Friday, August 24, 2007

Marginal MoneyLaw: What law schools can learn from bad baseball teams

Kevin SeitzerJuan Pierre
Marginal MoneyLaw

What law schools can learn from bad baseball teams

A MoneyLaw series

Jeff Harrison's most recent post, Law schools and competitive markets, hints that law schools differ in their ability to compete, particularly during times of financial hardship. Jeff also suggests that the extent to which a law school is being operated for its shareholders -- and the magnitude of the success attained in that enterprise -- can be measured. These observations form the basis for a meaningful exercise in MoneyLaw.

As writers in this forum so often do, I turn to baseball. The late Doug Pappas developed a brilliant metric for assessing the efficiency of Major League baseball teams. As Doug explained in 2004:
The easiest way to measure front office efficiency is simply to divide a club's payroll by its wins to come up with "dollars per win." However, neither side of this equation reflects reality. The worst team a club can field won't go 0-162, and despite some owners' best efforts, it's impossible to spend $0 on a major league roster. It's then necessary to look at marginal wins and marginal payroll.

George BrettThe Marginal Payroll/Marginal Wins (MP/MW) system evaluates the efficiency of a club's front office by comparing its payroll and record to the performance it could expect to attain by fielding a roster of replacement-level players, all of whom are paid the major league minimum salary. The formula is:
(club payroll - (28 x major league minimum) / ((winning percentage - .300) x 162)
The left side of this formula assumes that a replacement-level club would play .300 ball. That translates to 48.6 wins in a 162-game season, which before the 2003 Tigers was worse than any actual major league club since the institution of the amateur draft. [Editors' note: The 2003 Tigers went 43-119, good for a .265 record.] The previous low was the 52-110 (.321) record of the NL's two 1969 expansion clubs, the Expos and Padres, who began play with no minor league system, no way to sign free agents, and no players any other NL club really wanted to keep. After subtracting the replacement-level .300 winning percentage from the club's actual winning percentage, the resulting number is multiplied by 162 to calculate the number of marginal wins over a full 162-game season. This adjusts the formula for strike-shortened seasons and clubs which fail to make up a postponed game or two.
All that it takes to translate Doug Pappas's marginal payroll/marginal wins formula for use in legal education is to develop analogous metrics for payroll and wins.

The next two posts in this series will undertake these tasks. First, I will ask what it would cost to run the most threadbare law school that would manage to secure and retain ABA accreditation. That figure would represent legal education's equivalent of the Major Leagues' minimum payroll.

I will then tackle the more difficult task of defining "wins" in legal education. No matter how many law professors imagine themselves as the primary stakeholders in the existing university rankings game, students and their eventual employers are the true primary consumers of academic rankings. Since any effort to define academic "wins" is tantamount to proposing a different set of rankings, for purposes of this exercise, we might as well have the rankings we want. I propose student metrics mark the threshold of ABA accreditation: true employment rates (preferably at graduation), bar passage rates, and the like. A school performing at that level, and no better, would be legal education's equivalent of the 1969 Expos, the 1969 Padres, or the 2003 Tigers.

1969 Montreal Expos
Establishing those two baselines will enable us to gauge individual law schools' performance by some sort of marginal budget/marginal performance metric. How much does each school spend, relative to the absolute minimum needed to secure ABA accreditation, to move its outcomes by some measurable margin beyond that threshold?

Ours, after all, is an unfair academic game. Some schools are simply richer than others. It is equally true that some schools make more of their wealth, however limited or extensive it might be, than comparably situated counterparts. In legal education as in baseball, wins count. In a world of scarcity, though, how a school attains those wins, and how much it spends getting there, are pivotal questions.


Anonymous Anonymous said...

You define an excellent framework for a much needed measure of law school performance. But I question three terms which you use, for which it seem we need clear definitions before we can proceed. These terms are: shareholders, stakeholders, and consumers.

First, we can define law schools consumers or customers as students and their employers with little confusion. These groups together provide much of the operating revenue for a school, and expect to receive a certain service or outcome for their money. Given accurate and authentic metrics such as you suggest, we can with some confidence measure the performance of schools in providing services to their customers.

Second, stakeholders seems like fairly clear term, if we understand it to mean, "the sum of all groups which have some interest in a school's uses of its resources." Deans, professors, administrative staff, students, and even the general public all have their own -- possibly conflicting -- interests in the way law schools spend resources. But if we want to measure schools by how well they employ resources to serve the interests of stakeholders, then we first need to figure out what groups and interests we will consider, and what weight we will give each -- or what weight schools should give each -- in measuring them. It seems unwise to discount the interests of any group of stakeholders entirely, since the contributions and participation of all provide some essential resource in the running of law schools.

Many complaints about the way law schools use resources seem to amount to conflicts between stakeholder groups, or complaints between disparities between the resources supplied and outcomes received by different groups. Deans, for instance, make no net contribution of resources to the school, since their labor and management talent are presumably compensated by the salaries and benefits they receive. But they have huge influence over the use of resources relative to other groups. Some would say they serve their own interests, or those of other groups such as professors and staff, at the expense of others. Students, alumni, and the general public, on the other hand, make large net contributions of resources. But some would complain that they receive outcomes in terms of education, opportunity, and services falling far short of the level they should expect given their contributions.

Finally, shareholders seems a hard term to define, since law schools are not corporations of investors in the usual sense. We can view even a major league baseball team on one level as a business in which its owners invest, and the purpose of which lies in producing the best return on their investment. Law schools do have boards of trustees (directors) and donors (investors). But unlike the directors of a commercial enterprise, the trustees of a school do not have a simple and clear duty to protect the interests of or maximize returns for any distinct group of "shareholders." The trustees may try to produce a "return" for donors in terms of increasing the school's reputation and prestige, but this can not and should not be their only goal. If we mean to use some sort of return to donors as a measure of performance, we also face some problems in defining or measuring that return, since schools of course never provide any tangible or financial return to them.

Different groups of stakeholders may also lay conflicting claims as to which of them comprise the "shareholders" whose interests trustees should seek to protect and advance. It may help clear up the problem if we leave the term shareholder aside entirely, and instead focus on defining and weighting the interests of the several groups of stakeholders instead.

8/24/2007 4:45 PM  
Blogger Jeff Harrison said...


Some half-baked possibilites -- all divided by total law school budget per year (cost of living adjusted).

1. Accumulated starting salaries of graduates per class. (cost of living adjusted)

2. Number of graduates passing the bar.

3. Total number of graduates.

4. Total judicial citations of faculty scholarship.

5. Total citations of any kind of faculty scholarship.

Where it gets sticky is that public law schools represent a public investment for which one hopes there is a "public" return not fully internalized by the graduates.

8/24/2007 9:09 PM  

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