Presented by: Rocco Scanza Cornell University Richard D. Fincher Workplace Resolutions LLC

2. Designing Effective Conflict Management Programs for the 21st Century National Contract Management AssociationAnnual Conference April 25-27, 2005 Presented by: Rocco Scanza Cornell University Richard D. Fincher Workplace Resolutions LLC

3. Part One Background on Presenters We will use two examples through our presentation -a workplace example -a consumer product example (lawnmowers)

4. Two Part Program Today Part One is conceptual and research oriented. Part two is more practical relating to implementation.

5. Four Goals in Author’s Field Research Examine corporate environmental influences, usage of ADR processes, motivation to act, and resulting choices!

6. Cornell (ICR) Research • Survey of the 1,000 largest corporations • Corporate case studies... • ALCOA • Boeing • Bechtel • Chevron • Emerson Electric Corp. • FMC Corp. • GTE • Halliburton/Brown&Root • Hewlett-Packard • Kaiser Permanente • Kaufman & Broad • Mirage Resorts • PECO • Prudential • Schering Plough • TRW Corp. • USX Corp. • Warner Brothers

7. The Five Characteristics of Integrated Conflict Management Systems • Broad Scope • Tolerant Culture • Multiple Access Points • Multiple Options • rights-based • interest-based • Systemic Support and Structures Source: Guidelines For The Design of Integrated Conflict Management Systems Within Organizations, SPIDR’s ADR in the Workplace Track I Committee, 2000.

8. Experience with ADR Forms in the Fortune 1000

9. Mediators Arbitrators Satisfaction withADR Neutrals Veryqualified Not qualified Somewhatqualified Don’t know

10. Reasons to embrace ADR: • Delays in the courts • Costs of litigation • “Transaction” costs (often 2/3 or more of total settlement costs) • High level of risk and uncertainty • Competitive and market pressures • Downsizing, reengineering, restructuring • Quality improvement

11. Reactive Counsel’s office is responsible Top-down control Accountability resides with top managers Little emphasis on education/training Emphasis on resolving conflict Proactive Responsibility shared by all levels Bottom-up control Reward and performance systems reflect accountability Education and training is an on-going activity Emphasis on preventing conflict Traditional v. Systems Approach to Conflict Management Traditional Approach Systems Approach

12. Three Conflict Management Strategies“CONTEND…” • Corporations favor adversarial processes • Focus is on litigation and “rights-based” processes (e.g. arbitration) • Use of ADR is limited or nonexistent

13. Three Conflict Management Strategies“PREVENT…” • Corporation favors a systems approach to conflict management • Focus is on a comprehensive approach to dispute resolution and prevention • ADR = Appropriate Dispute Resolution

14. Three Conflict Management Strategies“SETTLE…” • Corporation favors negotiation • Focus is on “interest-based” processes (e.g. facilitation, mediation, etc.) • ADR = Alternative Dispute Resolution

15. Corporate ConflictManagement Strategies Proportions of the Fortune 1000 Corporations in the Contend, Settle, and Prevent Categories Strategy Percentage Size Industries Market Pressure Service, durable manufacturing, construction Less pressure Contend 9 Smaller Transportation, communications, utilities, trade, finance Some pressure Settle 74 Medium Financial services, insurance, construction, nondurable manufacturing More pressure Prevent 17 Larger

16. The Result of Six Years of Research…

17. 2005 Update on Research Findings • Corporate motivation is changing towards more strategic reasons • Much greater interest in assessment and outcomes • Greater interest in transformative style of mediation • Greater use of arbitration as last option • Champions are departing, placing systems at risk

18. PEOPLE*SOLVE atThe Exelon Corporation Employment Dispute Non-Legal Disputes Legal Disputes Internal Mediation Open Door Program External Mediation Resolution Facilitator Voluntary Binding Arbitration 2-Step Appeal Peer Review/ Business Unit Head Legal Consultation Program

19. The Use of Alternative Dispute Resolution in Maryland Business: A 2004 Benchmarking Study focusing on private-sector ADR use …most companies are taking a compartmentalized approach to alternative dispute resolution and they could benefit from using ADR processes in a more comprehensive and integrated manner. Maryland Mediation and Conflict Resolution Office (MACRO)

20. Recommendations from Maryland Business Study • Ensure that at least one person is dedicated to monitoring the ADR program. • Create an oversight body to support the visibility and credibility of the ADR program. • Ensure that the pools of available and well-trained ADR neutrals are appropriate for the types of disputes at issue. • Educate all levels of employees to recognize when ADR is appropriate and to know how to access the corresponding tools and systems appropriately. • Include successful use of the ADR program in the performance reviews of those accountable for implementing the programs.

21. Barriers to The Growth of Conflict Management SystemsIf this idea is so good…?

22. Barriers to Growth • Top management faces uncertainty • Costs are real…benefits are hard to determine • Lack of benchmarking • Uncertainty of the legal landscape • Uncertainty about neutrals • Systems are difficult to institutionalize • Inconsistent diffusion across the organization • Middle managers often resist • Competing methods of cutting litigation costs • Decision requires a leap of faith

23. Lessons from the Raytheon System Launch

24. Raytheon CorporationWarren Cunningham, Corporate ADR Director Key Program Features: • National distributed system • Four stage process utilizing both interest-based and rights-based elements • External National Service providers for mediation & arbitration • Use transformative mediation • Arbitration can be non-binding at Complainant discretion • Ethics, Compliance Management, Diversity organizations used as optional conduits for ADR complaints • Only self-represented employees eligible for ADR

25. First Year Findings • 53 formal ADR cases (April 7, 2003 through April 30, 2004) • Leadership concern about initial ADR caseload – unrealized • After extensive communication initiative and 7 months into the program half of employees surveyed said they were unaware of its existence. • Process knowledge retention -- Balance between case load and ADR Points-of-Contact needed major adjustment. Only 34% of 2003 designated PoC’s worked cases . • As recently as April 25, 2004 still found sites that had not implemented ADR • All were experiencing union organizing activity • Raytheon ADR selected for EEOC National Referral Back Pilot Program – national press release April 20, 2004 • One EEOC case referred back to Raytheon ADR – case resolved • 2 employment mediations* • No arbitrations • “Closing the gap between values and actions” George Mitchell

26. Raytheon 6-Sigma & ADR Initiated 6-Sigma project to reduce cycle-time associated with Step II • Actions Specific to Step II Cycle-time: • Analyzed natural “intervals” within Step II • Conducted individual case reviews for every 2003 case with PoC’s and SuperUser’s (when available) • Brainstormed with PoC’s and Superusers to identify primary contributors to lengthy Step II processing • Provided HRLT with BU comparative information on process execution • Created additional ADR CMS case “aging alerts” at 15 and 25 days • 2004 YTD Results – 87% of cases closing within 30 day goal • Other Case Management System Enhancements Identified As Part of 6 Sigma: • Created several additional data fields in CMS for more automated case analysis broader data accumulation • Adding automated agent reminder which activates 48 hours following case submittal and no response by PoC • Additional “pop-up” cautionary notes guide PoC’s in case administration

27. Raytheon’s ADR Process TRIGGERINGINCIDENT Human Resources RESOLVE OFFICE Ethics Office Business Management EEO Office OR Mediation Arbitration

28. Evaluation of Conflict Management Systems Determination of Design Objectives and Metrics

29. Threshold Questions • Why do organizations want to evaluate their systems? • Who will be the collector of data? • What are the metrics of evaluation? • What are the basic methodological problems?

30. Basic Assessment Steps • How do you collect the data? • How do you avoid survey instrument bias? • How often do you conduct assessments? • How do you construct he baseline data?

31. What is the Future of Conflict Management Systems? Is it here to stay, and for the right reasons?

32. What Has Changed in Design of Conflict Management Systems? Motivations to embrace More arbitration Emphasis on assessment

33. Key Conclusions • In most companies, dispute resolution has been a reactiveresponse rather than a strategicchoice • Most firms engage in dispute management—not conflict management

34. Key Conclusions • Conflict management has yet to be institutionalizedin most companies. • The rise of ADR was the consequence of changes in a set of environmental factors and a reversal of these factors could lead to a decline in the use of ADR • Companies use ADR for instrumental purposes

35. Risks of Reversal • The consequence of changes in a set of environmental factors and a reversal of these factors could lead to a decline in the use of ADR • Legal impediments: statutory and case law • Neutrals: quality and fairness • Mediation /arbitration as the unlawful practice of law • Backlash against providers, as in California

36. New Frontiers • There will be a limited Global application, except in public international organizations • There is the potential for enhanced Internet applications for multi-site organizations • There will be much more focus on metrics and evaluation. • Will be marketed as a competitive benefit to new employees

37. Observations on the Future • Broadening acceptance-Conflict Management will become less of a a reactiveresponse and more of a strategic choice • Gradual institutionalization-Conflict management will become more institutionalized • There will be greater integration with other corporate values and systems

38. The Tipping Point?Malcolm Gladwell“an idea whose time has come” • Have conflict systems reached the “tipping point” in American business culture? (the point at which disparate localized outbreaks become a full fledged epidemic) • Is the privatization of dispute resolution a permanent trend? (stickiness of the idea) • Is conflict management and private dispute resolution part of the new social contract? (is the concept contagious, generating excitement, energy and a dramatic shift in thinking?) • Or is it a passing fad?

39. Speakers • Rocco Scanza is Deputy Director of the Institute on Conflict Resolution at Cornell University. The institute is part of the of School of Industrial and Labor Relations. He is a mediator and arbitrator. He can be reached at 607-255-1124. • Richard D. Fincher is a full-time mediator and arbitrator of workplace disputes and employment litigation, and teaches in the Carey College of Business at Arizona State University. Dick is also a national design consultant for workplace conflict resolution systems, and co-author of “Emerging Systems for Managing Workplace Conflict.” He can be reached at 602-953-5322.

41. Designing Effective Conflict Management Programs for the 21st Century National Contract Management AssociationAnnual Conference April 25-27, 2005 Presented by: Rocco Scanza Cornell University Richard D. Fincher Workplace Resolutions LLC

42. Part Two Background on Presenters We will use two examples through our presentation-a workplace example and a consumer product example (lawnmowers)

43. Conflict Management Dispute Systems Ten Steps to Effective Implementation: A practical guide

44. Step One:Defining the Strategic Opportunity What is the goal?

45. Defining the Strategic Opportunity • What is your motivation? • The opportunity • reduce financial exposure, increase productivity, improve relationships, prevent new disputes, or change culture • Understand the difference between an ADR system versus an ADR policy

46. Step Two:Building Leadership Commitment

47. Building Leadership Commitment • Identify a Champion • Educate on rights, interests, and power • Sell the opportunity • Use design contract • Ensure sufficient resources • Clarify the essential steps • Consider receptiveness to change

48. Step Three:Creating the Design Team

49. Creating the Design Team • Defining membership • Includes senior executives and in-house lawyer • Could include workforce representatives • Typically hire a design consultant • Use a “change process model”

50. Step Four:Diagnosing Current Organizational Conflict