusing to Apologize

To restore respect and trust between Suzuki and VW, how could procedural apology have benefited VW? Similarly, how could understanding why VW may not apologize have benefited Suzuki?

During their arbitration, both international and Japanese media reported that Osamu Suzuki, the 80-plus year old Chairman of Suzuki, was offended by VW because of the way Suzuki was treated; he felt that VW viewed Suzuki as inferior to VW.[3] In May 2011, when Mr. Suzuki accused VW of disrespecting Suzuki by calling it VW’s “associate” rather than partner in VW’s annual report, VW could have apologized to save Mr. Suzuki’s face but it did not.[4] On another occasion, VW representatives told Suzuki representatives: “If you become a development center, the VW Group will rely on Suzuki, and our fate will be shared[…] Although it is not that we don’t trust you, we don’t know what will happen in the future. The future may bring concerns that you will be controlled by another company.”[5] While VW may have made the statement with no intention of offending Suzuki, Suzuki was reportedly offended because it implied that Suzuki was incompetent, unreliable, and unpredictable.[6]

When there is miscommunication or misunderstanding, what can be done to remedy the problem? If Mr. Suzuki was offended, it may have been in VW’s long term interest to apologize: “Please forgive us, Mr. Suzuki, if we have offended you or your team. Communicating in English, which is our second or third language, can be challenging. If we misspoke, we are deeply sorry.”

Generally, can such procedural, conciliatory, and vague apology resolve substantive issues? Probably not. However, at least for Japanese parties, such apology would go a long way towards building a relationship. It is an indication that past and future miscommunication or misunderstanding may be unintentional because good faith effort was made to show respect.

On the other hand, European and American parties may believe that such procedural apology is not only confusing but also distracting and even insincere. If apology is procedural, substantive issues and “the real problems” are not being addressed. Apology for the sake of formality may confuse the situation and complicate the matter. This may be the thinking of an American corporation, who hesitates to issue an apology after apology is demanded by a Japanese corporation. Because apology means different things in different cultures, it may be undervalued to the detriment of both parties, who miss an opportunity to nip a problem in the bud.

Power of Apology

To varying degrees, apology is valued universally and has been accepted as effective tool in ADR in multiple countries. By 1986, “apology legislation,” which legalizes use of apology as legal remedy, had been introduced in 56 jurisdictions including the United States, United Kingdom, Australia, and Canada to settle a variety of conflicts, including business disputes, family disputes, sexual assault charges on college campuses, and international war crime tribunals.[7] However, fear that apology can be construed as admission of guilt or liability remains in the United States.[8]

It is this strategic thinking, based on which one abstains from apologizing, which offends Japanese parties even more because it indicates that strategy rather than respect is controlling. It is especially disrespectful, the offended Japanese party may conclude, that apology is not forthcoming. The American strategy of rational thinking and self-preservation can be described as “kakehiki” in Japanese. Although kakehiki is just as valuable and inevitable in business in Japan as it is in the United States, it is not necessarily honorable in Japanese psyche. Kakehiki endorses hedging bets and calculating what is most advantageous at the expense of more honorable values such as respect. In contrast, formal apology shows respect, honor, and courage.

Therefore, when problems arise in ADR and apology is demanded, withholding it can be devastating. Parties can end up with more problems than when they started the ADR. This is where procedural apology can be effective because it can cure potentially serious relationship problems quickly without addressing substantive issues so the parties can return to solving the substantive issues.

Crowded Society and Apology

Japan and the United States can be at the opposite ends of the spectrum regarding use of apology. Scholars including Professor Lee have studied “the U.S.­–Japan axis” and explain that Japanese cultural norms, which value respect, community, and harmony, cause them to apologize more readily, when “one’s actions have resulted in the significant injury of another[.]”[9] In contrast, the U.S. inclination is to refrain from apologizing or to deny responsibility in the very same situation.[10]

One relevant factor is geography; Japan is ten times more crowded than the United States. Most Japanese communities are highly populated, in which people must work and live together in harmony for survival. Japan’s population was 127.1 million in 2014 and its surface area was 377,962 square kilometers while the U.S. population was 318.9 million and its surface area was 9,831,510 square kilometers.[11] Comparing their “population density,” which is “people per square kilometer of land area,” the U.S. density was 34.9 while Japanese density was 348.7.[12] The United States is roughly 26 times the size of Japan but Japan’s population is nearly 40% of the U.S. population.[13] Japan is a country, in which the equivalent of almost 40% the U.S. population lives.[14] Yet Japan is “slightly smaller than California.”[15]

Living in a crowded country helps explain why Japanese people value harmony, respect, and keeping face, and why they appreciate apology as show of respect. Avoiding confrontation resolves disputes and conflicts efficiently in Japan because when everyone lives and works in close quarters, parties cannot escape from one another. Confrontation, escalation, and disorder, cannot be permitted in crowded communities because dissenters cannot simply move out west, where there is plenty of land and few people. In Japan, there is little unclaimed land and wilderness. In such crowded communities, independence, individuality, and respectful disagreement, which are valued in U.S. communities, are subordinated. In Japan, it is often easier, more efficient, and ultimately beneficial to everyone, to apologize. Strategizing and avoiding admission of guilt or liability would likely aggravate the matter. Therefore, lack of apology, when it is expected, is that much more devastating to Japanese parties.

Law and ADR that Reflect Host Culture

Law and ADR systems generally reflect each country’s “societal inclination or disinclination to apologize.”[16] In Japan, legal institutions have reinforced societal use of the apology and integrated it into the country’s justice system. To resolve conflicts quickly and to have finality, Japanese courts regularly demand apology from parties. Professor Lee explains: “The culture of Japan is such that all of society, including the bench and bar, expects and demands an apology from a party causing harm or injury to another.”[17]

In the United States, apology is not typically a part of civil or criminal court proceedings. Courts can ask parties to apologize. However, even in ADR, apology may not be mandatory because “the societal inclination not to apologize in the U.S. setting is matched (and perhaps shaped) by a legal culture that advises clients not to issue an apology for fear that it may be used against the apologizer as an admission of legal liability.”[18] Therefore, apology is not given high “legal priority” and “legal doctrine based on apology” is not as well developed in the United States.[19]

“You Should Know Better”: High Context v. Low Context

To convey that a person is better than his or her own misguided conduct, expression, “you should know better,” is used in the United States and in Japan. However, the Japanese version implies this notion: “You lack common sense that all of us in this community unquestionably share, which means that you are showing disrespect.” Assuming that everyone shares the same common sense is a mistake, which Japanese parties can make due to geographical and cultural conditioning.

The reason Suzuki was offended by VW may have been that Suzuki assumed that VW should know better. VW must know that it should not call Suzuki an associate because they are equal partners, Suzuki assumed. It may not occur to Suzuki that VW representatives simply misspoke or misused some words. Suzuki assumed that VW knew better and yet, VW called them an associate rather than partner. Therefore, Suzuki was offended. Similarly, Suzuki likely assumed that VW knew or should have known that VW must apologize; it is common sense. Yet VW refused to apologize. Therefore, Suzuki was further offended.

“Joshiki shirazu,” meaning “lacking common sense,” is an expression used to describe conduct that is frowned upon in Japan. In a small and crowded island country with long history of interdependent agricultural communities and limited immigrant population such as Japan, common sense enables collective survival.

In contrast, in a large country made up of immigrants with frontier spirit, where multiracial, multi-ethnic and multi-religion communities coexist, such as the United States, common sense and assumptions are not dependable. Instead, freedom, pluralism, and tolerance for those who disagree with us, are valued. Many Americans living in large cities such as New York City, especially, do not assume that our neighbors, coworkers, and business partners, share the same customs and common sense. People in diverse communities must keep an open mind to learn from each other; we learn by compromising and communicating. Therefore, people are not so easily offended if there is misunderstanding or miscommunication.

In Japan, however, people are conditioned to assume that everyone shares the collective common sense, rendering disregard for common sense particularly disrespectful. Refusing to apologize can be offensive to many Japanese parties, when it may be dismissed as harmless by many Americans, who are conditioned to expect that people from different cultures have different customs.

[1] Ilhyung Lee, Introducing Int’l Com. Arb. and Its Lawlessness, By Way of the Dissenting Opinion, 4(1) Contemp. Asia Arb. J. 19, 27 (May 31, 2011), http://ssrn.com/abstract=1867886.

[2] Introduction to Japan’s Legal System, Library of congress, http://www.loc.gov/law/help/legal-research-guide/japan.php (last visited May 22, 2016).

[3] Anna Mukai, Suzuki Starts Arb. with Volkswagen to Buy Back Shares, BLOOMBERGBUSINESS (NOV. 24, 2011), www.bloomberg.com/news/articles/2011-11-24/suzuki-starts-arbitration-with-volkswagen; Hans Greimel, How the VW-Suzuki Alliance Went Wrong, AUTOMOTIVE NEWS (Aug. 3, 2015), http://www.autonews.com/article/20150803/OEM/308039944/how-the-vw-suzuki-alliance-went-wrong.

[4] Mukai, supra note 11; Greimel, supra note 11.

[5] Mukai, supra note 11; Greimel, supra note 11.

[6] Mukai, supra note 11; Greimel, supra note 11.

[7] Robyn Carroll et. al., Apology Legis. and its Implications for Int’l Disp. Resol., 2015-9 UWA FACULTY OF LAW RESEARCH PAPER 115–117 (2015), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2677033.

[8] Id.

[9] The Law and Culture of the Apology, supra note 8 at 2.

[10] Id.

[11] World Dev. Indicators: Japan, The World Bank, http://databank.worldbank.org/data/reports.aspx?source=2&country=JPN&series=&period= (last visited May 22, 2016); World Dev. Indicators: United States, The World Bank, http://databank.worldbank.org/data/reports.aspx?source=2&country=USA&series=&period= (last visited May 22, 2016).

[12] World Dev. Indicators: Japan, supra note 19; World Dev. Indicators: United State., supra note 19.

[13] World Dev. Indicators: Japan, supra note 19; World Dev. Indicators: United State., supra note 19.

[14] World Dev. Indicators: Japan, supra note 19; World Dev. Indicators: United State., supra note 19.

[15] The World Factbook, Central Intelligence Agency, https://www.cia.gov/library/publications/the-world-factbook/fields/2023.html (last visited May 2, 2016).

[16] The Law and Culture of the Apology, supra note 8 at 2.

[17] Id.

[18] Id.

[19] Id.

[20] The Law and Culture of the Apology, supra note 8 at 10.

[21] Id.

[22] Id.

[23] Id.

[24] Id.

The New York City Convening of the Global Pound Conference: September 12, 2016

Tue, 2016-07-05 13:23

The Global Pound Conference is a series of convenings of ADR practitioners, end-users, teachers and students around the world. Its goal is to assess the current state of Alternative Dispute Resolution and to point the direction for its continued advancement.

GPC events have taken place at, or or planned for, London, Singapore, Lagos, Mexico City, and many other places around the world. New York City’s conference will be held at Cardozo Law School on Monday September 12, 20-16.

More information on the Global Pound Conference may be found here. Information on the New York event is found here.

It’s difficult to imagine a more exciting, broader, and more comprehensive event in our field. All in New York City should of course be there on September 12, and others are encouraged to find a gather in near you and take part in this extraordinary happening.

The New York City Convening of the Global Pound Conference: September 12, 2016

Tue, 2016-07-05 13:23

The Global Pound Conference is a series of convenings of ADR practitioners, end-users, teachers and students around the world.  Its goal is to assess the current state of Alternative Dispute Resolution and to point the direction for its continued advancement.

GPC events have taken place at, or or planned for, London, Singapore, Lagos, Mexico City, and many other places around the world.  New York City’s conference will be held at Cardozo Law School on Monday September 12, 20-16.

More information on the Global Pound Conference may be found here.  Information on the New York event is found here.

It’s difficult to imagine a more exciting, broader, and more comprehensive event in our field.  All in New York City should of course be there on September 12, and others are encouraged to find a gather in near you and take part in this extraordinary happening.

CPR’s Third Volume on Employment ADR

Tue, 2016-07-05 12:05

Last year the International Institute of Conflict Prevention and Resolution (“CPR”) published a new volume, Cutting Edge Advances in Resolving Workplace Disputes. It is a fine book, an deserves to be a steady reference to practitioners and systems designers in the field.

The book is a joint publication of CPR and Cornell’s Scheinman Institute, and reflects the leadership of Jay W. Waks, Chair of the CPR Employment Disputes Committee, and Nancy L. Vanderlip, former senior counsel to several corporations and Chair of the Subcommittee charged with the project. It is a compendium of essays contributed by members of the Committee, each a contribution to the thought-leadership at which CPR is unparalleled.

David Lipsky of Cornell writes an overview of how corporations use ADR in employment, presenting useful findings from corporate surveys conducted in 1997, 2011, and 2013. He concludes that a growing number of companies rely on ADR as their principle approach to employment disputes, embracing a wide array of ADR techniques. In a subsequent chapter Lipsky focuses on the evolution of Integrated Conflict Management Systems and notes intrinsic organizational obstacles to their adoption, independent of their benefit.

Judy Cohen offers a chapter on approaches to stakeholder engagement in developing and nurturing such systems, including examples of companies’ roll-out materials and online resource centers. In that theme, Michael J. Wolf offers an approach to the use of online tools in service of workplace dispute identification and resolution. These range from web conferencing to sophisticated online dispute resolution platforms.

Employee hotlines are the subject of Stephanie Morse-Shamosh‘s chapter, which itemizes the many considerations in determining a hot;line’s function, attributes and trustworthiness. Mary Rowe and Randy Williams write on the practice — still too infrequent, in the view of many observers — of the organizational ombudsman.

Finally, Cynthia S. Mazur introduces a practice to which I have not previously given enough thought — the skills of a “conflict coach” in service of the goal of preventing, rather than resolving, conflicts that too often — and in her view unnecessarily — absorb institutional resources through formal mediation or arbitration.

While I served as Executive Vice President and Interim President of CPR, the Institute published two books in this area: What Jay Waks in his introduction calls the Fat Book and the Skinny Book. This newest publication is perhaps the Goldilocks Book — just right!

 

 

CPR’s Third Volume on Employment ADR

Tue, 2016-07-05 12:05

Last year the International Institute of Conflict Prevention and Resolution (“CPR”) published a new volume, Cutting Edge Advances in Resolving Workplace Disputes.  It is a fine book, an deserves to be a steady reference to practitioners and systems designers in the field.

The book is a joint publication of CPR and Cornell’s Scheinman Institute, and reflects the leadership of Jay W. Waks, Chair of the CPR Employment Disputes Committee, and Nancy L. Vanderlip, former senior counsel to several corporations and Chair of the Subcommittee charged with the project.  It is a compendium of essays contributed by members of the Committee, each a contribution to the thought-leadership at which CPR is unparalleled.

David Lipsky of Cornell writes an overview of how corporations use ADR in employment, presenting useful findings from corporate surveys conducted in 1997, 2011, and 2013.  He concludes that a growing number of companies rely on ADR as their principle approach to employment disputes, embracing a wide array of ADR techniques.  In a subsequent chapter Lipsky focuses on the evolution of Integrated Conflict Management Systems and notes intrinsic organizational obstacles to their adoption, independent of their benefit.

Judy Cohen offers a chapter on approaches to stakeholder engagement in developing and nurturing such systems, including examples of companies’ roll-out materials and online resource centers.  In that theme, Michael J. Wolf offers an approach to the use of online tools in service of workplace dispute identification and resolution.  These range from web conferencing to sophisticated online dispute resolution platforms.

Employee hotlines are the subject of Stephanie Morse-Shamosh‘s chapter, which itemizes the many considerations in determining a hot;line’s function, attributes and trustworthiness.  Mary Rowe and Randy Williams write on the practice — still too infrequent, in the view of many observers — of the organizational ombudsman.

Finally, Cynthia S. Mazur introduces a practice to which I have not previously given enough thought — the skills of a “conflict coach” in service of the goal of preventing, rather than resolving, conflicts that too often — and in her view unnecessarily — absorb institutional resources through formal mediation or arbitration.

While I served as Executive Vice President and Interim President of CPR, the Institute published two books in this area:  What Jay Waks in his introduction calls the Fat Book and the Skinny Book.  This newest publication is perhaps the Goldilocks Book — just right!

 

 

David Hoffman Inspires Us Again

Sat, 2016-06-25 14:24

David Hoffman‘s capacity to lead by inspiration is unparalleled.  When you attend a program or lecture by David, you feel as if he’s talking to you over a table, sharing stuff that matters to him in the hope that it will matter to you, too.

David recently gave a TEDx Talk in Northern Illinois University, and happily it is posted at YouTube.  It’s titled Lawyers as Peacemakers.  Really?!? Yes, Really!  His talk, couched as a summary professional memoir, is actually a testimony to the core impulse of dispute resolution — the desire to help parties to resolve the conflicts that burden them.

David is the only one of my heroes who regularly cries when he tells stories.  He cries in this TED Talk, too.  I attribute this proclivity not to David’s tendency to be emotionally labile, but to reflect his practice of entering the very beating human pulse of conflict.  He moves easily from a war story of a family conflict to the teachings of two Buddhist priests.  This is because David’s approach to his work is as transparent and committed as his approach to his life.  He seeks to live in a way that reduces the conflict that surrounds us — whether or not he is in a formal mediation.  The way he thinks, is the way he lives, is the way he works, is the way he talks, is the way he thinks.

It is no surprise, then, that David cites Gandhi in his talk, urging us to “be the change you want to see in the world.”  In the talk he “announces” that, as of that day, he will forthwith be a lawyer who is a “full-time peacemaker,” and “just say no” to litigation as part of his practice.  He sees the role of a lawyer as assisting parties to heal their rifts.

David Hoffman as peacemaker.  Really, David?!? Yes, Really!

Early Call for DR Section Proposals

Sat, 2016-06-25 13:51

The ABA Section of Dispute Resolution has announced that proposals for programming for the 2017 Spring Meeting (scheduled for San Francisco April 20-23 2017) are due by Wednesday, August 3, 2016.

This annual event is one of the wonderful ADR-related events of the year, and San Francisco of course among the most delightful cities in the world.  Gina Brown of the ABA notes: “A PDF of the proposal form is available on the Conference RFP web site, http://www.americanbar.org/groups/dispute_resolution/events_cle/annual/conf_rfp.html for preparation and planning purposes. All proposals must be submitted through the online proposal form.”

Screw on your thinking caps, colleagues.  I can’t wait to ttend your programs in San Francisco.

 

David Hoffman Inspires Us Again

Sat, 2016-06-25 02:24

David Hoffman‘s capacity to lead by inspiration is unparalleled.  When you attend a program or lecture by David, you feel as if he’s talking to you over a table, sharing stuff that matters to him in the hope that it will matter to you, too.

David recently gave a TEDx Talk in Northern Illinois University, and happily it is posted at YouTube.  It’s titled Lawyers as Peacemakers.  Really?!? Yes, Really!  His talk, couched as a summary professional memoir, is actually a testimony to the core impulse of dispute resolution — the desire to help parties to resolve the conflicts that burden them.

David is the only one of my heroes who regularly cries when he tells stories.  He cries in this TED Talk, too.  I attribute this proclivity not to David’s tendency to be emotionally labile, but to reflect his practice of entering the very beating human pulse of conflict.  He moves easily from a war story of a family conflict to the teachings of two Buddhist priests.  This is because David’s approach to his work is as transparent and committed as his approach to his life.  He seeks to live in a way that reduces the conflict that surrounds us — whether or not he is in a formal mediation.  The way he thinks, is the way he lives, is the way he works, is the way he talks, is the way he thinks.

It is no surprise, then, that David cites Gandhi in his talk, urging us to “be the change you want to see in the world.”  In the talk he “announces” that, as of that day, he will forthwith be a lawyer who is a “full-time peacemaker,” and “just say no” to litigation as part of his practice.  He sees the role of a lawyer as assisting parties to heal their rifts.

David Hoffman as peacemaker.  Really, David?!? Yes, Really!

Early Call for DR Section Proposals

Sat, 2016-06-25 01:51

The ABA Section of Dispute Resolution has announced that proposals for programming for the 2017 Spring Meeting (scheduled for San Francisco April 20-23 2017) are due by Wednesday, August 3, 2016.

This annual event is one of the wonderful ADR-related events of the year, and San Francisco of course among the most delightful cities in the world.  Gina Brown of the ABA notes: “A PDF of the proposal form is available on the Conference RFP web site, http://www.americanbar.org/groups/dispute_resolution/events_cle/annual/conf_rfp.html for preparation and planning purposes. All proposals must be submitted through the online proposal form.”

Screw on your thinking caps, colleagues.  I can’t wait to ttend your programs in San Francisco.

Arbitration Primer for Litigators

Mon, 2016-05-30 11:42

The Dispute Resolution Section of the New York State Bar Association, under the Chairmanship of David C. Singer, has published a dandy 23-page booklet to introduce lawyers accustomed to the courtroom to the intricacies and nuances of representing a client in arbitration.  as the Introduction notes:

It is a common misconception among litigation attorneys that any attorney who has represented a client in court is completely prepared to represent a client in domestic arbitration.  [In fact] the differences between these processes are significant, and could easily prove to be traps for the unwary.

Brief and pithy essays are then provided by some of the leading lights of arbitration practice:  Peter Michaelson on selecting arbitrators, Paul Bennett Marrow on issues of arbitrability, Barbara Mentz on conducing a preliminary conference, John Wilkinson and discovery, Geri S. Krauss on conducting evidentiary hearings, and so on.

This is exactly the kind of service that a bar association’s ADR section should be rendering to its fellow attorneys.  Its brevity is very welcome.  Its utility is, as it states, to alert litigators out of their slumber and prompt them to hone skills that are uniquely suited to the curious forum that is private arbitration.

In his book Hooray for Yiddish! Leo Rosten defines a mitzve as a kind, considerate deed that reflects the will of the divine.  His illustration is a policeman who, in persuading a despondent man not to drown himself in the Sea of Galilee, pleads with him: “If you jump I will have to go in after you.  I can’t swim.  I have a wife and two children.  Don’t be so selfish!  Perform a real mitzve.  Go home, and in the peace and comfort of your own home, hang yourself.”

In this spirit I urge upon the reader that buying about 50 copies of this pamphlet and distributing one to every litigator you know would be “a real mitzve.”

New ABA Mediator Ethics Opinion

Sun, 2016-05-15 16:54

In a previous post I noted the work of the ABA Dispute Resolution Section’s Committee on Mediator Ethical Guidance, which interprets the Model Standards of Conduct for Mediators (promulgated in 2005 by the ABA, AAA and ACR).  In that same post, I noted the frequent close correlation between ethical lapses and raw stupidity.

Well, we’ve got another one.

The Committee recently published an opinion that addresses the conduct of a mediator who posted the following on his Facebook page:

Whew!  Just settled my first Superior Court civil mediation.  A case involving a non-English speaking elderly client, who really really didn’t want to have to go through trial.  Possible jury verdict could have been zilch to around $80k.  I got her $50k.

The Committee’s formal opinion noted that the public Facebook post “would not be proper unless the mediator had the consent of all parties.”  I’ll say!

(See, that’s why I wouldn’t do well on Committees like this.  Lack the tact.)

Two grounds were cited in support of the Committee’s analysis.  First, Standard II(B), requiring impartiality, was violated by the mediator’s apparent sole concern on “getting” the plaintiff benefits.  Second, the Facebook post violated two subsections of Standard V (confidentiality) inasmuch as (a) it disclosed facts about participants in, and the outcome of, a confidential mediation and (b) it revealed the plaintiff’s sentiments concerning trial, which were presumably communicated during private session.

This is all very well.  But neither of these lapses sent me off my chair.  The one that jumped out at me was the sentence, “I got her $50k.”

My friend, you “got her” nothing.  One party offered, and the other party accepted, $50,000.  And you didn’t “settle the case” — they did.  It wasn’t “your” case, and it wasn’t “your” mediation — it was theirs.

This conflation of the mediator’s value with the occurrence of settlement during or soon after mediation is too frequent among folks who really should know better.  The case you’re mediating will certainly terminate prior to trial, for one reason or the other, and the fact that it settles during mediation doesn’t mean that “the mediator settled it.”

We often cite the statistic of the teeny number of filed civil cases that are disposed at trial (in federal district courts, 1.1%) in support of the importance of mediators’ contributions to those dispositions.  But what that statistic really shows is that parties usually settle litigated cases prior to trial. It doesn’t show that mediators settle cases that would not otherwise settle in the mediator’s absence.

I accept that mediation (not mediators) frequently prompts parties to consider settlement at an earlier stage than they might in the absence of mediation (though that’s hard to measure).  And I take it as an article of faith that good mediators are more effective than unskilled mediators in facilitating early settlement (though I have never seen reliable statistics on that, either).   But I am skeptical of the notion that a case that was not ripe for settlement nevertheless settled because of the mediator’s efforts.  And I reject utterly the idea that a mediator “settles cases.”

I don’t know whether I’m asking for professional humility or a simple reality check.  I do hope we remember that when we do our job, we don’t settle cases.  We help the parties to do so, if they conclude that it is in their interest to do so.  And when it happens the credit belongs to them, not to us.

With statistics like the ones cited above, we may as well take credit when water runs downhill.

Party Autonomy: "Something They Teach at Pepperdine"?

Thu, 2016-04-14 14:21

A group of sharp and experienced thinkers on the mediation process offered a panel at the recent ABA Dispute Resolution Section meeting in New York before a packed crowd of just-as-sharp practitioners on the topic “Reevaluating the Role of Autonomy in ADR.”  The discussion was led by an ever-patient and always-perceptive Hiro Aragaki of Loyola Law School, and questioned whether party self-determination — often extolled as a primary virtue in ADR and, indeed, Standard I in the ABA/AAA/ACR Model Standards of Conduct for Mediators — is actually a comforting myth.  Prof. Aragaki opened the session with an anecdote about an exchange he experienced where the other discussant eventually threw up his hands in exasperation and said, “Autonomy?  That’s just something they teach at Pepperdine!”

It got a good laugh.  But as the hour went on, it became increasingly clear that party autonomy may, in fact, not exist in the real world of mediation — not ever.

One common example of incomplete party autonomy arises from the disconnect (whether intentional or not) between a party and her representative.  The lawyer, seeing the matter through the lens of damages and contingent fees, may be seeking back-pay while the client might be seeking reinstatement.  Who is the mediator to listen to, and is it the mediator’s job to mediate between them in the first place?  Moreover, if the client were purely autonomous, the lawyer wouldn’t be needed, right?

Another speaker distinguished between self-determination as an attribute (a political or social perspective, as in “this person is a voter”) and as a capacity (a medical, psychological or educational perspective, as in “this person needs assistance to perform daily tasks”).  Does the person sitting in that chair actually possess the capacity to make optimal decisions on her own behalf?  Indeed, isn’t her own uncertainty on that score the very reason she hired a lawyer?  And, one layer up, the reason they sought intervention by a mediator?

Indeed, the whole idea seems to make most sense when applied to people who have control of a situation.  One speaker proposed that powerful white men are among the few who feel comfortable discussing party autonomy — because they are among the few who might actually possess it!  May a woman in 1950 be said to have self-determination?  Or, indeed, a woman today?  Does an employee who needs the job have autonomy in negotiating its terms compared to an employer who merely needs the job filled by someone?  As Anatole France said, does mediation, “in its majestic equality, mean that the rich, as well as the poor, are forbidden to sleep under bridges, to beg in the street, and to steal bread?”

Jennifer Reynolds acts as Ombuds for the University of Oregon, and is accustomed to dealing with individuals who are uncertain as to the appropriate structural, procedural or substantive context in which their concerns may be voiced.  Indeed, their confusion is what prompts them to call the Ombuds office.  Does lack of clarity on what you want and whom you want if from amount, in practice, to lack of autonomy?  When one party to a divorce is financially dependent on the other, may each party be said to be autonomous?  Same goes for employment disputes: As one speaker put it, “Getting fired is pretty disempowering.”

The attendees left with a more nuanced and more useful understanding of the principle of “party autonomy,” which released us as neutral facilitators.  When we find ourselves trying to solve a conflict, we all are disadvantaged to some degree.  We all are interdependent; what we decide in a mediation room will have an impact on people other than those who are present. None of us acts in a vacuum and none of us has perfect parity in either factual knowledge or negotiation skills.

Instead we might, as students and practitioners of the facilitative process, hope merely to provide help that a party did not otherwise have.  We might seek to experiment; we might even hope that the exchange is, to some degree, transformative to the troubled or broken relationship.  But to posit that the people in front of us are autonomous is simply delusional.

UIA Mediation Forum and Employment Systems Design

Thu, 2016-04-14 12:42

The Union International des Avocats have hosted the World Forum of Mediation Centres since 2002, and I have attended all but three of their meetings.  It is a convivial crowd of well-informed, deeply committed and sociable folks who tend to meet at interesting (mostly European) venues.

The meeting scheduled for Luxembourg on April 22-23, 2016, will feature many of the topics and speakers that make the organization so valuable.

It will be tinged with tristesse on this occasion, however, since it will be the first time that the late Colin Wall, co-President and co-Founder, will not be with us.  By way of both honoring and exemplifying Colin’s devotion to sharing insights on mediation, the program designers have asked various speakers to contribute a paper for inclusion in a volume to be published in Colin’s honor, proceeds to go to his designated charity.  My topic is systems design for employment dispute resolution, and the article follows.

Designing Employment Dispute Management Systems

Peter Phillips[1]

               In 2002, CPR Institute for Dispute Resolution[2] published a compendium of 20 American employers’ internal workplace dispute programs (the “Compendium”).[3]  The Compendium also included a comparative analysis of certain attributes of these programs,[4] as well as interviews with six program designers and administrators.[5]

This article summarizes the findings of this study. Some of the concerns addressed by the internal programs are unique to the American context, particularly its regulatory and statutory environment concerning workplace rights and regulations.  The overall approach reflected in these programs may nevertheless be of interest to students of workplace dispute resolution in other countries.

Why do companies adopt internal employment dispute systems? 

How do they measure whether the systems are successful?

            The impetus for most employment dispute resolution programs is usually managerial, and only secondarily legal.[6]  Though many companies are prompted to create employment dispute programs because of an adverse judicial ruling involving a class of employees, [7] a systematic managerial approach to workplace conflicts, clearly articulated and neutrally applied, lends consistency and manageability to the workplace.  It assists in identifying flaws (including supervisory weaknesses) in the workplace that might otherwise undermine employee confidence and morale.  It discourages intuitive, retaliatory, or vituperative managerial response to employee behavior.  Corporate policies and interests, rather than individual supervisors’ predispositions, drive company practices in the workplace.

            Additionally, there are the benefits of preventive legal exposure.  Managerial efforts to identify conditions or behaviors that might ripen into a legally cognizable cause of action, and to create nonlitigious avenues of redress, are clearly economically beneficial.[8]  Thus, well-planned and properly administered employment dispute management programs are not only managerially rational, but legally prudent.

The managerial goals of a dispute management program require the adoption of appropriate metrics.  That is, companies measure success in this area the same way they measure the success of any organizational system or policy – by a metric chosen for that purpose.  The effectiveness of employment dispute management programs might be measured by any of the following criteria:

  • How long does it take between the initiation of an employee complaint and its satisfactory resolution? And what resources (person-hours, days, etc.) are expended in that process?
  • What are the average costs of internal and external counsel in addressing an employee complaint?[9]
  • What is the rate of employee turnover before and after establishment of the program?
  • What is the rate of employee complaints filed with external government regulatory agencies?
  • What is the rate of employee utilization of the program?
  • To what extent are resolutions achieved at a junior management level, without implicating senior management time?
  • Are users generally satisfied with the experience of using the program? Would they recommend that peers use it?[10]

These metrics are merely indicative.  Each employer may adopt measurements that suit its management goals.[11]  The main point is that setting metrics to determine the effectiveness of any program is as important as creating the program itself.

Structural overview

            Almost all of the programs in the Compendium were designed with sequential and progressive phases, or steps.  Classically, the first step was consultative and informal; the second step was professionally facilitated formal negotiation (such as mediation), and the third step was adjudicative, either public (litigation) or private (arbitration).

Distinctions among the programs were variations on either the details of these processes or their sequence.  Some companies allowed mediation without the requirement of prior consultation.  Some companies made mediation optional for employees but, once selected, mandatory for supervisors.  Some used Human Relation officers as the first consultative step; others had peer review systems or methods to consult with management other than one’s immediate supervisor.  In some programs arbitration was binding on both parties; in others it was binding on the company but optionally binding on the employee.

Some companies required employees to use the program; others simply offered it.  One company encouraged employees to seek legal advice before accepting a proposal in settlement, and even offered to pay towards the employee’s legal costs for this purpose.  One company had no requirement of sequential use of its steps, and offered four rather than three: an “Open Door” or “Hot Line” option, an “Internal Conference” option, a “Mediation Option,” and an “Arbitration Option.”  Some companies required employees to waive court redress and agree to final and binding arbitration as a condition of employment; others offered but did not require it.

In designing “stepped” employment dispute management programs, all of the companies studied found it necessary to confront certain considerations.  These included:

  • Scope: Which employees will be covered by the program, and which disputes are cognizable under the program? Within the program, are some claims included in informal consultations but excluded from arbitration?[12]
  • Cost: Should employees be required to contribute to the cost of processes such as mediation or arbitration? Would cost-sharing deter usage, or would it ensure that the employer is not perceived as “owning” third-party neutrals such as mediators or arbitrators?
  • Neutrality: Who makes the choice of arbitrators and mediators?  How should the program address the risk of the “repeat-player syndrome,” where the same arbitrators are hired repeatedly by the company and are perceived by employees as incentivized to find in favor of the employer?
  • Incentives/Rewards: Many managers of well-designed programs are concerned to maximize employee usage. Should the program offer an incentive to prompt employee usage, or a reward as a consequence of usage?
  • Collaborative Design: Should the program be designed and then unveiled to the workforce, or should representatives of the workforce be enlisted in the design process? One employer strategically engaged union representatives who were predicated to object to the program, in an effort to co-opt that objection and create “ownership” by trusted members of the workforce.
  • Implementation: Even the most sophisticated program is ineffective unless utilized.  Who shall the program be communicated to employees?  Will junior supervisory management perceive that their authority has been undermined?  Should the “C-Suites” be involved in launching the program and making clear the company’s expectations of compliance with its directives?[13]

Skills of consensus-building are particularly valuable in this context.  The broader the input in program design, the more likely the program will be effectively implemented.  Objections to any program features are best heard early in the design stage, and not only addressed, but seen by the objector to have been addressed, in order to obviate their inevitable airing at a later time in less flexible circumstances.

The challenge of early problem identification

Four attributes of successful internal employment dispute management programs may be articulated as:

  • Providing expense-reduction benefits through front-ending resources to address problems before they ripen into more costly disputes
  • Encouraging amiable resolution of conflicts while avoiding animosities engendered by litigation
  • Building “early detection” mechanisms into the workplace to discover and address issues with supervisory error
  • Providing an adjudicatory process – when needed – other than public litigation

There are a variety of ways that the benefits of early detection of workplace problems may be accomplished.  One is the establishment of the office of organizational ombudsman.  Such an office is a resource to all members of the workforce, including managers and supervisors, and points inquirers to routes for solutions in a confidential atmosphere.  The ombudsman office is not part of Human Resources or the Legal Department, and is answerable directly to the office of the president of the organization.

This is an area in which responsible innovation may reap substantial rewards.  One program administrator, when asked what types of issues the program would address, replied that he would discuss with an employee concerns about the patterns of the linoleum on the floor, on the assumption that if the employee voiced concern about that, she had a broader concern about something else, and unless he heard about it now he ran the risk of hearing about in later, in the form of a legal filing.

The underlying premise is broadly shared:  Allocation of institutional resources to identify problems at an early stage is the most effective way of preventing later, more expensive claims or disruptive incidents in the workplace.[14]

Conclusory Observations

At the time the Compendium was compiled, not all participating companies maintained statistical reports of trends of usage, outcomes and user satisfaction levels.  Moreover, many of these programs no longer are in operation, either because of corporate restructuring, program modification, or other reasons.

Nevertheless, certain of the observations drawn in 2002 may still be useful for program designers today.  Among the most prominent are:

  1. Nearly all disputes submitted to systemic employment dispute resolution programs are resolved by agreement, and very few go to arbitration. Halliburton and Johnson & Johnson reported that fewer than 2% if disputes entering their programs proceeded to the arbitration stage.  General Electric reported only one arbitration in the 1998/99 period.  Shell reported fewer than 1% of the matters entering its program were arbitrated.[15]
  2. A good mediator can be hard to find. Though the market has likely changed in the 15 intervening years, as of 2002 many program administrators reported that few mediators had a background in employment law and few employment lawyers were trained in mediator skills.
  3. Many employees are skeptical of company-promulgated employment programs. Many of the administrators were confident of the fairness and efficacy of their programs, but spent a great deal of time trying to convince employees to use it.[16]  High employee satisfaction rates reported by those who did use the program seemed to have little effect on others’ usage.
  4. Reactive response, rather than proactive identification, still predominates management thinking. All programs were designed to respond to employee-initiated complaints and concerns.  None was designed to seek out the sources of employee dissatisfaction and prevent such concerns from arising in the first place.  Reactive policies have inherent limitations as managerial tools.
  5. The program does not result in increased employee complaints. None of the program administrators reported any change in the rate of voiced concerns in the workplace.  The concern that an institutionalized dispute management system might encourage or invite dispute reportage turned out to be a canard, with no data backing it up
  6. Cultural and legal assumptions persist. Employers in the United States approach employee conflicts from the assumption that employment is “at will” and the relationship can be terminated for any non-discriminatory reason.  By contrast, employees approach workplace conflicts in the context of a matrix of “rights” that legislatively express social values and give rise to legal causes of action.  In a given dispute, neither party has reason to reframe their vocabulary to articulate underlying interests.  The “rights” rhetoric of workplace conflict is pervasive and undeniable; rights-vindication is frequently the reason the problem is being pressed.
  7. The unavoidable still needs to be adjudicated. Despite the indications that efficiency derives from reallocating institutional resources from the back-end of a dispute to the less expensive front-end, it does not follow that all disputes will be resolved at the front-end and none will require adjudication.  The success of these programs does not imply that arbitration or litigation will one day be obsolete.  Rather, these programs address the many organizational benefits of resolving concerns at a very early stage, reserving costly adjudicatory processes for the very few instances where it is needed.

 

[1] F. Peter Phillips is a mediator and arbitrator in Montclair, New Jersey, USA.  His professional website is www.BusinessConflictManagement.com.  He is Adjunct Professor and Director of the ADR Skills Program at New York Law School.

[2] Now the International Institute for Conflict Prevention and Resolution.  See www.cpradr.org.

[3] CPR Institute for Dispute Resolution, How Companies Manage Employment Disputes: A Compendium of Leading Corporate Employment Programs (2002).

[4] The companies whose programs were included in the Compendium were Alcoa, Anheuser-Busch Companies Inc., Bank of America, CIGNA, Credit Suisse First Boston, General Electric, Halliburton Company, Johnson & Johnson, Masco, McGraw Hill, MG Company, Pfizer, Philip Morris USA, Rockwell, Shell, Texaco, United Parcel Services, UBS Paine Webber, U.S. Air Force and U.S. Postal Service.  The programs included were those in effect in 2002.

 

[5] The Compilation included interviews with Richard R. Ross, Senior Associate General Counsel, Anheuser-Busch Companies, Inc.; Donna M. Malin, Assistant General Counsel, Johnson & Johnson; Wilbur Hicks, Shell Oil Company; Geoffrey Drucker, Chief Counsel, Dispute Resolution and Prevention, U.S. Postal Service; Teri P. McClure, Corporate Counsel – Employment, United Parcel Service; and Elizabeth W. Millard, Director and Counsel, Credit Suisse First Boston.

[6] Richard R. Ross of Anheuser-Busch Companies stated in his interview, “We saw the Dispute Resolution Program as a means to not only provide [a dispute resolution] avenue for employees, but also encourage better management practices.”

[7] Geoffrey Drucker, administrator of the REDRESS program at the U.S. Postal Service, said in his interview that, although “the settlement of the class action [in a Florida lawsuit] was the immediate impetus, behind that was a concern about this rise in complaints and a desire to do something about it.”

[8] Elizabeth W. Millard of Credit Suisse First Boston said in her interview that to some degree the company “saw a dispute resolution program as a way of promoting management accountability, because it can demonstrate to managers that, if they make inappropriate decisions, the company will take employees’ complaints seriously, and support the employees’ efforts to seek redress.”

[9] Donna M. Malin of Johnson & Johnson said in her interview that the primary metrics her office maintained were the number of employee-related lawsuits and the expense of outside counsel.  A secondary metric was the time from assertion of the complaint to resolution.  Teri P. McClure of United Parcel Service stated in her interview that “[t[he main reason UPS started looking at alternative dispute resolution is because the largest percentage of our legal department budget was spent on labor and employment related matters.  We were looking for ways to reduce costs with respect to labor and employment-related litigation.”

[10] Geoffrey Drucker of the U.S. Postal Service notes that the metric chosen has a relationship to the program goal.  In his interview he said that the primary purpose of the program was “to improve the workplace environment,” and the program valued information on user satisfaction higher than rates of resolution.  “[W]e’re getting about 40% success rate in terms of resolution.  And levels of satisfaction with the process are [in the high 90s].”

[11] Wilbur Hicks, who administered the Shell RESOLVE program, said in his interview that the CEO of Shell specifically abjured metrics as a means of evaluating program success.  “[H]ow do you measure that – people feeling that they have more of a stake in what happens to them in the workplace?  In fact, Phil [Carroll, Shell’s President at the time of the program’s adoption,] would probably say, ‘Gee, if the number of complaints went down, that’s not what I want – I want the number of complaints to increase.  I really want people to feel safe bringing forth these issues.”  In fact, complaints did not increase.

[12] Elizabeth Millard of Credit Suisse First Boston articulated, in her interview, the rationale behind designing that company’s program to “cover[] everything as well as everyone”:  “I think some companies have decided that they are better off in court with some types of claims – bonus claims, for example.  Whether or not that is true is not an issue for us.  We are committed to the principle of alternative dispute resolution for employment-related claims.  And if employment ADR is a good thing, then its benefits should be made available as to all types of claims.”

[13] Richard Ross of Anheuser-Busch Companies stated in his interview, “The only reason this worked was that we had the full support of senior management, including the CEO.”  Teri McClure of United Parcel Service said that, “as part of the rollout, we used a videotape that included our CEO and our senior VP of HR, telling people that this program was something that the company takes very seriously.”

[14] Wilbur Hicks, of Shell, said in his interview, “We’re getting these things earlier in the process, when the emotions haven’t ratcheted up.  Big lawsuits drag on and on and people perceive that the company is resisting and holding out and they become more and more angry, so the price of resolving it goes higher and higher.”

[15] The overall theme was voiced by Elizabeth Millard of Credit Suisse First Boston in her interview: “I think the information is reliable, and that it convincingly demonstrates that, as a result of the program’s being in place, disputes are resolved sooner and at a lower cost in terms of legal fees and other transaction costs.”

[16] Teri McClure of United Parcel Service said in her interview: “I can’t emphasize it enough – the senior management buy-in and the marketing, the on-going marketing of the program.”