Diversity Nudges

Volume 3 • Issue 2 • January/February 2017
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Diversity in Practice

From the Journals: What GCs say about diversity in hiring outside counsel

In a recent article published in “Diversity in Practice: Race, Gender, and Class in Legal and Professional Careers” (Cambridge University Press, 2016), David B. Wilkins and Young-Kyu Kim examine how general counsel (GC) rate the importance of diversity initiatives as it relates to their selection of outside law firms for significant legal work. Based on original survey data (see “Corporate Purchasing Project”) from nearly 150 GCs as well as extensive interviews, Wilkins and Kim triangulate the relative importance of a law firm’s commitment to diversity in the hiring decisions of GCs. Importantly, as the authors point out, because the project was not pitched to the GCs as a diversity survey specifically—it was a wide-ranging questionnaire that focused on 19 factors that GCs might take into consideration in hiring and firing outside law firms—including prior relationships, cost, rankings, the geographic scope of the firm, and results in similar cases—it arguably offers a more realistic picture of what in-house legal departments really value, particularly with respect to diversity concerns. In this light, Wilkins and Kim’s examination yields important insights for the relative importance of diversity considerations in the hiring of outside counsel.

What did the author’s find? When looking at hiring criteria for what they call “very significant matters”—matters that are above being routine, in which cost would likely be the predominate factor, but below “bet the company” matters, Wilkins and Kim find that results in similar cases, reputation, and prior relations are the most critical considerations, writing:

[T]hese factors—results in similar cases, reputation, and prior relationships—dominate all other considerations. Indeed, these three are the only ones to cross the threshold of being considered “important” —let alone “very important”—by respondents.

Wilkins and Kim go on to note that diversity concerns are therefore not primary drivers of hiring decisions for very significant matters, writing:

All other considerations, including a firm’s commitment to diversity, are at best of secondary importance in this context. [O]ur survey reveals that diversity is a solidly second order consideration for the average GC of a large company when hiring law firms for very significant work.

Therefore, from a topline view, the findings are unequivocally clear: factors other than diversity are more important than diversity to the average GC when he or she is hiring an outside law firm for very important matters. Despite the seemingly pessimistic nature of this finding, Wilkins and Kim are clear that, “The impact of this finding should not be underestimated. In close cases where firms are similar on ‘results in similar cases,’ ‘reputation,’ and ‘prior relationships,’ a secondary factor such as commitment to diversity could very well tip the balance, even if GCs tend to view this consideration as only ‘somewhat important’ in the abstract.” Indeed, this finding was confirmed in interviews in which one GC stated, “[T]here was a firm or two that was on the bubble that made it on the list of eight because of strengths in diversity and pro bono and civil justice reform.”

A large sample—more refined results

Wilkins and Kim are also clear that one of the things that really distinguishes their study is it’s relatively large sample size. As a result, they write, “We therefore are able to compare respondents along a number of dimensions without losing the ability to generate meaningful results.” They go on:

[While] 45% of respondents gave very little weight to diversity considerations [,] this leaves 55% who report that a law firm’s commitment to diversity is at least “somewhat important,” with several suggesting that it is “important” or even “very important.” … This variation in GCs’ views about the importance of diversity raises an important—but difficult—question. Why do some GCs appear to value diversity much more highly than others in making legal purchasing decisions?

Wilkins and Kim consider four main hypotheses to shed light on that question—on why some GCs appear to value diversity more than others in making outside law firm hiring decisions.

  1. Companies with a strong commitment to diversity will be more likely to convey that commitment to their outside law firms, including via their hiring procedures.
  2. Companies that rate internally well with respect to diversity metrics will be more likely to value diversity highly when hiring their outside counsel for very significant matters.
  3. Companies that are either more visible, or have highly visible diversity related issues, will be more likely to value diversity in legal purchasing decisions.
  4. Companies that are less “insular” with respect to the general way they hire law firms or are less happy with current providers will be more likely to privilege diversity considerations.

For each of their four core hypothesis, Wilkins and Kim find support from their data, albeit with certain refinements.

First, Wilkins and Kim find that companies with strong, formal commitments to diversity programs prove more likely to value their outside law firm’s commitment to diversity when making hiring decisions. Yet, they also find that companies that engage in more “tangible” commitments to diversity initiatives—commitments that require a broad range of actions, including the commitment of resources (e.g. people or finances)—report valuing diversity in hiring decisions at higher levels than those who demonstrate more “passive” pledges. They write, “Companies who have made [a] deeper level of commitment also report placing more emphasis on diversity when selecting outside counsel.”

Second, with respect to their hypothesis that companies that rate internally well with respect to diversity metrics will be more likely to rank diversity high in hiring decisions, Wilkins and Kim looked at the presence of women – either on the board or among the company’s named senior officials – and how that impacts the value a given GC places on law firm diversity in purchasing decisions. In doing so, they found that, “As the percentage of women on the board or top management increases, so does the weight that the GC states that he or she gives to law firm diversity in making hiring decisions in very significant cases.” They go on, “Companies in which there are two or more female directors … [results in] more than a 50% increase in the importance that the company’s GC claims to place on diversity in hiring outside counsel.” That percentage goes higher as the number of women on the board increases. Based on this and other data, Wilkins and Kim conclude that company demographics matter with respect to hiring decisions—but the more senior the better.

Third, in examining whether companies that are either more visible or have highly visible diversity related issues are more likely to value diversity in legal purchasing decisions, the authors find support for both claims. In particular, Wilkins and Kim find that prior discrimination lawsuits is highly related to the relative importance of diversity in outside counsel hiring decisions. They write, “Companies that have recently been sued are significantly more likely to rate diversity as being more important than companies who have not been sued.” They go on “Almost 50% of the companies that experienced lawsuits answer that a firm’s commitment to diversity is important or very important whereas less than a quarter of the companies that did not experience law suits placed a law firm’s commitment to diversity in one of these categories.”

Finally, Wilkins and Kim find that those GCs who go outside themselves and their company for information about hiring decisions are more likely to elevate diversity in hiring outside counsel, writing, “GCs with ‘external’ focus value diversity significantly more highly than their more inward looking peers.” Moreover, those who look more outwardly are also more likely to terminate law firm relationships—and those that do terminate important law firm relationships frequently (two or more in a three-year period) report that they are concerned with internal management issues, including diversity.

Want to learn more?

Diversity in Practice: Race, Gender, and Class in Legal and Professional Careers, Edited by Spencer Headworth, Robert L. Nelson, Ronit Dinovitzer and David B. Wilkins

“Expressions of support for diversity are nearly ubiquitous among contemporary law firms and corporations. Organizations back these rhetorical commitments with dedicated diversity staff and various diversity and inclusion initiatives. Yet, the goal of proportionate representation for people of color and women remains unrealized. Members of historically underrepresented groups remain seriously disadvantaged in professional training and work environments that white, upper-class men continue to dominate. While many professional labor markets manifest patterns of demographic inequality, these patterns are particularly pronounced in the law and elite segments of many professions. Diversity in Practice analyzes the disconnect between expressed commitments to diversity and practical achievements, revealing the often obscure systemic causes that drive persistent professional inequalities. These original contributions build on existing literature and forge new paths in explaining enduring patterns of stratification in professional careers. These more realistic assessments provide opportunities to move beyond mere rhetoric to something approaching diversity in practice.” — Cambridge University Press

Diversity Nudges Volume 3 • Issue 2 • January/February 2017

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