Guaranteed Collaborative Outcome
In case of no agreement at the end of Final Session, Smartsettle offers a unique method of arbitration that encourages early fair concessions. A final binding outcome is guaranteed if parties are willing to let Smartsettle arbitrate the decision using the opinion of an expert neutral.
Like ordinary Pendulum Arbitration (also called Final Offer Arbitration), Smartsettle’s Dampened Pendulum Arbitration rewards fairness, but it does so in a way that avoids identifying a clear loser. In so doing it maintains a good atmosphere for continued harmonious relationships.
How it Works
If parties agree to arbitration and no agreement is reached at the end of Final Session, Smartsettle uses the opinion of an expert neutral to favour the party whose last accepted value was closest to fair. The following illustration applies directly to a Smartsettle One negotiation but the same principles apply to Smartsettle Infinity.
Suppose that Party A and Party B make visible proposals of 49 and 60 respectively and both parties are willing to accept an outcome between those values. Party A makes a hidden acceptance of 51 and Party B makes a hidden acceptance of 57. Neither party is willing to make any further concessions and Final Session ends as shown below.
The expert neutral is shown a range of values that cover the two last accepted values and extends an equal distance beyond each of the hidden accepted values to include the nearest visible proposal. In this case, the range of values shown to the expert neutral is as follows:
49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59
The neutral is not told what the hidden acceptances or visible proposals were. All s/he knows is that the range includes at least one of the visible proposals and that the hidden acceptances are centered on the range. The Neutral is instructed to choose one of these values that is the closest to fair in her expert opinion. Suppose that the Neutral identifies 55 as Fair.
If the value chosen by the Neutral falls between the accepted values, the party who is closest to fair is favored by taking an average of fair and their last accepted value. Tie goes to whoever moved first and rounding is in favor of the party closest to fair. If the value identified by the Neutral falls outside the accepted values, then that value becomes the outcome.
In this example, Fair falls between the accepted values and the final binding award is declared by Smartsettle to be 56.
Party A actually knows that Party B was favored in this case, but Party B does not know that. If Party B’s visible proposal had been farther away, neither party would have known who won or who lost.
Conclusion
Combined with Visual Blind Bidding, Dampened Pendulum Arbitration provides the best of both worlds. It encourages fair compromises early in the process, thus minimizing the actual need for arbitration, and it does this all without identifying a clear loser.