The Boston Chicken Problem

Boston Chicken was a Wall Street darling in the ‘90s. On the day of its initial public offering in November of 1993 its share price went from $10 to $23. In December of 1996 it hit $41½. But in October of ‘98 share price fell to $.50 and the company went into Chapter 11. Why?

Evidently the revenue numbers that got investors so excited weren’t coming from selling chicken; they were coming from selling franchises. Even if you have a great concept and great media buzz, even with fancy financing and even fancier accounting, somewhere underneath it all somebody has to be selling some chicken or the business model just will not work.

This is also a problem for the mediation business. The concept, we all agree, is wonderful. The buzz is exciting. The field is growing enormously. But it turns out there ain’t many of us selling much chicken.

This is all explained in a paper by Harvard economist Urska Velikonja called Making Peace and Making Money: Economic Analysis of the Market for Mediators in Private Practice available at http://works.bepress.com/urska_velikonja/1/.

I highly recommend the full article, but I’ll just quote from the abstract:

The article presents data that the supply of willing mediators by far exceeds the demand for their services, and suggests possible economic explanations for the excess entry, including overoptimism and the lack of formal barriers to entry. Excess entry is socially suboptimal: many aspirant mediators spend money pursuing what is likely an illusory career and forgo other career options, even though they were never going to be able to make money as mediators. The article also presents data that income distribution is uneven in the market for private mediation and suggests that the market is a winner-take-all market…. The analysis has important implications for aspirant mediators and for the design of mediation training programs…. Mediation training programs ought to be redesigned to convey to aspirant mediators the realities of mediation practice.

In other words, much of the growth we’re seeing in the field is coming from training, not from mediating cases.

This was brought home just this week when I received notification of an opportunity to serve as a mediator for the Key Bridge Foundation. Actually, I received more than one notice of this opportunity. One of my sources listed it under Job of the Month. Here is the announcement:

The U.S. Department of Justice Americans with Disabilities Act (ADA) Mediation Program is looking for experienced mediators who are familiar with mediating “under the umbrella of the law”.… In 1994, the Department of Justice established the ADA Mediation Program. [T]he ADA Mediation Program now operates under a contract with the Key Bridge Foundation.

The ADA Mediation Program would like to identify potential mediators from specific regions of the country who will, after successfully completing the Department of Justice’s ADA mediation training, be added to the ADA Mediation Roster.

To be considered for the U.S. Department of Justice ADA Mediation Program’s mediator roster, you must submit a completed application. Formal mediator training and experience serving as a mediator are basic requirements for admission to the roster. Prior experience resolving civil rights disputes is highly desirable. Additionally, your application must demonstrate that you have the experience, skills, abilities, and knowledge to help parties communicate better, analyze risks, and explore options for mutual satisfaction within the parameters of the ADA.

Nice, right? Maybe. But let’s look a little further. The Key Bridge Foundation website http://www.keybridge.org/ has a few additional facts to add. They are these:

• Since 1994, KBF Center for Mediation has handled nearly 1000 ADA complaints.

  
  

• KBF Center for Mediation manages a national roster of over five hundred professional mediators who have received training on the requirements of the ADA.

If I’m doing the math right, that’s an average of something less than two mediations per mediator over 14 years, or not quite one case every seven years.

That’s fine for the Key Bridge Foundation, but from the point of view of the mediator, that ain’t sellin’ no chicken.

                       

Barry Goldman

Barry Goldman is a Michigan-based arbitrator and mediator of workplace disputes. He is also an adjunct professor at Wayne State University Law School where he teaches courses in negotiation and ADR and the author of The Science of Settlement: Ideas for Negotiators, published by ALI-ABA in 2008. He can be reached… MORE >