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6.12.20: COVID-19 Crisis Series - Joint meeting of LAW FIRM and CLIENT-SIDE Luminaries

Updated: Jun 19, 2020

As its first topic of focus, the Council of Luminaries has decided to have regular meetings to discuss the effects of the COVID-19 pandemic on the legal industry as they materialize. The objective is to identify developments in the market, at their firms/companies, and within their teams, and to explore potential solutions and make predictions on where things go from here.

On June 12, we deviated from our standard schedule, instead hosting a meeting that combined the two groups. While, as always, which Luminaries were in attendance and who said what remain anonymous. The notes below are a digest of the comments and discussion that took place.

We spent this week's entire Joint Meeting on Diversity and Inclusion, discussing what we can do together to make more of an impact in this area.

Addressing coworkers and colleagues

A number of clients have Employee Resource Groups, which are aligned with different employee groups, such as LGBTQ+ or African Americans and even veterans. They also do employment engagement surveys, basically asking “do you feel comfortable here, like you belong?” Because as much as employers focus and work on improving inclusion and diversity, the impact can only be validated by direct input from those in the LGBTQ+ community, or people of color on whether or not they feel they belong and are valued. The surveys reveal some sensitivities and preferences of diverse employees that may not be satisfied in the current environment, but these can, and should be, perceived as opportunities for progress.

A few clients and firms reported that their leadership has been holding town hall meetings internally to talk about the issues. These can be very tough conversations to have, and meetings included very heavy topics. It’s best when leadership encourages open discussions that include diverse members of the firm, not just the CEO or Managing Partner providing their reflections—it needs to be an inclusive and open forum for these discussions.

These are also conversations that partners themselves need to be having with clients. As one Luminary put it, “We in Pricing can handle uncomfortable fee discussions on behalf of our attorneys, but ensuring we are sensitive and responsive to our clients’ priorities in ensuring inclusiveness are discussions that partners need to be having personally.”

It can be difficult to know the proper way to address delicate topics with diverse co-workers when you just don’t know what to say, so CEOs that are providing the tools and guidance on the proper ways to do so are doing a good thing. These are tough conversations, but it seems they are welcome. As one white, male Luminary put it, “I personally was afraid of saying the wrong thing. I didn’t want it to feel like I was pandering, especially given the gravity of the topic. But my colleagues said they wanted to hear from me. I’ve been working on listening. We can all be better at that.” Other organizations are encouraging these conversations enterprise wide, noting that while it may have been better if these conversations took place in the past, at least they are now.

It’s also important to remember that diverse teams are good for business, because they reflect the diversity of organizations’ customers and clients. Including multiple voices and perspectives not only leads to better outcomes and higher performance, which studies have proven empirically, but they nurture greater camaraderie, trust and the development of meaningful bonds across teams and organizations that are independent of race, religion, culture, gender, orientation, etc.

How much can we drive improvement of diversity as a small dept in a large organization?

One client asked what more corporate legal departments could be doing that is different from what’s happening enterprise-wide? It can be tough to know how to avoid overlap with other initiatives or how to customize them for legal departments’ needs. For example, vendor management programs should be being consistent and have the same themes from the enterprise.

One client discussed how they made D&I part of their law firm selection process and part of their KPIs. They did not give quotas, but instead let the firm set goals, then evaluated based on how they track to their own goals. So far, only one firm failed in its own initiatives. They owned it and took corrective steps.

The diverse lawyers often seem to be more concentrated in the junior-level ranks of the firm’s hierarchy, but as you move up, not much has changed in recent years. The consensus is that these programs are all great, but none of it makes a difference unless diverse team members get opportunities, get business and get billing credit. Many corporations track what firms do, but are they working with diverse lawyers or diversity owned law firms? Or are they relying on the same people at big law firms they always do? The reality is that diversity landscape hasn’t really changed in 20 years. At firms, work allocation also tends to flow towards the people partners are comfortable with, so there can be implicit bias involved.

One additional element of complexity for some global firms and corporations is that D&I can mean different things in different countries. What is measured, what isn’t, and definitions of diversity can vary geographically. In some jurisdictions, like France, this type of data is considered personally identifiable information so there’s no data.

It can also be difficult to find benchmarking data for law department diversity composition to know how to set goals for planning purposes. It is hard for clients to demand diversity when the law department doesn’t reflect that same diversity itself, though one client cited their own very diverse department that is a credit to their dedication to the mission and helps drive perspective for how firms are asked to mirror requirements.

It was also discussed that when clients measure diversity, they only measure lawyer diversity. The rest of the firm is ignored, which somewhat discounts importance of the staff/management, and often can distort the firm’s commitment to and investment in establishing a diverse workforce. There are often as many business professionals as lawyers in law firms, and these people are important to include in the considerations.

One group member noted that most Am Law 200 firms are quite alike in terms of D&I and that there may be more opportunity at smaller law firms. But giving more work to smaller firms is sometimes tricky because a client often prefers consolidation of efforts for managing portfolios of work, and using high numbers of smaller firms can be difficult from an operational/efficiency standpoint.

The answer likely is in collaboration. Most firms have a D&I person and that’s a resource that clients can use. One law firm group member reports that they have a comprehensive D&I plan and are going through every layer of their operations. “I was put on the firing line to answer what we are doing to increase the diversity of lateral hire candidates.”

Unintended Consequences

There is a capacity issue as many clients are requiring diversity – but there are only a limited number of diverse attorneys in the BigLaw talent pool (a problem, of course). This means there is a capacity constraint which in a normal economic setting would command higher pricing. However, clients will often insist upon high discounts and low rates across the board, which can be at odds with the ultimate goal of engaging, developing and promoting diverse talent.

The reason for the above negative implication is simple. Price-sensitive clients demand diversity, so the firm is forced to put their limited number of diverse lawyers on those clients’ matters, and bill them at a discount. As a result, the diverse lawyers are exposed to the risk of being penalized for not meeting the performance metrics for promotion, etc. based upon those lower rates. This can ultimately lead to those lawyers leaving the firm for greener pastures, of which there are many for talented lawyers, but even more for talented diverse lawyers. Then the client loses access to those diverse lawyers, and reprimands the firm for their lack of diversity. It’s a viscous cycle, but one that is based in rational economics.

One possible solution could be for firms to look less at rates and more at profit, which is starting to be a more broadly-referenced factor in partner KPIs and compensation models. On a more micro-level as it relates to pricing models that can help alleviate these issues, fixed fees, contingencies and blended rates can help improve profitability, which permeates all ranks of the engagement team and helps generate positive evaluation metrics.

The priority should be quality legal work, and understanding how to get that and what to pay for it is the challenge clients must tackle. One client-side member said that they stand in front firms and tell them, “We need a healthy defense bar and if the only lever we pull is rates, we will hurt your business, and we will not get the service we require. We can partner to find ways to keep our costs flat or even down and allow you to be more profitable.”

Quarterly Business Reviews can be a good vehicle for monitoring and managing diversity—a firm can spot improvements or sliding numbers and address them quickly. Doing so can lead to a simultaneous carrot/stick approach—if you don’t achieve goals, 25% of your work will be given to the firm meeting the goals. And if you do, you’ll end up with the work that is pulled from those who don’t. Fear of loss is a strong motivator, but for clients it’s often very difficult to actually move work. And firms know this, so it is critical to make that threat credible.

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