Arbitration is the most formal alternative to litigation. In this process, the disputing parties present their case to a neutral third party, who renders a decision. Arbitration is widely used to resolve disputes in both the private and public sector.
Arbitration is generally considered a more efficient process than litigation because it is quicker, less expensive, and provides greater flexibility of process and procedure. The parties often select the arbitrator and exercise control over certain aspects of the arbitration procedure. Arbitrators typically have more expertise in the specific subject matter of the dispute than do judges. They may also have greater flexibility in decision-making.
Traditional Arbitration Model
Under the traditional arbitration model, parties voluntarily participate in the arbitration process. Their participation may be the result of a preexisting contractual provision or an agreement that occurs after the dispute has arisen.
Arbitration agreements generally provide a means for selecting the arbitrator or panel of arbitrators, the format of the hearing, the procedural and evidentiary rules to be used, and the controlling law. If these details are not provided for in the contract, the parties may seek assistance from agencies that administer arbitrations.
Compulsory arbitration has grown in the United States particularly in the areas of labor relations, public sector employment such as police, fire, public employee disputes, private sector employment disputes.
Workplace Conflict causes significant inefficiency and loss of profit. Unresolved disputes result in turnover and increased cost of hire, increased training costs due to new hires and duplication training. Disgruntled employees result in turnover, increased absenteeism, lawsuits, decreased quality and increased risks of unions. Unfortunately, resolution of conflict is left in the hands of those not trained to deal effectively to reach resolution. Often managers believe that resolution is “my way or the highway”. Very little time is dedicated to finding the root cause of the dispute and reaching a mutual resolution.
In 2010 it was estimated that it cost 1.5 – 2.0 times a terminated employees salary and benefits to replace that employee.
Also in 2010, The RAND Institute for Civil Justice estimated that it cost, on average, $150,000 to defend an employment discrimination lawsuit in the United States. But the costs of poorly managed conflict are not limited to the legal costs that are not incurred when your organization has to defend itself in court. When a conflict drags on and on, and ensnares more and more bystanders, the amount of time spent is staggering. To find out just how staggering, estimate the time spent by each individual employee affected by the conflict, and then multiply this time by each person’s salary.
Most executives simply ignore conflict as they don’t have the tools and /or mechanisms to deal with it.