Understanding the ROI of Mediation for Business Disputes

I field dozens of discovery calls for mediation services every month. 

It's usually from a co-founder or business partner frustrated with how the business relationship is going. And often, they need to restructure their equity, dissolve the business partnership, or need help resolving a co-founder dispute. 

Mediation has many advantages: 

  • It's confidential
  • It's low-cost 
  • There's a therapeutic element to it
  • It's a business-focused process
  • Parties retain control over the process and any agreement reached

 The complexity of the mediated issues will make some of these advantages more pronounced than others. 

When trying to calculate the return on investment (ROI) of mediation, the following are the benefits (both intangible and concrete) that clients can achieve via mediation depending on their situation: 

Benefit #1: Legal Fees

There's a tendency to think that lawyers can be the best way to resolve disputes, especially when we're talking a lot of money. But attorneys can cost anywhere from $325 to $725 an hour depending on their specialty and tenure. All those billable hours will pile up fast. 

A case can average 1,000 hours to get to trial. If an attorney bills a client at the lower end of $325 an hour, this amounts to $325,000. That's a lot of money. 

On the other hand, a mediator charges anywhere between $1,500 to $10,000 for a mediation session. That fee will include the initial intake, investigation, any offline work the mediator needs to do, coaching calls before the mediation session, and the facilitation itself. And with its high rate of success, mediation can be an attractive option for resolving disputes when the business partners need a resolution faster than what lawyers could work out. 

Benefit #2: Time

Lawsuits are time-consuming. They can take anywhere between 2 to 3 years to get a final judgment. In between that time, it requires sitting for depositions, signing affidavits, attending court proceedings, and preparing for a trial. It's a considerable time investment. 

Mediation is a much shorter time commitment, anywhere between 3 to 12 hours. You still get in-depth information and analysis and can generate solutions that everyone can agree to. 

The mediation process, from initial intake to resolution, can be completed within a month. 

Benefit #3: Improved Relationship

Mediation is like business therapy – everyone has an opportunity to air out their concerns but with a distinct difference: a specific outcome (i.e., a resolution) is the target. A mediator is a neutral party that does not advocate for any side but is there to help the business partners in their communication around next steps. 

I had a mediation with a four-person co-founder team that was highly charged and complicated. One founder wanted to quit and move-on while the other three felt abandoned right as they were seeking a Series A funding round. His sudden departure would make getting funding harder for the business. When I came in to mediate the dispute, the communication and relationship between the founders had gotten that everyone blamed the other. As I facilitated a conversation about this founder's exit, I reframed the judgments that each person was making about the other, depersonalizing the disagreement, and coached each founder on how to communicate their position best. As we worked through the options, the founders agreed to a transitional agreement that kept the departing founder on while they fundraised and searched for his replacement. Everyone had the opportunity to speak their perspective while correcting some of the stories between them, leading to a healthier relationship (even if it wasn't perfect). 

Businesses are made of people first. And the strength of mediation is that we correct assumptions that people have about one another while depersonalizing the people conflicts that occur – all while making the business and next steps the focus of the conversation.

Benefit #4: Lessen Risk & More Creative Problem-Solving

The agreement reached in the previous story was the result of a creative problem-solving session that I helped facilitate. I'm not sure if that agreement would have resulted (where everyone's interests were preserved through a win-win solution) had attorneys been involved and the matter litigated. Since mediation is confidential, this also means less risk and exposure had this been aired out publicly in a legal proceeding. 

A mediator can be a useful resource for finding win-win solutions. 

Since the business founders are in complete control over the process, the options created, and the outcome, the mediator can help evaluate the feasibility of alternatives. A mediator can also suggest ideas that have worked in the past, aiding in the creation of options.  

Benefit #5: Durable Agreements

Lastly, since the business partners are directly involved in creating the outcome, mediation agreements have a high degree of durability. 

Most are not renegotiated later on or not enforced. Since no one wants to go through a process, spending the time and money on mediating, agreements created through mediation tend to endure.   

Remember, mediation is an entirely voluntary process. And anyone who is a party to a mediation can leave it at any point. 

Bottom line: mediation as a process is a cost-effective way of looking at a specific business problem with an eye toward speedy resolution. It's best for founders who know they do not want to spend lots of money or time on lawyers. And they understand the benefit that a neutral third party can have in clearing the air while creating win-win solutions that work for them.