The Role of the CEO In Dispute Resolution

Several years ago, I was advising a fairly inexperienced CEO — a terminal condition that everybody eventually outgrows, remember that — who found himself in the midst of a dispute in the 8/10 range — meaning it would not tank the company, but it would change the speed, trajectory, and azimuth of the company’s future progress. It was important.

There was plenty of regrettable behavior on both sides and there was an important legal issue, but it was a heated and contentious confrontation made moreso by the personalities involved. These personalities were not the CEOs’, but the management of both companies.

Push led to shove and they were on the brink of paying off some lawyer’s lake house and turning their fate over to twelve morons with a collective semester of community college amongst them.

They had both talked to their lawyers, but no lawyers had been unleashed. It was still solvable.

We chatted about it for a long time — lot of emotion involved — and I gave him a few nuggets of advice gleaned from more than three decades of CEO-ing:

 1. Understand the dispute completely and write it down. Do not solve the wrong problem.

 2. Figure out who the decisionmaker really is — CEO, management, Board of Directors? Deal with them, not the doorman.

 3. Figure out:

best possible outcome for the home team,

lowest outcome the home team would accept,

best possible outcome for the visiting team,

lowest outcome the visitors would accept.

The negotiating experts amongst y’all will recognize that as graphing the “settlement range.” If there is an overlap in the settlement range, then a deal can be made. If not, no deal.

This turned out to be a very important exercise because the CEO blurted out, “We can live with that.”

This is what I call “technique” contributing to success; or, planning makes it all easier. Plan.

 4. I told him this was a “five hopper” meaning it was not going to get settled at a single meeting and that each of five contacts would bring the warring parties halfway to the solution until finally somebody stuck their hand out and said, “Deal?”

Alpha CEOs always think they can sit down, explain how the cow ate the cabbage, settle things on their perfectly reasonable terms, and make a 3:30 PM tee time.

Not true.

 5. The most important thing I told this CEO was, “Deals get made by people. Go talk to this guy without trying to settle the thing, but to introduce yourself and to try to get it back to human terms.”

The Other CEO — who I knew — was older, more experienced, but I thought he was a reasonable guy (same church, kids played at the same rec center, private school, cocktail chatter, similar politics, pilot, golfer).

I told my CEO to keep focused on the resolution, don’t hurry, but keep it moving.

I then told him, “This is a one-on-one thing and the other CEO will make a concession to you if he knows it will be held in confidence. You do the same.”

Off goes my CEO armed with my advice and begins to work the deal.

So, what happened, Big Red Car?

Ahhh, what happened?

 1. My CEO defines the dispute, lays out the settlement range, and lays out his five hop strategy.

I review it and think, “Wow, this guy really listened to me. Could not have done it better.”

 2. Then, my CEO sits down with his management team and presents the entire package, plus he lays it out with his favorite board member who is a lawyer.

 3. Nobody but the CEO likes the deal. There is a Google doc mash up that is so full of changes you could not recognize the CEO’s initial work.

Editorial note: None of the other people involved with advising my CEO had ever settled anything like this and had ever dealt with an experienced CEO like on the other side. There was no “wisdom” in this crowd, but of course everybody was both a Constitutional scholar and an epidemiologist — if you get what I’m saying?

 4. This takes more than 45 days in which I can feel the other side getting progressively more pissed off. I can feel it in the air. There is a definite disturbance in The Force.

 5. I do something not completely professional — I “bump” into the CEO on the other side and let it slip I am advising my CEO and that I think he is a “good guy.”

The Other CEO — his decision — tells me the story from his perspective (surprisingly, other than some different emotions, my CEO’s original telling of the tale is a perfect match) and I engage in felonious listening.

I tell the other CEO, “Got it. I think you and my boy can work this out. Give him a chance.”

Other CEO responds, “Tell your boy to shit or get off the pot. I turn it over to the lawyers on Thursday and I’m out for a month to Colorado.””

  6. I go see my CEO and we take a walk around Town Lake, a guilty pleasure in Austin by God Texas. Bit of sun on the face, lots of water activities.

I delaminate his brain and get him back to where we started. I ask him, “What did I say about how this stuff gets done?”

“Mano-a-mano,” he says. “Bravo!” says I.

Pro tip: If you really want to get things fucked up, get a committee involved. Nobody can fuck things up like a committee that has no skin in the game and will not have to execute the plan.

So, what really happens, Big Red Car?

My CEO crushes it. He has the intro coffee before Other CEO heads out for Colorado.

They make a wary, but friendly contact. Rub each others’ heads, no horns.

The Other CEO comes home overdosed on sun, good food, fly fishing, hiking, horses, hot springs, and golf.

My CEO makes a settlement offer — in writing in the form of a detailed Term Sheet — and they have four more meetings and my CEO emerges from the last meeting with a signed agreement.

I cannot stress enough the importance of negotiating from a Term Sheet. Red-lining a Term Sheet is one of the most effective ways to negotiate and to draw the emotion out of the discussions.

During the four meetings, they trade concession for concession — slowly, patiently, allowing the other party to “process the information.” Textbook.

During the negotiations, I speak to my CEO frequently. Mostly, I listen, bit of approving clucking, but he is on the case. [He had a good plan and now all he was doing was patiently executing it, leaning into the five hops.]

At the end after the settlement is made, I tell the CEO this, “Look, stuff happens. Sometimes your team messes up. But when the really big stuff happens, sometimes only you can fix it. When fixing it, get a lot of advice, make a plan — as you did — but when it comes to cutting the deal, do it yourself.”

We laugh. The CEO leaves knowing he has the Right Stuff and that he can handle whatever the business world throws at him because he can do the dirty work when it needs to be done.

That is how a CEO deals with Dispute Resolution and how he learns the process and gains experience.

[If you are running ExxonMobil (XOM), this advice is not for you, but if you are a “former startup” and scaling, read it twice. Get a CEO coach who has a lot of experience and you can do anything.]

But, hey, what the Hell do I really know anyway? I’m just a Big Red Car and I use “regular gas.”

Post script: I wrote this six months after the original post. In making a deal or in advising a CEO, it is important to step back and try to make the right deal. Whilst I am an advocate for my client, I often find myself talking my guy in off the ledge or tempering expections either good or bad. Why? Because I paid a lot of dues to recognize the right deal.

If honorable men and women negotiate in good faith there is always a “right deal” that emerges. Know also there is often a fear of failure that prevents people from getting to the last step of reaching out to shake hands. It takes a bit of courage.

When next I spoke to the Other CEO, he was very complimentary of my CEO’s orderly approach to the negotiations and said that red-lining the Term Sheet made it infinitely easier.

In life, you never get what you deserve; you get what you negotiate and negotiations require patience, experience, and skill.