Thursday, June 5

Why do so few mediators make any money?

Now that I have your attention - this is just one of the chapter headings in a new article analysing the market for private mediators in the US by Urška Velikonja, a teaching fellow in Harvard's Economics Department.

Of course I would be remiss if I did not mention that the very next chapter asks Why do some mediators make so much money?

In any event, it contains much interesting data on the business end of what we do, although Urška surely the footnote has had its day?

Some of the money quotes;

>The vast majority of people who enter the mediation market drop out within two years. Of those who persist, about ten thousand earn $50,000 or more per year from mediation.

>Federal, state and local governments employ around two thousand mediators. Their average annual salaries range from $55,000 for local governments, $57,000 for state governments, and $105,000 for the executive branch of the federal government.

>In California, the median divorce mediator on the court roster charges $300 per hour, and not one charges less than $150 per hour; in Virginia, on the other hand,the median mediator charges less than $125 per hour, and only top 10 percent charge more than $200 per hour.

>Of the few thousand mediators, who are able to mediate full-time, the majority earns $50,000 or less. There are fewer than a thousand mediators and possibly a few hundred, who make a good living, grossing $200,000 or more per year.

>Only a couple dozen or so mediators, primarily former judges practicing with JAMS and a few high-end commercial mediators in markets, where the cost of living and, as a result, mediation fees are high, are able to consistently bill over one million dollars per year.

>Many mediators are “lone rangers.” They like and prefer working on their own, and form partnerships only for practical reasons: so that they do not have to turn away clients when they are sick or go on vacation, so that they can share the costs of administrative staff and marketing, and so that they have someone to socialize with.

>Mediators’ overhead is low (20-25 percent of gross revenues, and no more than 30 percent) and each mediator keeps the majority of the revenues without the need or the incentive to employ junior mediators. As a result, there is virtually no demand for junior mediators...

>The article presents data that income distribution in the market for private mediation in uneven, and suggests that the market is a winner-take-all market, where a few mediators at the top of the pyramid are busy and well-paid, while the vast majority of aspiring mediators is constantly looking for work, yet makes little or no money.

9 comments:

Dina Lynch Eisenberg said...

Thanks for the heads up, Geoff, about the study. Heavens, this isn't a mystery. Few mediators make money
because they aren't prepared to
be businesspeople either by temperament or training.

There may be a glut, as the article suggests, but that's not the entire answer. The problem is mediators
are reluctant marketers, and bad ones to boot.

The US has the highest per capita ratio of lawyers. They *somehow* make money and no one is crying about a glut. I have attorneys contacting me weekly about how they can 'get into mediation'. That tells me there's money to be made; we're just not claiming it. If mediators were successful in segmenting and educating the marketplace, they'd make money. And, I say that from hard-won experience, not conjecture.

OK, enough rant here. As you can tell, this topic gets me riled up so there's a longer post on my site.

Sheesh, when will people learn?!

vickie said...

like actors and screenwriter .... Deeper socko-economic analysis later

Diane Levin said...

Geoff, as a mediation trainer and as someone who served on the board of directors of the New England Chapter of ACR for four years, I have seen first-hand the realities that this report depicts. I teach an open enrollment basic mediation training five times a year. Many people take these trainings and typically have high hopes that they will be successful. Two years later, and maybe one or two determined souls out of a training with 20 participants will have persisted. Most will have given up. I also saw as a board member how many new members we would gain following the completion of area mediation trainings; and how many of them allowed memberships to lapse a year or two later when the realities of practice and the difficulties in obtaining paying work set in. (You are welcome to read more about why I think this way, and why I think this is a problem for mediation trainers to face up to, at
Too many mediators, not enough mediations: is it fair to keep training neutrals with career prospects so grim?)

I respectfully disagree that the problem is attributable to poor marketing skills or a lack of business savvy on the part of mediators. It is not. The problem is precisely what the study identified, including among other things the fact that the field is dominated by attorney-mediators who gain the lion's share of the cases, particularly the coveted commercial cases. This is because, as the report points out, attorneys remain the gatekeepers for a significant amount of cases. It's a tough field to break into if you're not a retired judge or a high-profile litigator from a top-tier law school.

I know many mediators, and I am one, who do not and most importantly cannot rely solely upon mediation as a source of income. Many people I know in the ADR field who have stuck it out also work as trainers, coaches, and consultants in addition to being mediators. Damn few of us make a living at mediating alone. Diversify your work portfolio and perhaps you can succeed. But don't quit your day job if all you want to do is mediate, and you lack the talent or aptitude for training or consulting.

Thanks, Geoff, as always for your generosity in sharing with your readers. This is an issue that bedevils our field. Mediation is a skill worth having -- but is it a career that is easily pursued?

Sarkis Jacob Babachanian said...

In Los Angeles, the superior court and the US district and bankruptcy courts all offer pro bono mediation programs that severely impact the market. Even parties with the means to pay a reasonable fee for service can and do take advantage of pro bono ADR programs. Only after the first three hours can the mediator bill at his or her normal rate - typically $250-$300 per hour split among the parties. This system, while great for those with truly limited means and while valuable as a training fround for mediators, has unfairly skewed the market. My two cents.

Rachel said...

Geoff, thank you for helping spark such a great conversation in the mediation blogosphere.

I am really uncertain of the position that better marketing and business sense can address the challenges laid out by Urska.

The picture of mediation as a winner-take-all market is hard to shake. Being a musician-turned-nonprofit-professional (and novice mediator), I've seen the challenges of functioning in such a market.

Actually, the mediation market is an even tougher one than music. There are options, layers and step-ladders in the music world. As you highlight here, none of those exist in mediation. Imagine if the only option in music were performing or teaching on a small scale.

I've written more about my thoughts on the winner-take-all market, and students' overoptimism, at www.MediatorInTheMaking.com .

Kyle said...

Geoff,

I think this conversation was a valid one to have for mediators. Hopefully, it will cause us to do some self examination of our skill, field, and where we want to see it going.

I am a mediator and I go through the ups and downs of mediating. In my opinion, I spend most of my time trying to educate the public about what mediation is rather than mediating or being invited to speak about mediation. Sounds like an oxymoron doesn't it? Let me explain. Once I make a contact, I spend most of my time convincing them that mediation is and would be beneficial to them or their business.

I believe if the public was more educated about what it is we do then it wouldn't be as difficult for mediators to get business. Think about it, most lawyers aren't tv ambulance chasers but they still do well in their fields. It's because their field is established publicly. I believe once we do a better job of doing that, we won't ever have to worry about finding business. In fact business will find us.

Kyle L. Bruner

479 said...

As a newbie:

I've mediated 3 cases with an experienced trial attorney as lead and have to say a few things on this thread. The two of us, lead mediator and co-mediator, would easily be busy all day and every day of the week, but for the fact that most people (if not all) do not understand what mediation is, how it works, or even that it's legitimate. We have to go into several court rooms, beg judge's clerks to let us in, go through the jury rooms, and solicit cases to mediate.

So, the public at large does not know mediation exists much less what it is or what it does or how they can save time and money through its use. When you combine that with the fact that many courts even today don't necessarily favor mediation where it could be an option, you have a real PR problem.

As a former reporter, it struck me right away that if I could go through the courts and connecting hallways and give out very simple fliers explaining mediation in a few words and how it could save people time and money, we'd have no problem getting cases. One of the court systems that I mediate with now has told me that they have many more mediation cases than they can possibly handle, and eagerly refer "overload" cases to private mediators.

So, I think the market is there, it's just untapped and very poorly represented in terms of PR/marketing/advertising. What if a mediator had a commercial on afternoon TV here in the US like all the lawyers do?

Anonymous said...

As a current practicing fulltime mediator I think your wrong. Mediation is not only the fastest growing field it can be very lucrative. The more lawyers we have the more we litigate. people are realizing that mediation is a primary source for dispute resolution as the courts are busting at the seams with backlogs. There is going to be a shift in the legal industry which has been monopolized by attorneys for years. The question is not how much will mediators make, rather it is how will the mediation field be regulated and what education will be required. Just as a good mediator doesent make a good lawyer, a good lawyer wont make a good mediator. Lawyers are trained in the art of argument the opposite of what mediation is all about-

Anonymous said...

I am a full time mediator part of the problem is that lawyers are becoming mediators since they have no work and only use their friends . so they lock up the market and stick together .
However i do make a very nice income and have never had to get a second job and make over $50,000 a year . But i have worked in the court system for over 17 years and have a few contacts myself and it would not be so easy for some one just starting out .