Conflict is part of British business life. It can stimulate innovation and healthy competition, but it can also destroy individuals and companies if it develops into open hostility.

But calling in the lawyers at the first sign of a problem is becoming a thing of the past, as directors, in growing numbers, embrace the concept of mediation.

The costs of litigation to business are huge, with lawyers' fees and court costs alone totalling around £33bn a year, not including the longer-term costs of bad feeling and lost goodwill that can be felt for years to come.

As an alternative method of dispute resolution, mediation has several advantages: it is cheaper, quicker and, in around 95 per cent of cases, it concludes with a satisfactory outcome for the parties involved.

Justin Patten, principal of Human Law Mediation, believes the idea is catching on in the UK, driven partly by a desire to avoid legal costs, but also by the courts themselves.

"The new rules introduced in April allow judges to issue court orders for litigants to consider mediation first," he explains. Patten argues that the benefits of mediation go far beyond nipping the threat of a lawsuit in the bud. When people have the chance to clear the air, they are often able to re-establish a productive working relationship.

"An employment dispute, for example, can be extremely damaging to a business, especially if it goes to a tribunal," he points out. "As a mediator, I have seen situations where the root cause of the problem has been something quite trivial that has been allowed to fester. Through mediation, it can be quickly and easily resolved, and everyone can move on."

But according to Frank Hanna, founder of The Mediation Agency, which operates out of offices on both sides of the Atlantic, not all directors have grasped the point. "You are entitled to bring legal representation," he says, "and unfortunately, a lot of organisations do, which, of course, incurs extra costs. The whole point of mediation is that you don't need to get lawyers involved."

The Centre for Effective Dispute Resolution, founded 18 years ago with the aim of cutting the costs of conflict, has seen the number of mediation cases rise. The centre's chief executive, Karl Mackie, says businesses are recognising how an independent facilitator can transform a legal problem into a commercial negotiation.

Although a new trend is emerging of anticipating conflict and learning to manage it, he feels executives still have a long way to go. "Better knowledge of how and when to act in conflict situations could keep
their businesses from derailing and keep profits on track," he says.
But Mackie is encouraged by the fact that more managers are recognising and understanding the "iceberg effect": that the built-up conflict hidden beneath the surface causes more damage than the open dispute.