Third Party Negotiations

Individuals or group representatives reach a stalemate and are unable to resolve their differences through direct negotiations. In such cases, they may turn to a third party to help them find a solution. There are four basic third party roles: mediator, arbitrator, conciliator, and consultant.

A mediator is a neutral third party who facilitates a negotiated solution by using reasoning and persuasion, suggesting alternatives and the like. Mediators are widely used in labor-management negotiations and in civil court disputes.

The overall effectiveness of mediated negotiations is fairly impressive. The settlement rate is approximately 60%, with negotiator satisfaction at about 75%. But the situation is the key to whether or not mediation will succeed; the conflicting parties must be motivated to bargain and resolve their conflict. In addition, conflict intensity can’t be too high; mediation is most effective under moderate levels of conflict. Finally, perceptions of the mediator are important; to be effective the mediator must be perceived as neutral and non-coercive.

An arbitrator is a third party with the authority to dictate an agreement. Arbitration can be voluntary (requested) or compulsory (forced on the parties by law or contract).

The authority of the arbitrator varies according to the rules set by the negotiators. For instance, the arbitrator might be limited to choosing one of the negotiator’s last offers or to suggesting an agreement point that is non-binding, or free to choose and make any judgment he or she wishes.

The big plus of arbitration over mediation is that it always results in a settlement. Whether or not there is a negative side depends on how “heavy handed” the arbitrator appears. If one party is left feeling overwhelmingly defeated, that party is certain to be dissatisfied and unlikely to graciously accept the arbitrator’s decision. Therefore, the conflict may resurface at a later time.

A conciliator is a trusted third party who provides an informal communication link between the negotiator and the opponent.

Conciliation is used extensively in international, labor, family and community disputes. Comparing its effectiveness to mediation has proven difficult because the two overlap a great deal. In practice, conciliators typically act as more than mere communication conduits. They also engage in fact finding, interpreting messages and persuading disputants to develop agreements.

A consultant is a skilled and impartial third party who attempts to facilitate problem solving through communication and analysis, aided by his or her knowledge of conflict management. In contrast to the previous roles, the consultant’s role is not to settle the issues but, rather to improve relations between the conflicting parties so that they can reach a settlement themselves. Instead of putting forward specific solutions, the consultant tries to help the parties learn to understand and work with each other. Therefore, this approach has a longer term focus: to build new and positive perceptions and attitudes between the conflicting parties.

An effective Negotiation Experience:

After Russ Berrie & co acquired the company that made Koosh Ball, it was Bernie Tenenbaum’s job to improve sales and profit. The balls were made in Asia so he began by flying to Hong Kong and meeting with the manufacturer. But before the meeting he contacted another firm in Asia to get a competitive price, they offered to make the balls for 3 cents less per ball. Tenrnbaum now knew there was room for cost cutting with his primary manufacturer.

Upon arriving in Hong Kong, Tenenbaum and his executive team had a very elaborate dinner with the current manufacturer and his whole family to find out whether it was possible to get the price down. Tenenbaum says he had three goals at that dinner. First he wanted to have a good relationship especially in China, your word really matters and the honor you give your partner means everything. If he had walked in and said ‘I’ve second sourced your product and they can make it for 3 cents less’, he might have walked away because they would’ve embarrassed him. Second, they wanted to let the supplier know that they were growing the business and there was an opportunity for the supplier to make more products for them (buyer). Third, Buyer had to ask for his help. Tenebaum never told the supplier they needed to lower the current price but told the supplier anything he could do to help them (buyer). The supplier understood what the buyer meant and he came back with a price that was a penny below the second source.