Comments on: Two cheers for indetured servitude!

By: Mike Madison

Mike Madison — Tue, 08 Apr 2008 17:03:35 +0000

Nate,

Fair enough. Empirically speaking, and asking and expecting gross generalizations:

Are smaller firms or larger firms more likely to be unable or unwilling to invest in training new lawyers?

Are smaller firms or larger firms more likely to speak loudly in the calls from the bar for extending “skills” training in law schools?

My own limited, anecdotal evidence suggests that “larger firms” is the answer to both questions.

By: Nate Oman

Nate Oman — Tue, 08 Apr 2008 16:24:52 +0000

Mike: I am not talking solely about big law firms, though. Indeed, I think that the free-riding problem is probably bigger for small firms that can’t diversify away the risk of losing investment in associates. On the otherhand, if we had specific performance or something like it (perhaps the return of master and servant acts) for junior lawyers in small firms, then those firms could invest more energy in training with greater confidence that they can recoup some of the benefit at the tail end of the contract. As it now stands, the costs of training get pushed back on to the student. Hence, if anything, the case for indentured servitude is stronger for small firms and solo practictioners…

By: Mike Madison

Mike Madison — Tue, 08 Apr 2008 16:14:59 +0000

I’m not quite persuaded, at least with respect to law firms. If we assume that law firms want to recoup the training costs associated with each and every lawyer they hire, then I agree: the free riding problem is such that firms have a vastly reduced incentive to invest. (That’s the “I’m a realist” part of my initial post. Been there, done that.)

The problem is that the larger firms want it both ways: They want to recoup their investment on every lawyer hired, but they hire far more new lawyers than they need in order to supply the partnership ranks. If attrition is already built into the system, then there’s no reason not to add the cost of training into the existing cost of hiring — unless the firms’ partners are unwilling to sacrifice profits, which often they are not.

Thinking more about the military analogy, and in light of the fact that only a small proportion of graduating lawyers nationwide enter the profession via the large firm door, prompts an additional thought: Are we looking to compare the legal profession to the armed forces, or is the right analogy a comparison between the large law firm and the Air Force (and/or between the large law firm and United Airlines)? Lots of pilots learn to fly on their own nickel and some of them — maybe even many of them — become commercial pilots. Some commercial pilots — maybe even many of them, these days — have little lateral flexibility because of seniority and pension concerns. But some simply love to fly, and their employers retain their services not because of the coercion implicit in seniority systems, but because the employers make it worth the pilots’ while.

In other words, the legal profession is a big place, and lawyers move around at least partly because they believe that they’ll be treated better in the next office tower. (Treat new lawyers like commodities, and they’ll behave like commodities.) They’re often wrong, but I’ve long wondered whether law offices of every size would have greater success in retaining lawyers if they used carrots as effectively as they use sticks — or more effectively.

For another comment or post: Does the profession need to deal with arbitrage?