This week: In the blue corner...

For Northern Irish people of my generation, Barry McGuigan’s world title fight against Eusebio Pedroza in London on 8 June 1985 is one of those “where were you when…” moments that stick long in the mind.

My mum, dad, brother and 11 year old me were all round at a good family friend’s house, where a jovial group had gathered to watch ‘our Barry’ take on the world featherweight champion from Panama, who had successfully defended his title nineteen times. (I think I was even wearing a home-made rosette of Barry!) Barry’s convincing 15 round victory on points really did make the entire country proud, at a time when few good things were being said about our wee part of the world.

Still, no matter how good he was, they would never let Barry fight Mike Tyson. Because size and resources matter.

From Step 1, you now understand that disputes are actually about psychology, as you will have to change the other side’s mind to reach a way forward. But that doesn’t mean the physical world is irrelevant to disagreements. 

Who has (and hasn’t) got what, and who can (and can’t) do whatever, has a dramatic impact on the underlying psychology of a dispute. 

Think about it. Knowing someone has more firepower than you is intimidating. Knowing someone can keep going for longer than you is demoralising. Knowing someone is finding this easy to handle is deflating.  Those emotions are created by the physical world. But they impact the psychology of a dispute.

So if you’re going to go (or be forced to go) toe to toe with someone, you need to know who you’re really dealing in the real world before you think about “going legal” with your disagreement. And there are four things in particular you need to try to understand.

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First up, cash. Money talks generally: but especially when it comes to disputes.

In any dispute, you’ll need enough money to pay your legal fees to run the claim all the way to the end, for as long as the other side wants to take things. You’ll also need money to cover the downside should things not go your way. That includes any payment you’re required to make to the other business, as well as the lion’s share of their legal costs. (And if they’re rich enough to use the most expensive lawyers, those legal costs will be very big.)

If you haven’t got enough money to cover both of those things (and be honest when you’re assessing this), then you shouldn’t even be thinking of going to court. Instead, you need to do some things differently:

One of my most fun full-time GC roles was with Bristow Group, the helicopter operator in the oil & gas industry. When I joined, the business was spending a lot of time arguing with its big oil customers about indemnities: indemnities that could only be used if we sued that customer. 

But our customers were big oil companies who unquestionably had much deeper pockets than we had.  They had the money to argue any dispute, and keep arguing it, for much longer and to a much greater detail than we ever could. So I quickly stopped arguing about indemnities that we could never use, and instead traded them for stuff that was valuable to us on the ground. Stuff like force majeure clauses that would kick in when an Icelandic volanic eruption in 2010 would ground all aircraft for several days…

But cash isn’t just relevant to the progressing a dispute. It’s also relevant to a dispute’s aftermath:

A supplier to a client of mine simply stopped supplying one day: a cast iron, clear cut breach of contract (not that any litigation is a sure thing). Yet I still advised them to drop it and focus on something more productive. Because the business they’d be suing had no assets whatsoever.  And while putting a business into bankruptcy might feel satisfying for a bit, (unlike cash) you can’t log that satisfaction onto your balance sheet.

If you’re the one considering taking legal action, you also have to be confident that the other business is actually going to be able to pay you what you’re seeking. If not, your claim is a chocolate teapot: lovely looking, but completely futile.

Put all that together and its clear that, between you and the other business, you need to understand which of you makes the most profit, which has the most cash in the bank, and (if you can) which has the most headroom in their banking facilities. Because even if you have the better hand at the poker table, you still have to be willing and able to meet all required stakes if you’re to win.

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Next up is management headspace. Because disagreements are a black hole for executive thinking.

In any dispute, as a business leader you’ll quickly feel like either you’ve been cheated or like you’re under attack.  You’ll then find it very difficult to not get caught up in thinking about how the disagreement is progressing and how to bend it to your will.  Yet, as an executive team, your headspace is the most scarce resource you have. Every second you put towards a dispute is a second you’re not thinking about how to land your business’ future. And if you’re not thinking about then, no-one else will be.

You must therefore understand how much capacity you really have in your leadership team for taking a dispute on. You also need to make an assessment of the same for your opposite number. That isn’t easy, admittedly: but its not impossible. LinkedIn, the other party’s own corporate websites and press releases, AI and common sense can all now help you assess how big their leadership team is and how devolved their management is:

Let’s look at that Bristow example again. Big oil companies are massive, with layers upon layers of highly capable managers. The headspace needed to handle any claim we’d make against them would be a drop in the ocean of their total management brainpower. Whereas it would have seriously taxed ours, putting us at a massive intellectual disadvantage.

If you’ve fewer free management resources than your opposite number, think hard about whether you really should take a dispute on. 

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Next thing to understand: internal grunt power (official technical legal term).

Disputes require work. Even if you have the management headspace, your business will also need to find, produce, manage and coordinate lots and lots of documents. You’ll need to take lots of statements, and formulate & review many legal documents setting out your arguments and position. 

Yes, you’ll have external lawyers, and you may even have some internal legal resource. But while those lawyers will do a fair amount of work for you, a lot will still be needed from your staff in the form of interviews, document collation, document reviews and tactical discussions.  That all needs what I call internal grunt power™.  People from within your organisation will have to be heavily involved.

You must therefore be ultra-realistic about whether you really should divert your team members onto this dispute. And, make no mistake, taking on a claim will be a diversion. These days, no-one has “spare time” in their role. You’re going to have to take the staff involved off something they’re currently doing if you want to take a dispute forward.  

So put your ego and emotions down, and think hard about whether that really does make sense for your business’ long-term objectives.

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Finally, there is the context around the dispute.

This one is very easily missed: I certainly don’t come across a lot of lawyers that talk about “context”, never mind go deep on it. Yet I think context is maybe even more important at the other three.  Because, in my experience, the context around the dispute dictates a lot of what really is and isn’t effective, especially given that a dispute is all about psychology.

Let’s return to our Bristow example again. As well as being having loads of money and management brainpower, the oil company was also one of our biggest customers. And while I don’t think there’s much that’s certain in litigation, I was certain that that customer would never work with us again if we even so much as hinted about formally taking them to court. Put all that together, there was no way we should have been worrying about indemnities that would help us sue them.

You can make sure you take the context properly into account by asking yourself a few simple questions:

• Are there any other particular factors that could drive one side or the other to go to extremes in this dispute?

• Is this dispute existential for them, something they have to win?

• Is there something going on in their business at the minute that would make them ultra-aggressive? Or ultra-defensive?

• What consequences might this particular action have? Who else is impacted by this?

• What exactly is the full relationship between us and the other business?

Chew the answers to these over. And don’t overlook the obvious ones. When I was at the food & ingredients conglomerate ABF, I had one group company that was hell bent on suing another company – even though it was one of their sister companies. (Let’s just say, head office couldn’t decide whether to laugh or cry at that).

The surrounding context is hugely important when it comes to disputes and disagreements. 

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And that’s Step 2 in the Relationship First Law OS: Disputes edition: explore the relative positions between you and your opposite number on cash, management capability, available internal resources, and the wider context of the relationship between you.

Because while disputes are first and foremost about psychology, the real world still plays a crucial role in finding a meeting of minds with the other business.

Good luck

Andrew

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