DIVERSITY IN THE DOWNTURN

TRENDS: from Diversity in the News, Winter 2009

The overall effect of the current economic downturn on lawyers and law firms is plainly evident and widely discussed. It’s time to focus on how the downturn will impact diversity in the legal workplace. Who and what will suffer most? What can be done under severe budget cutbacks? Is there a bright side?

The Hardest Hit

Law students and associates will bear the brunt. Nearly 44,000 law students will graduate nationwide in 2009, and indications are that law firm offers will be fewer and pay less. Law students are being counseled to look beyond the big firms and develop backup plans. James Leipold, executive director of NALP, told the National Law Journal, "For the class of 2009 it’s going to be tough." What effect will this glut of new graduates have on growing diversity at the firm? Probably negative: competition by more grads for fewer spots will allow firms to stick to hiring from only "top tier" law schools, even though plenty of recent scholarship has confirmed that a large proportion of minority talent is found in so-called second and third tier schools, and that law school rank in and of itself has little to do with success at the firm. Diversity experts have long been encouraging law firms to catch minority talent by fishing from a wider pool. But in a downturn, fishing from a bigger pool might not seem worth it, or just too risky. After all, if the small, elite pool is overstocked, why not take advantage? Unless a steadfast commitment to diversity goals is iterated from the top, a tendency to focus on things less risky on all fronts may close some minds to planning long-term growth in diversity through one of the best known routes — broadening the source of hires.

Peering Further Down The Pipeline

Heightened economic pressures will make law tuition harder to pay, taking on law school debt harder to justify, and the security of a legal career less certain. This applies to everyone. These considerations weigh more heavily, however, on minority prospective law students simply because they tend to be from families at the lower end of the economic spectrum. "You can’t discount that reality," stated Michelle J. Anderson, dean of CUNY Law School in Queens, New York. "African-American and Latino students down the pipeline are assessing whether it makes sense to go to law school." Professor Victor Goode, also of CUNY Law, added, "If you come from a low-income background …you may realize that there’s simply no way to pay the [law school loan] unless you’re absolutely guaranteed one of those big salaries at a major law firm." Even before the downturn, the pipeline to law school was leaking minorities. The ABA’s new rule linking accreditation to bar passage rates, bias in the LSAT, and the effect of US News and World Report rankings on admissions choices, were all implicated. Diversity in the downturn means that more, not less, careful scrutiny of these disturbing trends is in order. Leading institutions of the profession should peer long and hard down the pipeline over the next few years, to make sure their decisions and behaviors don’t drain it of even more minorities.

Are Minority Partners More Vulnerable?

Since October, the market for mid- to late-career lateral moves has become "officially flooded." Those watching out for the effect on diversity in the profession must ask, Will law firms that are tantalized by the prospect of scooping up lateral talent for less be more likely to consider ‘de-equitizatizing’ or pushing out partners? And if so, are minority partners more vulnerable? Studies and anecdotal reporting suggest the answer to both questions is, Yes. Research by Professor David Wilkins of Harvard University established a decade ago that Black partners are on more slippery footing than their white counterparts, especially in hard economic times. And this reality has only been confirmed in recent years. As one minority partner told this author, "We tend to have a thinner client base; in times like this, some of us are likely to be a phone call or two away from losing our book of business." A downturn could threaten minority partners most of all.

A Diversity Bright Side: Financial Crisis Opportunities For Minority Law Firms

The Treasury Department’s 250 billion dollar Troubled Asset Relief Program (TARP) of October included a congressional directive to allocate work to minority and women contractors—including lawyers. Groups like the National Association of Minority and Women Owned Law Firms (NAMWOLF) and the National Minority Law Group are starting to lobby for that program work. Treasury hired Simpson Thacher & Bartlett as legal counsel on TARP, and Emery K. Harlan, NAMWOLF’s chairman and a partner at Milwaukee’s Gonzalez Saggio & Harlan, said NAMWOLF wants to be a resource for the Treasury Department and Simpson Thacher as they search for minority- and women-owned vendors. Given that more federal legislation surrounding the financial crisis has followed the TARP enactments, more unique opportunities for diverse lawyers and their firms can be expected.

Survival Guide

There is much that a budget conscious manager or diversity professional can do to survive the downturn.

1. Keep diversity a priority and maintain the core program. Recession or no recession, the successful law firm of the future will be diverse. Law firms and clients largely "get it" that diversity of background, experience, gender, strengths, and pedigree, is the blue-ribbon recipe. Fortune 500 firms that are signatory to the Call to Action will continue to demand that their law firms maintain and even improve certain diversity criteria. Firms that slip back, lose diverse attorneys, or loose status may find that its teams will not pass muster with clients already firmly invested in diversity. Accordingly, firms should consider the effects of closing down practice areas or abandoning pipeline programs that will support a diverse law firm of the not-so-distant future. Evaluating hiring practices to ensure they don’t begin to value law school pedigree over diversity is a good place to begin. Now is not the time to cut loose on diversity programs; it is arguably the time to hold on to them more tightly through the storm.
2. Rethink billing. Law firms should let their clients know they will work with them through the downturn. Willingness to not only share the burden but also to engage in creative thinking about how to reduce costs, will cement what might otherwise become a loose relationship. If ever there was a time to respond to client cost reduction demands, it is now. And if ever there was a time to unseat the billable hour from its thrown, it is now. Project-based pricing, success fees, and other alternatives have long been known to promote diversity goals such as flexibility and relaxation of firm structures that hurt women and minorities. Now there is a new, immediate impetus for virtually all law firms to consider more fair and tolerable fee structures.
3. Cherry pick, downscale, negotiate, and eliminate fluff. Elaine Arabatzis, Director of Diversity at Dickstein Shapiro, advised an audience of diversity professionals at the MCCA’s November 19 Pathways to Diversity conference that firms may have to "cherry pick" among programs and initiatives. She cautioned firms to "stay the course" on diversity but at the same time to take a "targeted" approach to programming and sponsorships. In a recent article in the New York Law Journal, Lauren Tapper, Director of Diversity at Kramer, Levin, Naftalis & Frankel, suggests that managers "filter out sponsorship requests that are not truly part of your firm’s mandate." For example, social causes that are not part of your core diversity mandate "should not part of your consideration" in these lean times. Ms. Tapper also counsels negotiating things like conference sponsorships. Perhaps you could explain that this year your firm will sponsor a local chapter or contribute to a fund, rather than take on a national or bigger commitment. Scaling back on things like lunches or fancy refreshments will save money and deliver the message that the firm is committed to the core, not the fluff.
4. Spread the spend. Ms.Tapper also recommends partnering on initiatives and sharing expenses with other administrative departments at the firm. Legal recruiting, professional development, marketing, and HR are all departments whose goals frequently overlap with diversity. Try to pool funds or co-sponsor programs. Law firm managers have also recommended working with clients to co-sponsor diversity initiatives. This would also serve the important lean-times tactic of deepening client relationships.
5. Keep abreast of new generation diversity products. Many new products in diversity and inclusion leverage the internet. On-line mentoring, affinity groups, newsletters, and learning opportunities are emerging. These might be an excellent and a cost efficient component of your diversity initiatives. On-line data management systems created explicitly for diversity professionals may save many hours of a diversity professional’s time. Diversity Research is currently developing "DiverseAndInclusive.com," a rich internet application for diversity learning and systems management.
6. Engage in purposeful follow-up to maximize the return on each diversity spend. What did the attendees from your firm get out of that conference? Is that knowledge being shared? Was there any follow-up to the minority bar association dinner the firm sponsored? Is anyone keeping track? Follow-up will leverage the effect and stretch the value of the original diversity spend.
7. Bottom line: keep a big footprint. Encourage top management to be reiterate its commitment to diversity. When the worst wave of the recession recedes, firms that have a diversity footprint deep in the sand will be all the stronger.

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