New survey shows most businesses ignore mediation in solving business disputes

Businesses should not believe they can fix corporate disputes themselves and must seek the advice of a third party, a new Government report reveals.

The report also shows that businesses shun the advice of third parties when entering dispute with only a third of businesses involved in arguments seeking professional advice. David Lording, director of Mediate Today, says businesses usually do this to save face.

“The reasons why organisations don’t usually call for third parties is because they believe they can do it themselves. They think, our people are getting paid well, and there are people who work in HR and so on, who can handle it.”

“Many of them think that going to a third party for advice means that they are incapable of resolving it themselves,” he says.

The comments come as small business minister Nick Sherry released a new survey yesterday showing that about 20% of businesses have been involved in a dispute of some kind with another business in the past five years.

However, the survey found that only one third of these businesses involved in disputes thought their case was serious enough to actually seek external advice from a third party.

“What comes through strongly from the survey is that many small businesses don’t know about low-cost options available to them for dispute resolution,” Sherry said in a statement. “In the case of small businesses, a dispute may drain significant resources and have an impact on everyday operations.”

The survey, commissioned by the Department of Innovation, Industry, Science and Research, found about 9% of business involved in disputes classified it as “serious”, and only 6.5% took legal or third party action.

Those companies involved in despites, which had legal action as a component, were more likely to be in the mining sector and wholesale trade, (17%), followed by electricity, gas and water industries (13%) and construction, (12%). The sectors least likely to have any kind of disputes were the health care and public administration sectors.

Businesses with revenue over $1 million were more likely to have experienced disputes where legal action was necessary, while businesses in the $200,000-500,000 bracket were more likely to have a potentially serious dispute where they avoided action due to costs.

About 33% said the dispute involved a supplier, 5% said a business partner or associate was involved and 4% said the dispute involved a competitor.

But it also found that those small businesses that actually sought third party advice were more likely to be satisfied with the outcome. The survey shows speaking with a lawyer was the most common form of advice, at over 30%, while other popular methods included speaking with industry organisations and official mediators.

Of the 9% of respondents who had sought the advice of a third party, 44% said they were satisfied that advice would help achieve the best outcome. Another 46% were satisfied with the range of options available, and 43% said they were satisfied with the cost. About 73% said they were satisfied with the quality of advice given to them.

Sherry said in a statement that too many businesses aren’t aware of the options available to them.

“The key message from this study is that despite the wide range of mechanisms available, including low cost and free services, many small businesses simply are not aware of these services and this may be a place where all levels of government could play a role.”

Lording agrees and says businesses need to seek advice before problems escalate and end up costing them too much.

“I really think it’s a matter of early intervention in these things. Many businesses don’t take these matters seriously enough and they wait too long to get them going.”

Sherry says businesses can seek out any number of mediation techniques including free Government services, along with the advice of lawyers and private mediation firms. Lording says SMEs need to make sure they seek advice as soon as possible when involved in a dispute.

“Even the larger organisations I’ve spoken to have said the mediation or advice they’ve received has been fantastic. Many businesses admit they don’t know what to do to solve certain disputes, and they seek out advice as a result.”