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| Diversity Makes Cents: The Business Case
for Diversity Since the 1980s, almost half of law school
graduates have been women. During that same time frame, the percentage
of minority law school graduates has doubled: from 10 percent to 20
percent. Perhaps in consequence, women and minority lawyers are better
represented at the associate level than among partners. Nationally,
approximately 43 percent of associates are women and 15 percent of
associates are minorities; their placement thus lags roughly 5 percent
below their representation among law school graduates. Locally, 47
percent of associates are women and 9 percent are minorities at Twin
Cities law firms. Progress has been slow. In 1993, nationwide,
12 percent of partners were women, while 2.5 percent of partners were
minorities. There has been considerable debate within the profession
about what these numbers mean. One camp believes that the playing
field is not level and never has been for women and minorities; in
their view, a “glass ceiling” inhibits their success. Others maintain
that the statistics reflect a personal choice to jump off the traditional
law firm partnership track. More recently however, many diversity proponents
instead talk about diversity in terms of the “business case” or that
diversity enhances the bottom line. As stated in a study by the Minority
Corporate Counsel Association (MCCA), “Law firms that only pay lip
service to diversity may pay a stiff economic price.
Law firms that do not take diversity seriously are already
losing money.” Diversity Enhances Business This shift in the debate has been welcomed
by many involved in diversity initiatives. Instead of lawyers in firms
arguing about whether there is in fact anything “wrong” at their firm
that needs correcting, they now discuss how improving their representation
of women and minorities may enhance their business. That debate is
usually a far less controversial one since, not surprisingly, it is
easier for lawyers to reach a consensus about activities aimed at
enhancing revenue and profits as opposed to achieving social justice.
Diversity helps the bottom line in a variety
of ways. First, diverse law
firms attract and retain better lawyers.
The pool of available white male law school graduates continues
to shrink. As noted above, approximately half of law school graduates
today are women and 20 percent are minorities. Firms that recruit
solely through the “old boys network” are finding that this network
is becoming smaller and smaller. As a result, these firms lose out
on many talented lawyers. Law firms that do hire women and minorities,
but fail to retain them, experience substantial turnover costs. It
has been estimated that the cost of losing a second year associate
can be as much as $250,000 when one factors in the lost return on
the investment in training the associate. Law firms that are able
to retain their diversity hires reap the benefit of their investment
in training. And of course, law firms that lose such associates, on
occasion, face discrimination litigation with its attendant expense
and distraction, as well as adverse publicity. Another argument in favor of diversity relates
to the quality of lawyering. Many corporate
clients want diverse perspectives when seeking legal advice. As expressed
by Catherine Lamboley, the general counsel
of Shell Oil, “When you use people of diverse backgrounds and different
ways of looking at things, you get a better solution.” A more controversial reason supporting the
business case for diversity concerns the strategic use of women and
minority attorneys in litigation. Jury pools today are more diverse.
According to the chairman of the National Association of Minority
and Women Owned Law Firms (NAMWOLF), “Using firms with lawyers of
a different race, sex and age may allow them to better connect with
juries, who also are more diverse.” Critics contend such use of women
and minority attorneys is tantamount to exploitation. This criticism
is frequently heard when companies intentionally seek out law firms
that have women or minority attorneys available to help defend a lawsuit
involving race or sex discrimination. The response to the critics
is that as long as the attorneys are competent and their presence
does not risk being viewed as “window dressing” by the jury, the strategy
is simply smart advocacy. New Business Through
Diversity Perhaps the most compelling argument underlying
the business case for diversity relates to marketing and business
development. The legal profession is a relationship-driven business.
Once the competency threshold is passed, selection of counsel is often
subjective and is frequently driven by the comfort and personal chemistry
between lawyer and client. It is therefore not unusual, as a minority
female partner at a major national law firm noted, that clients “want
people who reflect their backgrounds.” According to the most recent MCCA survey,
14 percent of general counsels today are women and 5 percent are minorities.
In-house counsel are 20 percent women and
10 percent minorities. Twenty-five percent of business owners are
women and 15 percent are minorities. Says the chair of NAMWOLF, “Just
like there’s an old boys network, there’s a network of people of color and women.
Nowadays at the large corporations, it’s a person of color or a woman
who is making the decision [of whom to use as outside counsel] and
for some it’s not appealing to deal with an all-white [male] firm.” Not only are women and minority lawyers
developing new business relationships with clients, some corporate
clients today are demanding that their law firms have respectable
diversity statistics. If the firms don’t, they won’t get the company’s
business. As more and more companies have become committed to diversity,
they in turn, expect their vendors to be.
“Diversity in our workplace and supplier base strengthens our
company and our performance in the global marketplace,” observes Delta
Airline’s general counsel. More Than Lip Service Needed
Two major companies that have garnered much
recent publicity about their efforts to use diverse law firms are
Shell Oil and Sara Lee. Both corporations gather extensive information
from the law firms already doing business with them and those seeking
to do business with them. These data go well beyond the number of
women and minority attorneys at the firm. The companies want to know
if women and minorities are actually doing the work and/or getting
business development credit. They also examine the law firm’s diversity
policies. If the numbers are weak, what does the firm plan to do to
make them stronger? Most importantly, the corporations are holding
the law firms accountable. Says Shell Oil General Counsel Catherine
Lamboley, “We no longer do business with [some] firms because
they were simply giving lip service to diversity.” A number of other blue chip corporations
evaluate diversity data (though less exhaustively than Shell and Sara
Lee) when considering who to retain as outside counsel. The list includes
Coca-Cola, American Airlines, Wells Fargo, Bank of America, Baxter
Healthcare, and Merck. This trend is best summed up by Merck’s general
counsel, Kenneth Frazier, who said, “We are in the fortunate position
of having many highly capable law firms lining up to work with us.
And it was hard in some ways to differentiate among these firms. But
we found that diversity was something that would allow us to make
that differentiation.” As the list of companies formally seeking
diversity data continues to grow, there are also companies and individual
in-house counsel who informally solicit such data before selecting
counsel. Furthermore, an “underground network” of women and minority
in-house counsel routinely recommend law firms with good diversity
records that they have retained to others within their network. Under
these circumstances, many law firms do not even get a seat at the
table, thus losing potential business without ever knowing it. |
