Law firms have increasingly prioritized what we can all agree is an important goal: meaningful improvement in the diversity of their ranks. Beyond the positive human and workplace impetus behind this push, firms are experiencing a growing trend of externalpressure to increase parity through all levels of hiring and promotion. This pressure comes from their clients — and rightly so. Companies and general counsel have an important interest in seeing law firms increase diversity.
Superior Corporate Performance: A near causal relationship exists between diversity and bottom-line corporate performance. There is an 80% improvement in business performance when levels of diversity and inclusion are high. Fortune 500 companies with the highest representation of women board directors attain significantly higher financial performance, on average, than those with the lowest female representation. And racial and ethnic diversity has an even stronger impact on financial performance in the United States than gender.
Superior Law Firm Performance: Though a company’s lawyers work separately from the business and outside the corporate benchmarks and performance indicators described above, the analysis is equally meaningful within the firm. Clients see diversity as a key performance indicator to discern the quality and prestige of a law firm.
Why is this? First, heterogeneous teams produce more nuanced and innovative solutions to problems. The more perspectives you have in approaching a challenge, the more cross-pollination of ideas, and the better your chance of creative resolution. Since innovative problem solving is the very reason companies hire outside counsel, it is rightly a fundamental factor in their selection of a law firm.
Furthermore, by 2040, an estimated half of the population will be made up of groups now considered minorities. The U.S. population of young adults, college students, and graduate students has never been more diverse. Companies are more profitable if their ranks reflect their client demographic, and law — a service industry — will undoubtedly observe this same trend. A law firm with no African-American partners, for example — of which there are currently twenty in the Am Law 200 — will come under increasing scrutiny by discerning general counsel.
Raising The Bar. In-house counsel and law firms are employing some noteworthy means of improving the diversity of their legal teams. Many general counsel have come to rely heavily on minority- and women-owned law firms, and prioritize doing so wherever possible — as I recently observed at an inspiring NAMWOLF conference. Relatedly, and as suggested by Showtime General Counsel Gwen Marcus in a recentkeynote address, Biglaw firms can bolster their diversity commitment through strategic relationships with women- and minority-owned law firms to whom they refer smaller matters.
As a women-owned business, Cadence Counsel is proud to play a role in deepening these types of relationships. General counsel now engage diverse firms on larger matters knowing the firm can ramp up as needed with our Ad Hoc Counsel. They use Cadence lawyers to bring diversity directly to the in-house workplace. And they direct their outside firms that have not yet reached their diversity goals to partner with Cadence as a way to infuse a diverse resource into their legal spend.
More diverse companies and firms are better able to win top talent and attract and retain diverse talent. Law firms have a big job ahead of them in an industry where women make up 18% of equity partners, and ethnic minorities represent 6% of partners — but many are up to the challenge. Close strategic collaboration between in-house law departments, law firms of varying compositions, and alternative service providers can be a powerful tool in advancing these goals.