Nothing You Can Say On Diversity

A credence-good environment with high switching costs and (the perception of) delicate equilibria is prone to devil-you-know conservatism. This is a recipe for stasis and entropy but not necessarily satisfaction. Not everyone is as happy with their current roster as Hermann. Those who perpetuate the status quo may not necessarily like it. But they perpetuate it all the same. Which brings us to diversity and alternative appropriate fee arrangement (AFAs)). Both issues were litigated decades ago. According to the public pronouncements, diversity and AFAS won on the merits. In-house counsel declared in a loud, clear voice “This is happening.” Then it didn’t.

The paltry gains (relative to expectations) should give us pause. The center of gravity of the legal universe shifted in-house. Corporate legal is a buyers’ market. For decades, buyers have been publicly clamoring for change. But diversity and AFAs came at costs in-house counsel were not willing to pay. This (largely) is what transpired:

I’ll tackle diversity this post and AFAs in the next.

Diverse = Different than the status quo

In 1999, the Chief Legal Officers from 500 major corporations signed a “Diversity in the Workplace Statement of Principle” that included the pledge:

We expect the law firms which represent our companies to work actively to promote diversity within their work-place. In making our respective decisions concerning selection of outside counsel, we will give significant weight to a firm’s commitment and progress in this area.

The Statement was an activity anchored in ABA Goal IX—”To promote full and equal participation in the legal profession by minorities”—adopted in 1986 and later modified to include women and persons with disabilities. To reinforce that this was not lip service, the 1999 Statement was identified as being More Than Words.

The “more than words” theme was given a signal boost in 2004 by the Association of Corporate Counsel’s promulgation of a Call to Action, which built on the Statement:

In an effort to realize a truly diverse profession and to promote diversity in law firms, we commit to taking action consistent with the referenced Statement. To that end, in addition to our abiding commitment to diversity in our own departments, we pledge that we will make decisions regarding which law firms represent our companies based in significant part on the diversity performance of the firms. We intend to look for opportunities for firms we regularly use which positively distinguish themselves in this area. We further intend to end or limit our relationships with firms whose performance consistently evidences a lack of meaningful interest in being diverse.

We’re about to hit the 20th anniversary of the Statement. So how are things?

Do you see the seismic shifts in trajectory in 1999 and 2004 when in-house counsel went beyond words and answered their own call to action to get serious about outside counsel diversity? Me neither.

Law remains the least diverse profession. And, somehow, on closer inspection, the underlying reality is often worse than the data suggest (here, here). The conclusion of recent scholarship out of Harvard:

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.

Which is not to deny the steady, if not steep, upward trends. Nor is it to suggest that in-house counsel are all talk. One of the most discordant aspects of diversity efforts is the ease of assembling an all-star team of law departments with serious diversity programs directed at outside counsel (example, example, example, example, example). Yet, in aggregate, inside counsel have done little to move the needle on outside counsel diversity despite their market power and long-standing public commitments.

Diversity is another instance of innovation being slower than our intuitive logic would suggest, especially when we extrapolate from outliers. My observations are hardly original. People much smarter than me have dug into the underlying issues (I’m partial to this series by Macey Russell for IILP). We can point to some bad faith. We can cite some virtue signaling. We can see the explicit effects of implicit bias. But I am drawn to the explanatory power of governance by fiat and preference intensity.

Lawyers believe in words. Words as sword. Words as shield. Words as incantation (even when the original meaning has been lost to time). Lawyers as advocates who speak things into existence. Lawyers as scriveners who wield the binding power of the pen.

Logophilia has its virtues. But, at the extreme, we treat words as self-executing. So let it be written. So let it be done. We issue but do not enforce billing guidelines. We demand but do not pursue innovation, cost containment, efficiency, etc. We declare our commitment to diversity and consider the matter resolved.

Inertia and self-reinforcing structural impediments to change mean that mere words are insufficient to drive diversity at the desired velocity.  Action is required. Actions cost—time, sustained attention, uncomfortable conversations, implementation dips, temporary disruptions to a seemingly fragile status quo.

In a vacuum, we can take in-house counsel at their word they would prefer more diversity. We can also observe that no one operates in a vacuum. In our messy reality, with its tradeoffs and resource constraints, most in-house counsel place diversity far enough down their priority list that abstract support results in benign neglect.

Unanimity might even make the situation worse. One critical characteristic of the diversity debate is the frequent absence of debate. Everyone blithely nods their head in agreement. But, returning again to our innovation illusion, consensus can blunt the urgency to act. The shared recognition that an issue should be addressed is easy to confuse for a sense that the issue is being addressed, thereby giving rise to one of the most common collective action problems: free riders.

I’m Back on My Bullshit

Regular readers know I spent several posts poking good-natured fun at law firm marketing bullshit. But they also recall I laid down a marker. I promised to situate bullshit in the inside/outside counsel dynamic rather than take the coward’s way out. I refuse to advance the simplistic premise that stubborn law firms are the sole impediment to innovation in the legal market.

“Value” is a word that is regularly used in service of bullshit. Value-based fees. Value adds. Value services. Value is not itself a bullshit concept. Understanding value is fundamental (as always, read Ken Grady on Lean). But value is, by definition, vague. And vagueness is an invitation to bullshit.

Value depends. Value is contingent on what the customer is willing to pay for. If something does not add value from the customer perspective, it is waste. Value is not what customers say they want. Value is what customers actually buy.

The question: what is in-house counsel willing to pay for?

Consistent with the lawyer theory of value, the modal in-house counsel is willing to pay by the hour for labor from smart (preferably incumbent) lawyers at brand firms working sequentially on discrete matters. Diversity is absent from the answer. So are AFAs. So are innovation, automation, efficiency, analytics, project management, and most everything I spend my time delivering.

It seems I just intimated that most in-house counsel do not value diversity. I wouldn’t want to leave any misimpressions. So outright, in technicolor: most in-house counsel do not value diversity.

I have angered more than few in-house counsel with such declarations. They think I am branding them a bad person. I am doing no such thing. I am not saying they are indifferent to diversity, let alone opposed to diversity. Rather, promoting outside counsel diversity comes at a cost they are not willing to pay.

My inflammatory remarks tend to follow brief discussions of what they currently do to promote outside counsel diversity (see Addendum). Most responses boil down to in-house counsel expressing their preference for diversity to incumbent outside counsel, often in easy-to-ignore written form. When I suggest that the available evidence demonstrates words are insufficient and then inquire about their actions (measurement, incentives, enforcement), they get defensive. They passionately explain how very busy they are with high-impact, mission-critical work and how nice it would be if, for once, outside counsel would be ‘proactive.’

My standard retort is that the problem with incentives is that they work. Inside counsel are asking outside  counsel to do what they themselves will not. Outside counsel are equally busy with high-impact, mission-critical work. Outside counsel know they will be held accountable by inside counsel if they miss a single substantive beat. Outside counsel have learned they will not be held accountable (by most clients) for failing to meet vague mandates to be more diverse. Moreover, outside counsel have been subjected to so many toothless proclamations over the years—billing guidelines, budgets, AFAs, LPM, LTA—that, with respect to service delivery, in-house counsel have become the adults in Peanuts: undifferentiated noise.