Five ways to keep disputes out of court.

Even if you win, a lawsuit can be a disaster. Attorney fees eat up $20 billion a year in the United States alone, and that doesn't count the cost of diverting key personnel from productive work or of damaging profitable business relationships. But more and more managers are discovering that litigation can be avoided with inventive use of alternative dispute resolution, or ADR. All forms of ADR are designed to do two things: save time and money and soften the sharp edges of the adversarial system. In the majority of cases, disputants settle their differences quickly and to the satisfaction of both parties. In the best of cases, opponents resolve their disputes cooperatively and forge new ties. Arbitration, the oldest and most adversarial form of ADR, is now a compulsory prerequisite to litigation in about 20 states. Mediation, perhaps the most versatile and the least coercive, depends greatly on the skill and personality of the mediator. Other methods include the rent-a-judge program, summary jury trial, and minitrial, all of which simulate real litigation to one degree or another but with greater speed, more privacy, and less expense. (The last two have settled several bitter disputes in weeks-after years of litigation.) Variations and hybrids of ADR methods are limitless. In picking the ADR method best suited to your circumstances, factors to consider include: the extent to which both disputants are committed to ADR, the closeness of the business relationship between the two parties, the need for privacy, the urgency of reaching a settlement, the absolute and relative financial health of both parties, the importance of the principles involved, the complexity of the case, the size of the stakes, and the ability and willingness of company executives to get involved.