Conflict Leadership

Michael Leathes

In early 2009, a dozen General Counsel of international companies co-authored an article entitled The Perfect Storm.  The factors feeding the storm were cited as economic and financial turmoil, the drive by corporate law departments for greater control over outcomes, and new Information and Communication Technology capabilities.  The authors predicted that energy generated by this triple convergence would radically change the attitudes towards disputes held by both the supply and demand sides of the legal services market.  It spells opportunity for those acting on President Obama’s The world is changing, and we must change with it, and loss for those that don’t, or drag their heels.

Control

The control factor is one that individual General Counsel can really influence.  Control is central to modern expectations of Good Corporate Governance, underscored by Section 404 of the Sarbanes-Oxley Act but extending far beyond financial reporting and risk assessment to embrace any significant risks that can have financial consequences.  Litigation is inevitably such a risk for all parties.  Exerting greater control over litigation has become a top priority for most organizations.

Controlling litigation

Litigation is not just a risk; it is one that cannot be controlled.  A third party – a judge or arbitrator – is the one in control through their authority to impose a judgment or award.  Advancing strong arguments is a proper attempt to exert influence, but is not an instrument of control.   Exerting more effective control over litigation entails much more than delegating to competent litigators.  It involves negotiating an acceptable settlement.

Do we have a conflict – or does the conflict have us?

In his book Confronting Conflict (1999), the Austrian political scientist, economist and mediator Friedrich Glasl described a ladder with nine rungs or levels that typified the life cycle of disputes.  At the bottom end of the ladder comes the positions taken by the parties; Rung 2 is the polarization of those positions, and Rung 3 the deterioration of communication and the start of mutually recriminatory acts by the parties.  Dr. Glasl identified Rung 3 as the limit of self-help in resolving the dispute.  Then comes the Tipping Point when, as Glasl put it, we no longer have a conflict, rather the conflict has us.  This is the stage at which litigation and arbitration replace self-help as the primary resolution method.  Rung 4 sees the deployment of tactics, Rung 5 is loss of face and increasingly personal attacks, and Rung 6 represents the point at which threats become strategic.  Harmful blows follow on Rung 7, supplemented on Rung 8 by the parties’ goals no longer being confined to winning but also to destroying.  On Rung 9, the parties enter a mutually-destructive abyss.

While every conflict is different from every other, Glasl’s Escalation Ladder is helpful in focusing not merely on the need to manage disputes, but to lead the way to an early resolution and avoid an inevitable and uncontrollable escalation.  Mature in-house counsel know that once they get past the self-help limit at Rung 3 on the ladder, they are locked into a spiral binding from which there is no easy way out.  Whether the resolution requires negotiation, mediation or some other process, taking direct control over the potential outcome and the process to reach it requires strong doses of leadership, vision, determination, innovation and, often, courage.

Litigation is no place for romance; hope is no instrument of control

Hyperactive preventive counselling is essential.  There is no such thing as a cast iron case but it is human nature to fall in love with the strength of our arguments and our sense of justice.  Legal action is no place for romance.  The best we can do is put forward the most persuasive argument in the hope that it prevails in the final judgment or award.  Hope is no instrument of control.  In about 50% of all cases that hope turns into despair.

Negotiation, on the other hand, is a very powerful instrument of control.  It offers many more options for achieving an acceptable and certain outcome, usually much faster and cheaper than litigation or arbitration, and negotiators remain in control over what they are prepared to agree.  The options are much more numerous because factors outside the scope of the dispute can be brought into play to help find a mutual settlement basis.

Leading is much more than Managing

A few years ago, litigation or arbitration were things we were expected to manage.  Usually, this was a corporate euphemism for delegating real influence to outside counsel.  We pretended to be in control by virtue of our status as the client, but in reality we mainly monitored the situation, commenting here and there, paying the bills and riding out the risk, while escalating claims and counter-claims, allegations, tactics, smoke screens, costs and risks took command.  Control was impossible.  We were obsessed with doing things right – a mark of a manager – not doing the right things (a mark of a leader).

Today is so Yesterday