The Value of Mediation to Our Clients
Over the last few months, I have been thinking a lot about the cost and value of mediation services I provide to my clients.
Most ADR professionals use an hourly rate much as lawyers do. The problem with this method is that it encourages us to think in terms of "time" instead of "value". Since we do not think in terms of the value of our services to clients we have a difficult time explaining why clients should be using our services in addition to or instead of legal processes.
We even hesitate to talk about the cost/value proposition among ourselves or with the lawyers we often work with. If you look at a cross section of mediators' websites you will have difficulty finding out what they charge. There is little opportunity to compare costs when selecting a mediator and cost matters to clients. Often "alternative fee arrangements" really means to discount fees which again may have no relationship to the value of services to clients.
A recent survey by the Centre for Effective Dispute Resolution (CEDR) in the United Kingdom, found that Mediators rated the most significant factors in determining their appointments as being:
1st - Professional reputation
2nd - Availability
3rd - Professional background/qualifications
Lawyers similarly rated the significant factors in selecting a mediator with one major difference:
1st - Professional reputation
2nd - Fee levels
3rd - Availability
I suspect we would find similar results in Ontario.
We know that our services help our clients resolve difficult problems and that mediation has an 80% plus success rate (using settlement as the definition of success). So let's look at the value of mediation. Some of the commonly used explanations are that mediation:
- Saves on legal costs.
- Is quicker than litigation.
- Preserves confidentiality.
- Preserves relationships.
- Produces more integrative and satisfactory outcomes.
But none of these really drill down into value. So if "Fee levels" is an important part of choosing a mediator why are we not more transparent about our costs?
Cost and value are not the same. Most clients want value from our services rather than the cheapest price. Should we be quoting on each case individually? What do we mean when we provide a half-day or full day rate?
If we look at mediation services from this perspective we can see that mediation helps clients, in addition to the above points to:
- avoid the risks involved in having a court or arbitration tribunal impose a decision
- reduce the costs of dealing with these risks
- reduce the time that clients and their staff, CEO's etc., must spend on the dispute
- reduce the disruption to their personal or business lives caused by the dispute
- allow for business solutions to business disputes.
Lawyers are well aware that they help their clients by reducing risks. So do mediators. If we work together we can provide great value to our respective clients.
As a result of my review of this topic I have decided to drop the hourly rate concept and only provide half-day and full day rates. While my half-day rate is based on a fixed number of hours, my full day rate means just that, a full day. I no longer charge for time spent after 4 or 5 pm. This way, my clients know exactly what my services cost and can see the value of my approach to pricing.
It also encourages lawyers and their clients to carefully consider the time required for their case. I have had several mediations lately that were booked for a half-day but required significantly more time. Neither the clients nor their counsel had taken this possibility into account and we could not continue on since they had other commitments. I believe that a valuable opportunity to settle was lost.
My new fees are intended to provide a fair reflection of the value of my extensive experience in mediation to my client. They are based on a dispute of average complexity and are subject to adjustment in more complex or multi-party disputes.
If there are exceptional circumstances in a particular case I will of course consider whether I am prepared to make an adjustment to my regular fees.
This is a work in progress and I plan to return to the topic in future newsletters so I would welcome any comments or ideas you might have about pricing professional services.