Friday, March 14, 2008

Reverse auctions for entry-level law professors

At the end of a spring break that I spent, in significant part, staring at budget numbers and thinking about law school finances, I've finally come around to responding to a neat post by Rick Bales called Getting what you pay for.

Rick made good MoneyLaw use of Michael Dorff's newly posted article, The Rational Choice Myth: The Selection and Compensation of Critical Performers:
Some positions within an organization wield unusual impact over the entity's success. The decision makers who hire these critical performers face a daunting task: to distinguish among closely comparable finalists in a context where small differences in talent can produce enormous outcome divergences. I apply research from psychology and behavioral law and economics to argue that decision makers demonstrate unwarranted confidence in their ability to distinguish among nearly identical candidates. The illusion of validity, representativeness bias, insensitivity to predictability, and the fundamental attribution error all impede decision makers' ability to make these fine distinctions. Once they have made a selection, cognitive dissonance induces inappropriate confidence in the outcome's validity and promotes excessive compensation. Involving a group in the decision may worsen these effects by imbuing outcomes with the false veneer of market legitimacy through social cascades and by discouraging contrary views through excessive consensus or groupthink. * * * In the corporate context, I . . . propose a combination of mandatory compensation caps linked to firm size and a reverse auction among CEO finalists to determine the successful candidate.
Rick "enjoyed [Michael's] article, and couldn't help thinking about how it might apply to hiring in the legal academy." Michael's observation that corporate boards' "strong emotional incentive to bolster their confidence" in their CEO choices may lead them "to exaggerate the distinctions between the winning and losing candidates" and to "remain insensitive to the predictability of the new CEO’s future performance." According to Rick,
This sounds to me remarkably like the way we traditionally hire entry-level law faculty. Our predictors of future success, such as the prestige of law school attended, are an empirically poor predictor of future performance, so we convince ourselves that we have found a star, then are loath to recognize, even years down the road, evidence indicating otherwise.
This is a very long road, but it leads to a large, beautiful, and eminently habitable house. In academia as in corporate management, reverse auctions can't eliminate imprudent hiring decisions. But they can lower the cost of all hiring decisions.

Read the rest of this post . . . .In the corporate context, Michael Dorff recommends a reverse auction for CEOs, based on "a small group of finalists based on traditional criteria, all of whom . . . deem[ed] acceptable" by the corporation's board. Since "boards cannot manage the production side of the equation, they should at least minimize cost" by choosing the CEO candidate who agrees to do the job for the lowest salary.

For his part, Rick "continue[s] the analogy to entry-level law teachers" by arguing for a variant of reverse auctions: "the faculty should recommend to the dean a slate of candidates, and then let the dean do some bargaining." In the place of salaries, which are harder to negotiate in academia (at least by entry-level faculty candidates) than in for-profit environments, Rick suggests that law schools "could bargain for [things] such as institutional service and a commitment to innovative teaching."

I find the entire analogy and analysis fascinating. I hasten to add one point. There is a way to implement a reverse auction for entry-level law professors in more explicitly financial terms: student contact hours. A single figure — number of students times credit hours per course — simulates the financial impact of a potential faculty hire. The vast majority of law schools are dependent on tuition, and student contact hours correlate strongly to the amount of tuition collected. And since students per course directly correlate with the number of hours that a would-be law professor must spend teaching, answering questions, and grading exams, the candidate who expresses a high degree of willingness to absorb those students and those hours is sending a strong signal. According to this strategy, a law school faced with a slate of acceptable entry-level prospects should hire the candidate who, relative to her or his rivals, is willing to work longer hours, to serve more students, and to accept a lower amount of unstructured time — for scholarship and for leisure — for a given salary level.


Anonymous Matt said...

The think I'd worry about with this approach is that it might well maximize this one desirable trait (though I'm not sure it would- how would you enforce it, for one thing?) but it's not at all clear to me that this trait is well-correlated with other desirable traits one wants in a law professor- scholarship, quality (as opposed to quantity) of teaching, inovativeness, etc. You can't maximize multiple variables at any one time, of course, so I worry that this approach would leave you maximizing one desirable variable at the expense of others. I don't have a method that gets you everything you want, of course, but since this isn't all you want I worry that it wouldn't be that great of a plan.

3/15/2008 12:35 AM  
Anonymous Anonymous said...

I love this. Great idea! I have one worry though: you would wind up with the candidate most interested in teaching and the least interested in scholarship. As a result, you'd get more teaching and service, and less scholarship, out of the candidate, most likely. But don't we want the opposite these days: teaching that is barely adequate, but not impressive, in exchange for lots of excellent articles? Or is that not what Deans want?

3/15/2008 3:10 AM  
Anonymous shg said...

This factor, "number of students times credit hours per course," relates to the practicing lawyer's hourly rate, assuming that a client selects the lowest rate from a pool of acceptable lawyers. The problem we always face is that there's no way to compare whether this was an effective method of selection because on never knows what the outcome would have been with another lawyer or how many hours it would have taken another lawyer to achieve the same outcome.

So, there's no real way to test the validity of the choice, by outcome or cost.

But as far as desireable traits are concerned for lawprofs, desire to spend time with students certainly seems a better indicator for a teacher than law school attended. That is, of course, if one assumes that teaching is still a significant part of the job description, as I believe it should be.

3/15/2008 5:41 AM  
Anonymous Michael Risch said...

I'm not sure the students in class time method would work too well for any hire not destined to teach first year classes.

For example, I was hired to teach IP. I'm told that my 30 Patent Law students is pretty big for a 430 student law school, but there's no way I could compete with a Civ. Pro. teacher.

I offered to teach professional responsibility, but the school wanted to have an IP Practicum (only 10 students) and I was the only one with the experience to teach it.

So, I'm pretty glad I'm not paid by class enrollment...

Of course, you don't want an entry-level candidate that teaches 4 10 student seminars, but how often does that happen? I consider myself fortunate that I have been asked to teach all my classes in my core subject area - don't most entry level professors teach at least one large 1L class? How do you sort out those who do so "willingly" from those that don't? And how do you avoid punishing those with important but not as populous specialties?

3/15/2008 8:28 AM  

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