TOC experience in conflict

solving (mediation)

Alexander MerenkovInsurance company Severnaya Kazna Russia 2013October 2013

26-27 October 2013, Moscow

www.tocpractice.com

8th International Conference of the

TOC Practitioners Alliance - TOCPA

Aleksander Merenkov

8 TOCPA

General Director of Insurance Company Severnaya Kazna

Russia, since 1996

Chairman of the Mediation Center of the Ural Chamber of

Commerce, mediator, trainer

Associate Professor of General Economic Theory

Department of the Ural Federal University.

Consultant in strategy, negotiations and sales

since 1998.

Insurance experience since 1994

Experience in publishing, commercial, medical

and telecommunication business.

Publications in electronic and printed media

Yekaterinburg 190, Soni Morozovoy StreetOffice phone: +7(343) 262-3-316Mobile phone: +7(909) 007-3-999E-mail:merenkov@kazna.comfacebook.com/aleksandr.merenkovSkype: guruskwww.kazna.com

8 TOCPA

Fact

Interpretation

Emotion

Conflict

Information processing

Conflict-Solving Method

Military activities FORCE

Use of physical force- FORCE

Threatening and Intimidation - FORCE

Judicial and arbitration lawsuits RIGHTS

Negotiations INTERESTS

Mediation ( and other effective methods to

solve conflicts) - INTERESTS

It is a square

It is a triangle

It is a rectangle

The core of the conflict

Interest vs. Interest

Position vs. Position

The core of the conflict

Solution sequence

Let talk

Understand views of the parties

Understand the core of the conflict

Come to the interests of the parties

Find mutually acceptable solution

Check for feasibility

Compose an agreement

Evaluate the satisfaction of the parties

Mediation and TOC

Position 1 + Position 2 = Conflict

Conflict = CLOUD

CLOUD = assumptions identification

Assumptions = Interests

Injections = conflict solving

Mediation and TOC

Injection workup with the parties on 6 layers

of resistance on

Action Plan Agreement = map of injections

Check for feasibility = Legitimate Reservations

Assessment of the result

Procedure

Result

Emotional

Example

Conflict between two business owners

Solution come to an agreement

Sequence of work see above

Short and emotionless description of the conflict from the perspective of Party 1

Petrov owns 50% of Autotrade, LLC with Sidorov (other 50%). They started their joint business in 2005 selling tires. Then, they decided to construct a building, where car dealership, including a service center, will be located. They raised a loan at Sberbank for the sum of RUB 30 mln. And then the crisis struck (2008). There were difficulties with builders, the city administration was procrastinating with the documents approval. Petrov solved these issues himself, Sidorov did not help. The building was constructed, but due to the overdue loan, it was not commissioned. Sidorov took a floor under a rent agreement and promised to share 50% of profit. Petrov found around two years ago that Sidorov understates the income in order to decrease Petrovs share of profits. He filed a lawsuit to recover the rent fee. He won the litigations.

Step 1 What the parties came to the mediation with

Short and emotionless description of the conflict from the perspective of Party 2Sidorov owns 50% of Autotrade, LLC with Petrov (other 50%). They started their joint business in 2005 selling tyres..Then they decided to construct a building to host a dealership and service center. They raised a loan at Sberbank for the sum of RUB 30 mln. And then the crisis struck (2008). There were difficulties with builders, the city administration was procrastinating with the documents approval. Petrov was solving these issues, Sidorov was financing, but as they were friends did not take the documents proving the payment. The building was constructed, but due to the overdue loan, it was not commissioned. Sidorov took a floor under a rent agreement with a condition to share 50% of profit. Sidorov honestly shared the income paying part for the rent fee, and part to pay the bills of Autotrade, LLC, but did it on the pledge of the word of Petrov. Two years ago Petrov demanded that the premises are freed for a minimum termination fee. Sidorov refused. Litigations followed.

Step 1 What the parties came to the mediation with

Step 2 Describe the expectations of the parties position 1

What Party 1 ultimately wants

Sidorov should withdraw from the business

and leave the building to him.

Step 2 Describe the expectations of the parties position 2

What Party 2 ultimately wants

Get half of the premises value

AB D

DC

Recover the money invested by Party 2

to construction

Common goal reached through and

1

2

5

3

4Want of Party 1

Want of Party 2

NeedMotivation of Party 1?

NeedMotivation of Party 2?

CONFLICT!

Step 3 Build a Cloud for each conflict(or several)

Create a cloud following the specified sequence of entities

Receive half of

the premises

value

Recover time and

moral efforts 1,

contributed by Party 1

to construction

Receive income

from the building

Keep the premises

and not pay any

compensation

Where assumptions can be

unsurfaced

Expectations of others (they expect me to)

Assessment by others by certain criteria

Area of responsibility (I have no choice)

Authority (I have the right)

Generally accepted practice in this field

(people do not fly)

AB D

DC

BBBB----D 1:D 1:D 1:D 1:Only thanks to my efforts and connections the building was finally constructedBBBB----D 2:D 2:D 2:D 2: People who trust me and help me want to work in these premisesBBBB----D 3:D 3:D 3:D 3: I did not receive any compensation in the course of construction

In order to [B]I must [D],Because

Step 4 Identify B-D assumptions

Formulated B-D assumptions. Check if the wording meet the above criteria forassumptions.

Receive half of

the premises

value

Recover time and

moral efforts 1,

contributed by Party 1

to construction

Recover the money invested by Party 2

to construction

Receive income

from the

building

Keep the premises

and not pay any

compensation

AB D

DC

In order to [C]I must [D],because

CCCC----D 1:D 1:D 1:D 1:I always recover my investmentsCCCC----D 2:D 2:D 2:D 2: I diverted the investment from another businessCCCC----D :D :D :D :I did not gain any income in the course of the whole construction

Step 5 Identify C-D assumptions

Formulate C-D assumptions. Check if the wording meet the above criteria forassumptions.

Receive half of

the premises

value

Recover time and

moral efforts 1,

contributed by Party 1

to construction

Recover the money invested by Party 2

to construction

Receive income

from the

building

Keep the premises

and not pay any

compensation

Scrutinizing the assumptions

Check the offered assumptions against three first rules for the direct arrows:

Rule 1: The Assumption should contain words directly related to both statements.

Rule 2: Explain the connection, not the statement. Check if the assumption is a repetition or elaboration (explanation)of or D? We want not to see the repetition of the statement, but we want the connection between and Dexplained.

Rule 3: If we want and if, then (read the connection from the left to right)

Rule 4: What is current prevailing mechanism by which the party achieves [] by [D]?

D-D 1: The parties do not trust each other and do not want to cooperate

D-D 2: The parties do not see a way out that would satisfy both

A

DB

C D

[D] and [D] are in conflict,because

Step 6 Identify D-D assomptions

Formulate D-D assumptions. Check if the wording meet the above criteria forassumptions D-D.

Receive half of

the premises

value

Recover time and

moral efforts 1,

contributed by Party 1

to construction

Recover the money invested by Party 2

to construction

Receive income

from the

building

Keep the premises

and not pay any

compensation

Step 7 Create a table of assumptions

Enter 2 strongest assumptions B-D, C-D, D-D into the table

Assumptions:B - D

C - D

1. Only thanks to my efforts and connections the building was finally constructed

2. I did not receive any compensation in the course of construction

1. I diverted the investment from another business2. I did not gain any income in the course of the whole construction

D - D

1. The parties do not trust each other and do not want to cooperate

2. The parties do not see a way out that would satisfy both

B - DSolution Injections:

C - D

B - D

C - D

1. Evaluate the contribution into construction by efforts and connections

2. Evaluate the size of compensation3. Identify the process of receipt

1. Evaluate the diverted investments2. Evaluate lost income3. Identify the process of receipt

Step 8 Find and write the Injections to attack the assumptions

D - D

1. Use an independent valuator2. Continue mediation to reach agreement on the order of the receipt of the income

C - D

Assumptions:

1. Only thanks to my efforts and connections the building was finally constructed

2. I did not receive any compensation in the course of construction

1. I diverted the investment from another business2. I did not gain any income in the course of the whole construction

1. The parties do not trust each other and do not want to cooperate

2. The parties do not see a way out that would satisfy both

AB

C

Injection

Because....

Because....

Step 9 Select the most preferable Injection and check if it satisfies and

1. Evaluate the size of

compensation of the

efforts and investments

of the parties

2. Evaluate the size of

income short-received

3. Identify the procedure

for indemnification

4. Receive indemnification

Recover time and

moral efforts 1,

contributed by Party 1

to construction

Recover the money invested by Party 2

to construction

Receive income

from the

building

Step 10. Write the list of possible actions in this situation.Step 11. Note desired or forced actions for each party.

Possible actions Party1

Party 2

D F D F

Continue joint business receiving half of the income V VHire an independent director and receive half of the income V VGive the business under a management of a professional MC and receive half of the income

V V

Withdraw from a business with a compensation of 50% of the premises value

V V

Sell the business and share the income equally V V

Steps 10-11 Possible solutions andwhat the parties think of them

6 layers of resistance

Disagree about the problem = came to the mediator

Disagree about the direction of the solution=injections

Do not see benefits = how the injections lead to the interests

satisfaction

Negative consequences = negative branches = auxiliary

injections=map of injections

Obstacles = auxiliary injections = map of injections

Say yes, but do nothing = check the plan for feasibility =

auxiliary injections

Step 12. Injection (benefits)

Evaluate monetary value of mutual claims

Select the variant to meet them

Stop court litigations

Receive money for the building

Keep the relationships

Step 13. Injection (negative

ramifications)

Will not be able to continue joint business

Will be unhappy about the outcomes

Image of both parties may be damaged

Step 14.Injection (obstacles)

Will not be able to agree upon the value and

compensation procedure

Will not find a trustworthy valuator

Emotional claims will constantly arise

Step 15. Sequence of injections

Identify the mediator

Identify the independent valuator

Conduct independent valuation

Agree upon the valuation for the purpose of the

indemnification

Agree upon the indemnification procedure (chose

from previously identified alternatives)

Align the PR of the transaction to retain the image

Identify sanctions for breaching the agreements

Step 16.Feasibility check (legitimate

reservations)

In this process we check if:

1. Clarity is there

2. This exists

3. There is a cause and effect relationship

4. Cause sufficiency

5. There is another cause

6. Fire in the house

7. There are any predicted effects

Step 17 Check satisfaction of both

parties

Procedure 0-10 = clear understanding of the

procedure

Outcome 0-10 = result=map of injections

corresponds to the interests = assumptions

Emotion 0-10 = logical procedure eliminating

conflict

Conclusions

provides a clear logic for the mediation

procedure

The parties and the mediator clearly see the

conflict map

Benefits-obstacles-negative ramifications are

elaborated

Clear logic solves the task without emotion

Final solutions meet the interests-assumptions

helps to come to terms