Ramping Up Diversity During a Recession

Business Law Institute panelists say industry should learn from mistakes of 2008, adopt processes to eliminate bias

During tough economic times, diversity and inclusion initiatives aren’t always a top priority for law firms and legal departments. But it’s especially important for firms and companies to make sure they’re hiring, promoting and retaining diverse talent in a downturn, according to speakers at this year’s Business Law Institute.

The presentation, “Recession Calls for You and Your Business Clients to Double Down on Diversity,” was held online Sept. 10 as part of CBA-CLE’s annual business law conference. The webcast offered up lessons from the last recession and highlighted processes legal industry employers can implement to ensure underrepresented groups don’t lose ground when the economy hits a rough patch.

“I think diversity is important to the legal profession for three reasons,” said speaker James Sandman, general counsel for District of Columbia Public Schools and president of Legal Services Corporation, which funds civil legal aid programs for low income people.

“First, I think it’s a societal issue. Second, it’s a client service and client relations issue. And third, it’s a quality issue,” he said. 

Diversity is important as a societal issue because perceptions of the justice system are affected by whether judges and lawyers look like the people in the communities they work in, Sandman said. 

When it comes to client relations, he said, most organizational clients are much more diverse than the law firms and lawyers representing them. “And that’s an issue. People need
to be able to relate to those who provide professional services to them,” Sandman said.

Finally, studies show diversity leads to better decision-making and creativity because it brings together people with different backgrounds and perspectives, he said.

For about 20 years, there was a steady increase in diversity at law firms, but that stopped abruptly with the 2008 recession, according to panelist Caren Ulrich Stacy, CEO and Founder of Diversity Lab, an incubator focused on fostering diversity in the legal profession.  

The Great Recession brought a 14% decrease in racial and ethnic diversity in law firm partnership, according to Stacy. There was a 29% increase in the gender pay gap among lawyers, and layoffs also disproportionately affected women during the last recession. The recession also wiped out gains in the number of Black associates at law firms, and it took a decade to get back to pre-2008 numbers.

But there have been some positives in the last decade, Stacy added, including a 12% increase in racially and ethnically diverse summer associates and a 3.6% increase in racially and ethnically diverse partners. In the last 10 years, female general counsel at Fortune 500 companies have increased by 15%.

“Our goal is to have the 2020 recession not affect diversity in the same way that it did in 2008,” Stacy said. So how do we keep history from repeating itself this time around? 

One approach is for law firms to reskill and retrain diverse attorneys in high-growth areas, Stacy said, noting that Hogan Lovells has been looking at underutilized talent and training attorneys to move into bankruptcy law as companies are being forced to reorganize and declare bankruptcy due to the economy.

“We’re seeing a great amount of law firms reskill and retrain their workforce for areas that are important and necessary with COVID-19, but also for growth areas,” she said.

According to Stacy, about 75 to 80% of firms that have made public announcements about personnel decisions during the current downturn are doing temporary furloughs or pay cuts, rather than layoffs. While there may be layoffs that haven’t been made public, she said, it appears more firms are turning to creative tactics to avoid permanent cuts than during the previous recession.

Legal industry employers are also “applying a diversity and inclusion lens to all of these decisions,” Stacy said. For example, a firm might decide that equity partners will skip a draw one quarter, or salaries might be cut by 10% for those making over $100,000, but anyone making less would not be affected. Decisions like these can help avoid worsening pay disparities for women and people of color, since they are less likely to be equity partners or top earners.

Sandman also observed that layoff and furlough decisions are being made with “a lot more nuance and sensitivity” than during the last recession, and firms are recognizing that some people can absorb a pay cut better than others. 

“I have not seen this before,” he said. “And it’s unfortunate that these decisions have to be made at all, but the appreciation for the human consequences of the decisions that
law firm leaders are making is a good thing.”

Stacy said it’s important to have systems and processes to encourage diversity, because “when you depend on human nature, or when you depend on human decisions, unfortunately, there are biases baked into that.” These systems and processes become even more important in a recession, she added, because people tend to fall back on their biases more when they’re in stressful situations.

One such system is the Mansfield Rule, she said, which requires law firms and legal departments to consider at least 30% women, people of color, LGBTQ attorneys and lawyers with disabilities for leadership roles, equity partner promotions, senior lateral positions and other opportunities. Stacy’s organization, Diversity Lab, oversees the Mansfield Rule initiative and certification.

Senior attorneys can adapt the rule when assigning work to make sure they are considering women, people of color, LGBTQ people and people with disabilities when handing out plum assignments, she said. 

Stacy also recommended firms periodically send out employee pulse surveys, which the company Qualtrics has made free during the pandemic, to get a sense of how attorneys are feeling about their workload, communication with supervisors and colleagues and job satisfaction. The results can help firms understand how to mentor and assign work to diverse attorneys.

Summing up his final thoughts, Sandman said that there’s pressure right now for lawyers to focus on revenue-generating activities and downplay the “soft stuff” like mentoring and professional development. “But I think it’s pennywise and pound foolish to dispense with those things because of immediate financial pressures,” he said. 

“We need to take the long view here. Doing away with those things or downplaying them is not going to make any significant difference in the profitability of any law firm or any practice,” Sandman said. “These things need to be ramped up, not backed off.” 

—Jessica Folker

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