Talent Management Column

Are Lawyers Really Helping Us?

With research questioning the overall merit of bringing lawyers in to alternative-dispute resolutions, and with common sense reminding us that lawyers cost money, a better solution might be to agree beforehand to leave the lawyers out.

Monday, June 17, 2013
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I should begin by noting that I come from a family of lawyers and that I understand, as my lawyer colleague Phil Miscimarra says, that lawyers have to eat, too. Lawyers do many useful things beyond keeping their clients out of trouble. One of their most important roles within the area of civil law is to help their clients in disputes with other parties. Many of these are associated with the workplace.

Alternative-dispute-resolution practices came about in large measure because of concern that the court system was an expensive, slow way to resolve disputes that rarely got to the heart of the matter.  Systems of arbitration and mediation were created as an alternative. Grievance arbitration may be the most common example.

A recent study, titled Lawyers as Agents of the Devil in a Prisoner's Dilemma Game, investigates and reviews what happens when lawyers are added to these alternative-dispute processes, such as when the parties decide to engage a lawyer to represent them in arbitration processes. Almost without exception, these proceedings were designed to avoid the need to have lawyers as representatives. The study looked at union-management-contract arbitration, employee-grievances arbitration, child-custody-dispute resolution and alternative-dispute processes for civil suits. (For our purposes, though, the results likely generalize to all forms of problem-solving where the option to bring in lawyers exists.)

What's the good news for lawyers? There is evidence that they help moderate the initial views of their clients. In disputes like these, both parties tend to be quite dramatically overconfident about the merits of their own case and the likelihood that they will win. Their lawyer can bring them down to earth, making it easier to get a settlement that the parties can live with.

On the other hand, it doesn't take a lawyer to do this. All it takes is someone who can get the individuals to do reasonably simple thought exercises, such as taking the perspective of their opponent or reviewing outcomes of prior disputes. The parties also learn to moderate their demands quickly, so once parties have experience in disputes, continuing contact with a lawyer isn't necessary for that benefit.

Here's where things get complicated: If you have legal representation and your opponent does not, on average, you do better in these dispute-resolution processes. Exactly why is hard to say. If you both have lawyers, however, the results are arguably no different than if neither of you have lawyers. In the latter case, though, you both pay attorney's fees and, in some cases, the sum total of those fees can be greater than the value of the issue in dispute.

If both parties could agree not to use lawyers, the evidence suggests that they could save a lot of money without changing the outcome of the dispute. If your opponent is going to use an attorney, however, you need to use one as well to avoid losing.  As the authors of the study note, this is an example of the classic prisoner's dilemma: It's in our interests to cooperate, but, because I will lose in a big way if you don't cooperate, my incentives are to not cooperate, either.

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Problems like this can be solved by agreeing before the resolution process that disputes will be settled without using lawyers. Such agreements might be hard to enforce, of course.

The more interesting issue concerns the whole process. The notion of alternative-dispute resolution starts to feel a lot less alternative when we bring the lawyers in. What lawyers appear to do is prevent us from losing, albeit at a price.

Maybe it would be helpful for us to think through our priorities in these disputes. Is our goal to settle the issue and move on? Or are we really focused on not losing?   

Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School. His latest book is Why Good People Can't Get Jobs: The Skills Gap and What Companies Can Do About It.

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