In the lifespan of an organisation, it will inevitably encounter internal and external conflicts. This is especially true as the organisation grows, establishes new business relationships and partnerships, expands its operations, and hires more people. While some disputes may be minor, others can have a detrimental effect on the organisation’s operations and reputation.
Although it is impossible to prevent disputes entirely, developing and implementing a dispute resolution playbook can provide a structured framework to help the organisation navigate conflicts effectively and protect its interests.
Building a dispute resolution playbook
Building a dispute resolution playbook requires an in-depth analysis of the organisation and its operations, as well as a clear understanding of dispute resolution mechanisms and their application in various conflict situations. This detailed process involves a thorough review of business operations and interactions with internal and external parties, coupled with a comprehensive risk assessment to identify potential areas of conflict. To ensure the playbook is both effective and comprehensive, the process should be conducted with the guidance of legal counsel with extensive experience and expertise in dispute resolution. There are a number of steps involved in developing the playbook, and each step comes with its own considerations.
Step 1: Identify possible areas of conflict
The first step in creating a playbook is to identify where disputes are likely to occur and understand their underlying causes. Potential conflict areas will vary based on industry, operational structure, and business relationships. These conflicts should be categorised into two main groups: internal and external. Internal conflicts involve disputes within the organisation, such as those with employees, while external conflicts arise with parties outside the organisation, such as suppliers.
Once these areas of conflict are identified and categorised, the specific types of conflicts that could emerge and the parties likely to be involved should be determined. For instance, employment-related conflicts might include discrimination cases or wage disputes.
After identifying possible types of conflicts, a risk assessment should be conducted to evaluate the likelihood[1] of each conflict arising and the potential impact on the organisation.[2] This includes assessing various risks, such as reputational damage, financial loss, or reduced market value.
For this step to be successful, input must be gathered from across the organisation. Employees and leaders from different departments should provide insight based on their experience and understanding of their areas of the business.
Step 2: Review past disputes
Reviewing past disputes the organisation has encountered is crucial. This assessment should cover the category and nature of the dispute, its origin, how it was handled, the dispute resolution mechanisms employed, the outcome, the timeline, the costs involved, and the overall impact on the business.
The purpose of this review is to understand how past disputes were managed and whether the organisation handled them successfully. The results of this review should inform the risk assessment conducted in Step 1.
Step 3: Understand the different dispute resolution mechanisms
With an understanding of past disputes and potential areas of conflict, the next step is to determine the appropriate dispute resolution mechanisms for each possible conflict.[3] To be able to determine this, the organisation needs to have an understanding of the different types of dispute resolution mechanisms. Dispute resolution falls into two broad categories: litigation and alternative dispute resolution.
Litigation involves resolving disputes through court trials, where parties present their cases before a judge who adjudicates the matter.[4] Parties are able to present evidence and testimony from witnesses that will buttress their claims. This process is highly procedural and often time-consuming.
The Nigerian Court System: Hierarchy
The Nigerian Court System: Jurisdiction of Courts
Alternative Dispute Resolution (ADR) refers to resolving disputes without a court trial. There are various ADR mechanisms, with the most common being early neutral evaluation, negotiation, mediation, and arbitration. Each ADR mechanism has its own set of rules and processes that must be followed.
The choice of ADR mechanism will depend on the organisation’s goals and objectives concerning the dispute. A common approach is for organisations to employ multiple ADR mechanisms for a single dispute, progressing through them as needed. For instance, a dispute may start with negotiation, and if that fails, move to mediation, and ultimately, if mediation is unsuccessful, proceed to arbitration.
In recent times, organisations have increasingly turned to ADR to settle disputes due to the time-consuming and costly nature of litigation. The Nigerian court system, in particular, is plagued with challenges, leading to significant delays before a matter is resolved. These delays can result in substantial financial implications and disrupt business operations. However, businesses should be aware that in some cases, they may not have control over whether a dispute ultimately ends up in court, so they should be prepared for that possibility.
Furthermore, organisations that adopt ADR should be fully committed to the process. In some cases, however, litigation tactics and procedures are introduced during arbitration, which can prolong the process and undermine the efficiency that ADR is intended to provide.[5]
Step 4: Design the playbook
With all the necessary information at hand, the organisation can now design its dispute resolution playbook. This playbook should focus on mitigating the occurrence of disputes and providing clear guidelines for resolving disputes when they arise.
Resolving disputes
The playbook should outline the most appropriate mechanism(s) and procedures for resolving each identified conflict. For instance, a contract dispute with a key supplier may start with negotiations. If those negotiations are unsuccessful, the playbook could recommend early neutral evaluation, followed by a return to negotiations or escalation to arbitration if necessary. Organisations should also tailor the resolution mechanism to the nature of the conflict—whether internal or external. For internal disputes, companies usually have a grievance procedure in place, so they must decide when to apply this process and when to utilise dispute resolution mechanisms.
The playbook should also consider the perspectives and potential actions of the opposing party, acknowledging that the organisation may not always control how a dispute is resolved. Whilst the organisation may seek to resolve the dispute as quickly and cost-efficiently as possible, a highly combative opponent may force the dispute to litigation. Escalation procedures should be outlined, including when to engage outside legal counsel and involve senior management. Additionally, the playbook should estimate the costs associated with resolving each identified dispute, though cost should not be the primary factor in selecting a dispute resolution mechanism.
Mitigating disputes
The playbook should also include strategies for mitigating or avoiding disputes. These strategies will vary depending on the business and its specific operations, but there are general practices that can help limit the emergence of disputes:
- Clear Documentation & Contracts
Contracts should be clear, unambiguous, and well-drafted, outlining the rights, obligations, and liabilities of each party. Past disputes should guide the drafting of contracts. Dispute resolution clauses should be included in all contracts, specifying the procedures and escalation processes. For example, where arbitration will be adopted in the event of a dispute, the clause should specify the number of arbitrators and how the arbitrators will be appointed.[6] The absence of clear dispute resolution clauses can lead to further conflicts over how disputes should be resolved.
Additionally, any supplementary documentation should be drafted with clarity and precision. For example, in employee matters, a well-drafted employment contract paired with an ambiguous employee handbook can lead to significant issues, particularly if the contract references the handbook or directs parties to it.
- Effective Communication
Clear communication is essential to maintaining healthy internal and external relationships. Organisations should keep detailed records of communications and decisions and establish clear communication channels for employees and third parties, ensuring that grievances are directed to the appropriate individuals and teams.
- Due Diligence
Thorough due diligence can help an organisation mitigate risks through careful assessments of business opportunities, partnerships, and potential conflicts. Risk assessments should be conducted and professional advice sought before entering new ventures. Background checks on suppliers, customers, and other stakeholders, along with necessary KYC documentation, can further reduce the likelihood of disputes.
Step 5: Implement & Review
Once the playbook is developed and approved by key stakeholders, it should be implemented organisation-wide. Employees need to be informed of the dispute resolution processes and their responsibilities in ensuring compliance. They should also be made aware of when the internal grievance procedure will apply to internal conflicts. Regular reviews and audits should be conducted to evaluate the playbook’s effectiveness and ensure adherence. Any emerging issues or procedural gaps should be addressed, with adjustments made as necessary to improve or refine the playbook.
Conclusion
Disputes can pose significant financial, operational, and legal risks to organisations. Organisations that recognise this will benefit from developing a dispute resolution playbook to help them navigate conflicts effectively and minimise the number of disputes they encounter.
If you would like to build a dispute resolution playbook that protects your business interests, email insights@xentialp.com.
=========
[1] A metric that can employed is; highly likely, likely, unlikely and highly unlikely.
[2] High impact, medium impact and low impact.
[3] The primary focus should be on disputes that are likely or highly likely to happen and which will have a medium impact or high impact on the business.
[4] Under the Nigerian court system, juries do not form part of the process. Judges preside over all matters.
[5] Todd B. Carver and Albert A. Vondra, Alternative Dispute Resolution: Why It Doesn’t Work and Why It Does, Harvard Business Review, (June 1994).
[6] Parties to an arbitration may elect to appoint only one arbitrator.
