The Art of Mediation

Mediation is an art not a science. There is no single way to do it ‘right’; but there are some simple things that parties can do in advance, that may improve the chances of obtaining a satisfactory outcome.

My last post looked at WATNA and why it is important. Today I look at BATNA (‘best alternative to negotiated agreement’). While I’ve looked at them in separate posts, they really go hand in hand, in practice.

WATNA is largely directed to understanding your worst possible exposure if mediation fails, so you can make an informed assessment about whether to accept that risk or not. BATNA can also help assess offers – but primarily from the perspective of how close they come to meeting your realistic best outcome.

Let’s assume a mediation concerns a disputed will. One of two children has been ‘cut out’ of a parent’s will and seeks an order for provision. It is a small estate of, say, $500,000 (and we’ll ignore legal costs for the purpose of this exercise). Let’s also assume the ‘disinherited’ child had a poor relationship with the deceased parent and hasn’t been in contact for decades; and that both children have equivalent financial needs. On those very basic facts, the disinherited child’s BATNA is probably less than 50% of the estate - let’s say they might get 30% if the case goes to Court. If the estate is only prepared to offer, say, $75,000 to settle, then the disinherited child may decide s/he will let a Court decide. Conversely, if an offer of $125,000 is made, that is approaching the BATNA so the child may decide to settle to obtain a certain outcome (which isn’t much below the best alternative).

However, let’s now further assume the child’s WATNA is that they need $50,000 urgently to pay out a debt and, if they don’t, they will lose their small business and become bankrupt. In that context the offer of $75,000 is far more attractive – but for reasons that have nothing to do with the will dispute.

This simple example shows that if a party enters a mediation already understanding both of these parameters, they are likely to be far better placed to assess offers and progress negotiations.? Being prepared, by knowing the ‘guardrails’ of WATNA and BATNA can help take some of the stress out of a mediation, because you are not making evaluative decisions ‘on the run’; and if new information becomes available during the negotiation, you have a frame of reference against which to assess it.

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